Ex-President of Defunct O.C. Firm to Plead Guilty

The former president of Home Theater Products International Inc., which collapsed in 1995 in the wake of a bogus-sales scandal, agreed to plead guilty to a charge of insider stock trading, according to documents filed Friday in federal court.

Jerome A. Adamo is scheduled to be arraigned and to enter his plea at a Feb. 4 hearing in U.S. District Court in Santa Ana, Assistant U.S. Atty. David C. Marcus said.

Adamo, who faces 10 years in prison and a $1-million fine, is the third executive to be charged.

Paul R. Safronchik, the former chairman, pleaded guilty to criminal conspiracy, bank fraud and securities fraud. He is awaiting sentencing. Douglas Roy, another former executive, also has pleaded guilty to a conspiracy charge and is awaiting sentencing.

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

Adamo, in his plea agreement, admits that after learning from the company’s outside auditor that HTP had fraudulently overstated its sales, he tipped off a woman “closely associated with him” to sell her 3,000 shares.

After the scheme became known publicly, the stock price dropped dramatically. The woman, whom the government did not identify, avoided losses of nearly $10,000.

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

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.

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.