Aviation Distributors Settles 3 Lawsuits
Airplane parts reseller Aviation Distributors Inc. said Thursday that it has agreed to settle three class-action lawsuits over alleged securities violations brought by shareholders last fall.
If approved by a federal court, the settlement would provide a pool of $740,000 in cash and 210,000 shares of company stock to be divided among shareholders, the Lake Forest-based company said.
It also would mark another step the company has taken to resolve a financial mess stemming from its auditor’s accusations that the company had used phony sales figures to obtain a loan.
The auditor, Arthur Andersen LLP, quit last fall, and the company revealed the internal problems in a document filed with securities regulators. In the uproar that followed, both the company’s chairman, founder Osamah S. Bakhit, and its chief financial officer, Mark W. Ashton, resigned.
The accounting firm withdrew approval of its financial reports for the company’s prior three years, a step that led to Nasdaq’s delisting of the company’s stock.
Two federal shareholder class actions, filed in Santa Ana, allege the company had issued false and misleading statements about its financial results. A third federal suit alleging similar wrongdoing was filed in Los Angeles.
Defendants include Bakhit, who remains as a consultant, and Ashton. Arthur Andersen, Cruttenden Roth Inc., underwriter for the company’s initial public offering, and the company’s officers and directors were named as defendants in one or more suits, said Kenneth Lipinski, Aviation’s chief operating officer.
The 210,000 shares targeted for distribution in the proposed settlement consist of 80,000 shares newly issued by the company and 130,000 contributed by Bakhit. Lipinski wouldn’t disclose which defendants will pay $740,000 in cash.
Robert Palmer, a lawyer for Cruttenden Roth, said the underwriter “hasn’t been asked or required” to pay. Arthur Andersen wouldn’t comment. Lawyers for other defendants couldn’t be reached.
Jonathan Plasse, a New York lawyer for the shareholders, described the settlement terms as “fair and reasonable.”
In private stock transactions, a 5,000-share block of the company’s stock sold at $5.63 a share in the last trade of the day Thursday, up 25 cents from the previous day’s final trade.
Officials said the company soon will file revised financial statements for the last two years. While the company has been in default on a loan from the Bank of New York since Arthur Andersen resigned, Lipinski said the bank continues to support the company and “the relationship is good.”
Officials said the company continues to cooperate with a Securities and Exchange Commission investigation into Arthur Andersen’s allegations. They said the company also plans to reapply for listing on Nasdaq or the American Stock Exchange but wouldn’t say when.
