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Eric Grunder,
<br />The coon Editor 546-8261
<br />Stockto a
<br />Record
<br />Sunday, November 1, 1992
<br />m
<br />allegedFraud
<br />Circuit
<br />1
<br />deai
<br />Suit blames firm's demise on breach of contract
<br />By Bill Cook
<br />The Stockton Record
<br />Securities fraud, deceit and breach of
<br />contract were key factors in the closing of
<br />the 160 -employee Circuit Works Inc.
<br />plant in south Stockton, a federal court
<br />lawsuit claims.
<br />The civil suit alleges that a Los Gatos
<br />computer -software company, Scorpion
<br />Technologies, bought Circuit Works on
<br />July I1 in a deal involving a third compa-
<br />ny based in Hong Kong. Scorpion then
<br />reneged on its obligations, including pro-
<br />viding an infusion of operating money,
<br />and Circuit Works folded, the suit al-
<br />leges.
<br />Circuit kk arks' founder, John P. "Jay"
<br />Hansen, and a partner, Richard S. Sebas-
<br />tian, both of Discovery Bay, are seeking
<br />unspecified damages from Scorpion in
<br />the suit. One insider estimated as much as
<br />$5 million may be at stake.
<br />Meanwhile, Circuit Works' employees,.
<br />who lost two weeks of wages when the
<br />plant suddenly locked its doors Sept. 4,
<br />are trying to pick up their lives.
<br />"it made a drastic change in my life,
<br />I'll tell you," said Roger Hinz, 45, of
<br />Lathrop, And Hinz, a Circpit Works
<br />maintenance worker for eight years, was
<br />luckier than most of the firm's 160 em-
<br />plovecs. after a short time collecting on
<br />employment benefits, he lined up another
<br />job at an apartment complex.
<br />"But I took a big pay cut," Hinz said.
<br />"Almost one-half."
<br />Hinz and other workers could file a
<br />lawsuit to get the money owed them plus
<br />accrued vacation and damages, said
<br />Duane Mooney, a consultant brought in
<br />last December in an attempt to revive Cir-
<br />cuit Works.
<br />"But in my personal opinion, the work-
<br />ers are dead" as far as getting any money
<br />from the company, said Mooney.
<br />Circuit Works' closure reportedly left
<br />creditors holding more than $3 million in
<br />unpaid bills, and the firm's circuit -board
<br />nacos pnoro
<br />EMPTY LOT: The parking lot at the Circuit Works plant remain inside. The district attorney may seek legal action
<br />on Frank West Circle sits empty, but hazardous chemicals to have them removed.
<br />DA may sue to force toxic cleanup
<br />at boarded -up manufacturing plant
<br />By Bill Cook
<br />The Stockton Record
<br />The San Joaquin County district at-
<br />lorney's office is considering legal ac-
<br />tion to force removal of hazardous
<br />chemicals from the closed Circuit
<br />Works manufacturing plant.
<br />"The matter is under investigation,"
<br />said Deputy District Attorney Lisa
<br />Brown, "but no charges have been
<br />filed."
<br />Brown said the situation was referred
<br />to the district attorney's environmental
<br />protection unit by the county Health
<br />Department and the city of Stockton.
<br />She declined to discuss further details.
<br />Some acids and other chemicals used
<br />in the manufacture of printed circuit
<br />boards are classified as hazardous waste
<br />if they are left standing for extended
<br />periods, authorities said.
<br />"I think there's a good possibility it
<br />(the Circuit Works plant) will become a
<br />(federal) Superfund cleanup site," said
<br />Duane, Mooney, who was chief operat-
<br />ing officer of the plant located just
<br />north of French Camp.
<br />Mooney downplayed the real dangers
<br />of the situation, however.
<br />"These are plating chemistries and
<br />.drummed -up chemicals: corrosives,
<br />acidics. They're considered hazardous
<br />waste because they've been stored in the
<br />plant for more than 90 days. Are they
<br />hazardous to the people of Stockton?
<br />No. Are they hazardous to the environ-
<br />ment? No."
<br />They are a nuisance, though, and
<br />they could be a very expensive nuisance,
<br />Mooney said.
<br />Because the plant shut down sudden-
<br />ly, in midday, the chemicals used in cre-
<br />ating etched circuit boards are still
<br />floating throughout the expensive
<br />equipment, in etchers, strippers, devel-
<br />opers and plating tanks, Mooney said.
<br />The Alan Baker Co. of South San
<br />Francisco leased most of the equipment
<br />to Circuit Works. But Baker's efforts to
<br />recover the equipment are being greatly
<br />complicated by that pieces still are
<br />loaded with chemicals, Mooney said.
<br />The chemicals will have to be remov-
<br />ed from the equipment, placed in ap-
<br />propriate containers, and disposed of
<br />according to strict regulations, along
<br />with the chemicals still encased in their
<br />original containers.
