HTP Overstated Sales Revenue, Executive Says : Audit: Acting CEO of the beleaguered Anaheim firm unsure of the exact figure. Management changes expected.
ANAHEIM — HTP International Inc., jolted by accusations that it booked $9 million in nonexistent sales, acknowledged for the first time Monday that revenue for its last fiscal year has been overstated.
But the extent to which sales were overstated for the year that ended June 30 is still unclear, Irwin Zucker, the company’s acting chief executive, said in an interview.
The Anaheim maker of home entertainment furniture, speakers and other products is expected to get a full report by the end of the month from Putnam, Hayes & Bartlett, a forensic accounting firm that reconstructs financial information.
“What they’ve been able to tell me so far is that there’s some overstatement,†Zucker said. “They haven’t been able to quantify it, and they haven’t been able to give me many more details.â€
HTP, formerly known as Home Theater Products International Inc., was rocked last month by the resignation of its auditor, Jaak (Jack) Olesk of Beverly Hills. Olesk, who also withdrew three prior years of certified audits, cited “significant weaknesses†in the company’s internal controls and concerns about “management integrity.â€
When HTP Chairman Paul R. Safronchik, who also was the chief financial officer, challenged Olesk’s statements in a filing with securities regulators, Olesk countered with detailed allegations, sparking an investigation by the Securities and Exchange Commission.
The auditor said that the company recorded as much as $9 million in nonexistent sales during its fiscal year and that an expected $4-million profit should be a $5-million loss. He said management acted “nonchalant†when he confronted top executives.
Zucker, an executive vice president who said he knew nothing about the auditing disagreements, has become acting chief executive, replacing Safronchik and the company’s president, Jerome A. Adamo. As early as this week, Safronchik is expected to resign and Adamo is expected to retire.
Zucker said the company will likely take some legal action against Olesk for withdrawing audits for fiscal 1992, ’93 and ’94. Zucker asserted that Olesk either was negligent and made mistakes in conducting the audits or he wrongly withdrew perfectly good audits.
“One way or the other, he’s not going to do this without any consequences,†Zucker said.
Olesk said that, after he uncovered phantom 1995 sales, he checked previous years’ records for nonexistent sales. He said he withdrew the audits because he determined that revenue in those years also had been misstated.
Audits for at least the previous two years are required to be on file with the SEC, which regulates public companies. A typical audit costs about $125,000, according to industry experts.
HTP’s stock was delisted from the Nasdaq market, as required, after Olesk withdrew his previous audits.
The company also faces at least four civil lawsuits alleging fraud. All the suits were filed in August. Three were filed in federal court in Los Angeles by the well-known plaintiffs securities law firm of Milberg, Weiss, Bershad, Hynes & Lerach in New York and San Diego.
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