LV bank in pact to recover diverted funds

Thursday, June 3, 1999 | 11:43 a.m.

A small Las Vegas bank that alleged $2.2 million was diverted illegally from its ATM network in December has recovered more than one-third of the missing funds.

Business Bank of Nevada said Wednesday that it has recovered $800,000. A structured repayment agreement has been signed with the ATM processor, NMS Financial Inc., and bank officials said they expect to get all the bank's money back by January.

"Through vigorous pursuit of all related parties, using every available legal means, we have been able to develop a structured payment program and a stipulated repayment agreement that will assure the bank will recover all of its monies," Al Alvarez, president and chief executive officer of the bank, said in a statement issued Wednesday.

Under terms of the agreement, most of the money is scheduled to be repaid this year.

The reported loss stems from a dispute between the bank and a company that was contracted to supply cash for the bank's ATM network. Business Bank of Nevada, formerly known as Las Vegas Business Bank, had contracted with Pinnacle Cash Systems LLC to supply the machines. Pinnacle had a contract with DCI Inc., doing business as NMS Financial.

The bank filed suit in District Court in March alleging fraud and breach of contract against DCI and its sole shareholder, Errol Vestuto. Pinnacle joined the bank in the suit.

DCI filed a counterclaim against the bank alleging fraud and breach of contract after the bank filed its suit.

With the signing of the repayment agreement between NMS Financial and the bank, Judge Valorie Vega last month stayed the court proceedings.

Vestuto could not be reached for comment this morning.

The diversion of funds was disclosed when the bank took a charge against 1998 earnings. The bank said that while the charge offset earnings that year, the negative effect will be nullified this year as the repayment is recognized as a recovery.

"If recovery of these funds continues as expected, and when combined with anticipated earnings for the current year, I project the bank will have a very good financial year in 1999," Alvarez said.

When the funds were discovered to be missing, the bank's holding company, Business Bank Corp., made an unsecured loan of $1 million to bolster the bank's capital position while it attempted to recover the losses.

Alvarez said the bank, headquartered at 6085 W. Twain Ave., hasn't been slowed by the reported losses.

The bank says its loan portfolio has grown and it plans to expand its SBA lending operation this year. In addition, Business Bank of Nevada recently opened a third branch at the corner of Lake Mead Boulevard and Tenaya Way.

The company's stock dipped slightly in the wake of the loss. Today, it was up nearly 10 percent, trading this morning at $13.125, up $1.125. When the losses were first reported, the issue was trading at $15.625.

Alvarez said most of the stock is owned by the bank's 14-member board of directors. The issue trades over the counter, so the company is not required to file certain performance reports with the Securities and Exchange Commission.

"If recovery of these funds continues as expected, and when combined with anticipated earnings for the current year, I project the bank will have a very good financial year in 1999."Al AlvarezBUSINESS BANK OF NEVADA PRESIDENT