<br />"I think a private company could
<br />probably do the job for $200,000,"
<br />Mooney said.
<br />Because there may be disputes over
<br />the plant's ownership, and thus who is
<br />responsible for and capable of financing
<br />the cleanup, Mooney believes the feder-
<br />al government may end up paying for
<br />removal of the chemicals.
<br />"In that case, it could cost $1 million
<br />or $2 million," he said.
<br />customers were cut Ott withum notice.
<br />The customers soon found new sup-
<br />pliers, which insiders say virtually eliml-
<br />timed any chance that Circuit Works
<br />mightrcopen.
<br />"It's a disaster," said Mooney, who
<br />was chief operating officer of Circuit
<br />Works when it shut down. "I've seen
<br />nothing this convoluted in my 30 years in
<br />the field, This was a total joke "
<br />Mooney said he expects the Hansen -
<br />Sebastian suit will be the first of a Burry
<br />of legal actions.
<br />The suit charges that Scorpion, among
<br />other things, deceived the former Circuit
<br />Works owners, failed to provide promised
<br />financial help failed to negotiate with
<br />creditors,. neglected Circuit Works cus-
<br />tomers and "totally abandoned (Circuit
<br />Works) in early September 1992."
<br />The suit, filed in U.S. District Court in
<br />San Jose, does not involve a third original
<br />Circuit Works partner, Steve A. Martino,
<br />who also lives in the Sacramento -San
<br />Joaquin Delta area.
<br />Named as defendants, in addition to
<br />Scorpion Technologies, are its president
<br />and chief executive officer, Terry Marsh;
<br />Business Promotions International Ltd..
<br />the' Hong Kong firm; John T. Dawson of
<br />San Jose, attorney for both Scorpion and
<br />Business Promotions International; and
<br />Michael Horne, managing director of
<br />Business Promotions International.
<br />Marsh and Dawson have not returned
<br />telephone calls by The Record.
<br />The demise of Circuit Works was rela-
<br />tively quick. The lawsuit said the firm,
<br />which moved from the Silicon Valley into
<br />the Grupe Business Park near French
<br />Camp 10 years ago, had. historical annual
<br />sales of $20 million. It had lost a little
<br />business in recent years but was still ro-
<br />bust early last year.
<br />At that time, its employees were work-
<br />ing three shifts a day, turning out more
<br />than $1 million worth of sophisticated
<br />two- and three -layer printed circuit
<br />boards each month for the manufacturers
<br />of computers and other electronic equip-
<br />ment.
<br />What happened?
<br />The answers — pieced together from
<br />court records and other documents plus
<br />interviews with Mooney and other insid-
<br />ers — involve not only the alleged fouled -
<br />up sale to Scorpion but also increased
<br />competition and the squeezing of Circuit
<br />Works' bank credit line and cash Bow.
<br />In mid-1991, Circuit Works' biggest
<br />customer, Compaq Computer, canceled
<br />its contract. Mooney said the loss of
<br />Compaq dropped Circuit Works' month-
<br />ly gross sales from about $1.2 million a
<br />month to around $800,000 a month.
<br />The loss was reported to Circuit
<br />Works' major bank, Comerica Bank, in
<br />San Jose. In response, Mooney said, the
<br />bank reduced Circuit Works' line of cred-
<br />it by $600,000, dropping it to $1,1 mil-
<br />lion, and put further restrictions on bor-
<br />rowing.
<br />This credit squeeze greatly hampered
<br />Hansen's attempts to attract new custom-
<br />ers to replace Compaq, Mooney said.
<br />Circuit Works employees also felt the
<br />squeeze. Roy Mora of Sacramento, who
<br />was the company's operations director for
<br />hazardous waste, said that in mid-1991,
<br />workers were asked to take pay cuts of 5
<br />percent to 20 percent. Work shifts were
<br />cm to two a day, Mora said.
<br />Bruce Ballard, who has moved to a
<br />small town near Mount Lassen, was Cir-
<br />cuit Works' director of engineering from
<br />September 1990 until it closed. He said
<br />Compaq's pullout was simply another
<br />symptom of rapid changes in the indus-
<br />try, changes to which many U.S. man-
<br />ufacturers did not adequately adjust.
<br />"In the late '60s and the'70s, it was fat
<br />city for printed circuit -board manufactur-
<br />ers," Ballard recalls. "Profit margins
<br />were 40, 50 percent.
<br />"Then competition began to develop in
<br />the U.S. and Korea, in Singapore, Tai-
<br />wan, the Pacific Rim. Overhead costs be-
<br />gan to escalate, salaries rose, and there
<br />were more regulations. But management
<br />practices didn't adapt to the new circum-
<br />stances. Management hadn't 1, 'ed how
<br />See t, . Urr, a -e
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