Creditors Will Take All Assets, Incomnet Says

Financially troubled Incomnet Inc., which filed for bankruptcy protection in September, said Monday it is unlikely that its stock will be listed again on any exchange or that shareholders will receive any value for their shares.

The Irvine long-distance service reseller also said that plaintiffs in a class-action lawsuit against the company will not receive anything from a settlement last June.

Plaintiffs, who had accused the company of falsely denying the existence of a Securities and Exchange Commission investigation, had settled for $500,000 in cash, $100,000 in expenses and about $4 million worth of stock.

Incomnet’s stock was removed from the Nasdaq SmallCap market soon after the company filed a petition under Chapter 11 of federal bankruptcy laws. Incomnet said it planned to submit a restructuring plan in U.S. Bankruptcy Court in Santa Ana next week.

Under the plan being formulated, the company said, creditors would be repaid and nothing would be left for shareholders or class action members.

The company, which has 120 employees in Southern California, had listed in its bankruptcy filing debts of $27.5 million and assets of $23.1 million.

Incomnet has lost money for seven straight quarters and said its third-quarter loss was “significant.”

In 1997, one of its subsidiaries, National Telephone & Communications Inc., paid $1.25 million to settle accusations that it had switched the long-distance service of at least 10,000 customers without their permission, a process known as slamming.

That same year it paid $800,000 to settle a shareholder lawsuit that involved former Chief Executive Sam Schwartz.

The class-action lawsuit stemmed from the company’s denial in 1994 that it was under investigation by the SEC. Schwartz, who resigned from Incomnet in 1995, had been investigated by the agency for allegedly making improper trades of the company’s stock.

In 1996, he turned over to Incomnet more than $2 million he made on his trades.