Ex-Chief of Home Theater Ordered to Pay $25 Million
The former chairman of Home Theater Products International Inc. has been ordered by a federal judge to pay $25.3 million to investors who bought stock in the company when 75% of its sales were bogus.
Paul R. Safronchik, who pleaded guilty last December to criminal conspiracy, bank fraud and securities fraud, lost his civil case before it got to trial in U.S. District Court in Santa Ana.
His admission of guilt in the criminal case and inability to raise any defense in the civil case left nothing for a jury to determine, Judge Gary L. Taylor decided last month.
How much the plaintiffs will be able to obtain from Safronchik isn’t known. “It has not been determined yet if he has any significant assets to pay the judgment,” said James I. Jaconette, a San Diego lawyer for investors.
The civil case will continue against Jerome A. Adamo, the company’s president, Jaconette said Thursday.
HTP, an Anaheim manufacturer of home theater electronics products and furniture, tried to recover through a reorganization in bankruptcy but, instead, its business was sold off in pieces.
Investors were defrauded from the moment the company went public in April 1994, Taylor found in setting damages.
Safronchik admitted in his guilty plea that by the end of its first fiscal year, June 30, 1995, the company reported $12 million in sales, but that $9.3 million of total “simply did not exist.”
The company’s outside auditor uncovered the bogus sales and resigned in September 1995. He also found that the $5-million profit HTP reported should have been a $4-million loss. He withdrew his audits for the previous three years.
In his criminal case, Safronchik, who also was the company’s chief financial officer, admitted that he sent phony invoices to sham companies at mail drops controlled by him and two other HTP executives. He said they then forged documents sent by the auditor to fool him into believing the invoices were authentic.
Another HTP executive, Douglas Roy, pleaded guilty two weeks ago to one count of conspiracy. Both he and Safronchik, who also is known as Pablo Reuben Safronchik, are scheduled to be sentenced early next year.
