Ex-Company President Guilty of Insider Trading

The former president of Home Theater Products International Inc. pleaded guilty Wednesday to one charge of insider stock trading stemming from the 1995 collapse of the company over bogus sales figures.

Jerome A. Adamo, 62, of Buena Park is the third top Home Theater executive to enter into a plea bargain with federal prosecutors, Assistant U.S. Atty. David C. Marcus said.

Paul R. Safronchik, the former chairman, pleaded guilty to criminal conspiracy, bank fraud and securities fraud; Douglas Roy, the former controller, pleaded guilty to a conspiracy charge.

Adamo admitted that he learned from the company’s outside auditor that 75% of HTP’s sales were overstated and then, before the news became public, tipped off a woman “closely associated with him” to sell her 3,000 shares.

Once the scheme was known, the stock price dropped dramatically. The woman, whom the government would not identify, avoided losses of nearly $10,000.

Under the plea agreement, Adamo will pay a $50,000 fine and restitution for the losses avoided by the woman. In return, prosecutors will recommend a more lenient sentence.

Marcus said the woman will not be charged with any crime.

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 a three-year period.

Safronchik admitted that the company had reported $12 million in sales for its first fiscal year ended June 30, 1995, but that $9.3 million of those sales “simply did not exist.”

HTP, a onetime Anaheim manufacturer of home theater electronics products and furniture, tried to recover through a reorganization in bankruptcy. But instead, the business was sold off in pieces.

Adamo faces a maximum penalty of 10 years in prison and a $1-million fine at his May 11 sentencing before U.S. District Judge Gary L. Taylor in Santa Ana.

Safronchik faces as many as 45 years in prison at his sentencing, scheduled for May 4. Roy faces five years in prison at his April 8 sentencing.