Aviation Distributors’ Chief, CFO Step Down

IRVINE —  Aviation Distributors Inc., accused by its former accountants of submitting false sales figures to obtain a bank loan, said Wednesday that its top two executives are stepping down.

The airplane parts reseller also said it has hired a new auditing firm, Grant Thornton LLP, to review its financial records for the last three years.

Aviation founder and Chief Executive Osamah S. Bakhit has given up his management responsibilities and will focus on building the company’s sales unit and developing joint ventures with other firms.

Mark W. Ashton resigned as chief financial officer and a director. Aviation officials declined to discuss the matter further Wednesday.

The company’s troubles surfaced in late August, when Arthur Andersen LLP resigned as Aviation’s auditor and withdrew three years’ worth of financial reviews. At the time, the accounting firm said it discovered false sales figures and that the company had attempted to cover up the discrepancies.

The disclosure prompted Nasdaq officials to halt trading of the company’s stock in September. The shares were delisted in October.

During its investigation, Arthur Andersen suggested that Aviation staff fire Bakhit, according to documents filed with the Securities and Exchange Commission.

Bakhit, who owns about 60% of Aviation’s common stock, has given control of his 1.44 million shares to company trustee Dirk O. Julander, an attorney based in Irvine, according to documents filed Wednesday with the SEC.

Bakhit had personally guaranteed Aviation’s $15-million line of credit with Bank of New York to preserve financial ties with the key lender. The agreement in September helped Aviation keep its revolving credit lines open until the end of this month.

Aviation and bank officials declined to discuss the matter.

Grant Thornton, the country’s seventh-largest accounting firm in revenue, is already working on Aviation’s financial records, officials said.

“I would think Aviation would want this audit done as quickly as possible,” said Brian McGreevy, an accounting industry analyst with the Atlanta-based newsletter Public Accounting Report. “The longer Grant Thornton takes, the harder it could be for Aviation to come back on the [stock] market.”

So far, shareholders have filed at least two federal class-action lawsuits accusing Aviation of misleading investors by filing false financial information that inflated the company’s stock price.

One suit also lists as a defendant Cruttenden Roth Inc., the Irvine firm that underwrote Aviation’s initial public offering in March.

Incorporated in 1992, Aviation buys airplane parts and redistributes them to airlines around the world, including British Airways and Qantas Airlines.