O.C. Reseller to Plead Guilty to U.S. Charges
Aviation Distributors Inc. said Wednesday that it has agreed to plead guilty to federal charges stemming from an alleged scheme to falsify records to obtain a loan and that it will pay a fine of $750,000.
The Lake Forest company, a reseller of airplane parts, said that it agreed to plead guilty to conspiracy to commit securities fraud, filing a false registration statement and falsifying its books and records.
For the record:
12:00 a.m. Oct. 27, 2000 For the Record
Los Angeles Times Friday October 27, 2000 Orange County Edition Business Part C Page 5 Financial Desk 1 inches; 21 words Type of Material: Correction
Aviation revenue--Aviation Distributors Inc.’s sales totaled $10 million in the second quarter. A story Thursday reported an incorrect figure.
Aviation has been beset by legal and other difficulties since its auditor resigned in September 1997 over allegations that the company had submitted false sales figures to obtain a bank loan.
Arthur Andersen LLP withdrew approval of Aviation’s financial reports between 1995 and 1997, and Nasdaq delisted the stock.
The uproar triggered investigations by the U.S. attorney’s office and the Securities and Exchange Commission, as well as lawsuits by disgruntled shareholders. The company’s chairman and founder, Osamah S. Bakhit, and its chief financial officer, Mark W. Ashton, resigned.
The proposed settlement “removes the litigation cloud the company’s been under for the past 3 1/2 years,” Aviation Chief Executive William D. King said.
The company announced the plea agreement before federal authorities took official action.
The U.S. attorney’s office in Los Angeles plans to file charges, along with the plea agreement, in the next several weeks, spokesman Thom Mrozek said. He wouldn’t comment further.
King said he took the unusual step of publicizing the proposed agreement to preempt insiders from trading shares before the official announcement.
Aviation has also entered into a proposed settlement with the SEC, King said. Under the pending plea agreement, the company would promise not to violate any securities laws for three years. Aviation would pay no fine and admit no wrongdoing, King said.
An SEC spokeswoman declined to comment.
In April 1998, Aviation and other defendants agreed to settle the shareholder lawsuits, setting up a pool of $740,000 in cash and 210,000 shares of stock to be divided among shareholders. The company issued 80,000 shares, while Bakhit, the founder, agreed to contribute 130,000 shares.
Aviation earned $800,000 in the second quarter, compared with a loss of $1.4 million a year earlier, as sales more than tripled to $3.2 million.
Aviation’s stock, which trades over the counter, closed unchanged Wednesday at $2.06 a share.
