PCC Group Put in Receivership for Unpaid Loan

PCC Group Inc., an 18-year-old Pomona-based company that runs a computer-parts distributorship and other businesses, was placed in receivership after it was unable to pay off a large loan to Imperial Bank, according to a filing with the Securities and Exchange Commission.

PCC could not repay $4.6 million owed to Imperial because companies that bought computer equipment from PCC bounced a series of checks late last month and early this month, according to the document filed Tuesday.

Imperial Bank appears to have made other loans to PCC and may be owed as much as $11 million, said Michael D. Myers, a Claremont attorney who was designated as receiver for PCC on Nov. 7 by a Los Angeles County Superior Court judge.

Imperial, a major lender to Southland small businesses, recently agreed to be acquired for $1.25 billion by Michigan banking giant Comerica Inc. The move raised some concerns among Wall Street analysts because Imperial had warned of rising credit problems in the spring.

However, in its third-quarter financial report, Imperial said its overall credit quality was improving.

The receivership may mean an end to PCC’s efforts to transform itself from a computer-parts distributor to a broader business with Internet interests.

The company’s stock, which has traded as high as $5.19 in the last year, was suspended Tuesday by Nasdaq, with the last trade at $1. Nasdaq said it was requesting additional information from PCC.

The SEC also is believed to be looking into the matter.

Myers, the receiver, now is overseeing the operations of PCC and its wholesale computer distributorship, PC Craft Distribution Inc., as part of Imperial’s effort to collect what it is owed.

PCC said in the SEC filing that it is “very unlikely that PC Craft will be able to continue in business without the recovery of the bad checks.”

The company’s two newer subsidiaries--Computer Discount Center, which sells computer equipment over the Internet, and ETS Securities, a brokerage catering to online traders and day traders--are exempt from the receivership. However, Imperial reserved the right to request that those units be added to the receivership.

A total of seven companies bounced checks to PCC, said Matthew Taylor, a partner at Myers’ law firm, Myers, Taylor & Siegel.

PCC recently sold $5.7 million of equipment to four of the companies, according to the filing, But checks totaling $4.6 million from those companies subsequently bounced. Payments from three other companies also later bounced, the filing said.

The companies named in the filing include Micro Perfect Inc., Prima Micro Inc., Micro Research Inc., Megatech and Transwell Inc.

The companies are headquartered in Taiwan and are interrelated through overlapping ownership, said George Rodda, a PCC director and Newport Beach attorney who founded PCC in 1983.

Myers called the circumstances surrounding the sales and bounced checks unusual.

“The whole matter looks very, very suspicious,” he said. “It’s not normal and standard to suddenly have millions of dollars of bad checks” in a short period of time.

Rodda said his company was doing business in good faith, and was caught unawares by the nonpayment. “All of a sudden, for some reason we’re not totally familiar with, [they] bounced a bunch of checks,” he said. “We feel victimized by the bad-check companies.”

David Poitras, an attorney representing PCC, refused to comment.

PCC, in its SEC filing, said that it routinely bought from and sold to the same group of companies.

The computer-component reselling industry is known for its razor-thin profit margins, and several leading companies have had financial difficulties in recent years.

PCC Group recorded a net loss of more than $2 million in its 1999 fiscal year, as revenue dipped to $69.6 million from $79.7 million in 1998.

PCC has sought to move into more profitable business lines in recent years, Rodda said. It started Computer Discount Center about three years ago, he said.

PCC formed its online day-trading business in December, in part to cater to overseas investors who want to trade U.S. stocks, Rodda said.

PCC said in August that ETS Securities was “near break-even” and the firm had been planning to spin off the unit to shareholders.

On Oct. 5, PCC announced that Rodda had purchased 200,000 PCC shares at $2 each. The capital would “assist the company to exploit the current excellent market conditions,” PCC said.

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PCC’s Slide

Shares of Pomona-based PCC Group (ticker symbol: PCCG) have been suspended since late Tuesday on Nasdaq, after the company said its major lender had named a receiver to take control of the business.

Monthly closes and latest on Nasdaq

Tuesday: $1.00

Source: Bloomberg News