Vestin details accounting problems

Wednesday, June 5, 2002 | 11:10 a.m.

SUN STAFF AND WIRE REPORTS

Vestin Group Inc.'s former auditor Grant Thornton LLP informed the Las Vegas company that its internal controls failed to ensure some related-party transactions were appropriately documented and approved by its board, said a regulatory filing Tuesday by Vestin to the Securities and Exchange Commission.

The auditor, which was dismissed April 18, also told the company that some related-party transactions weren't properly identified as related-party transactions when initially recorded in the company's books, the amended Form 8-K filing said.

In addition, Grant Thornton told Vestin Group that the lack of periodic reconciliation of accounts resulted in a significant number of adjustments after the company's books were closed at year-end, that checks were being written with verbal approval only and that written documentation of approval wasn't always retained for such checks.

The firm also told the company that the amount being paid to one of its officers exceeded by about $35,000 the compensation specified in that officer's employment contract, the filing said.

Vestin Group said all the correspondence from Grant Thornton has been delivered to the company's auditor Ernst & Young LLP. The company's audit committee is discussing the matters with Ernst & Young, the filing said.

Vestin Group said it believes the internal control matters mentioned by Grant Thornton didn't result in any material inaccuracies in its published financial statements and that, through the implementation of improved internal control procedures, it has adequately addressed the matters.

Vestin's most recent regulatory filing follows other recent actions from the company.

Vestin said Friday that Chairman and Chief Executive Mike Shustek has filed for the possible sale of 150,000 shares of common stock worth about $1.2 million.

The sale would account for 2.7 percent of the commercial mortgage company's common stock.

Shustek, who owns 59 percent of Vestin's outstanding common shares, said he would sell the shares to diversify his portfolio.

And late last month, Shustek voluntarily reduced his annual salary from $840,000 to $150,000, an income change that will be effective in the fourth quarter.

Shustek said he took the pay cut to "align" his interests as an executive of and shareholder in Vestin more closely with the firm's shareholders.

Vestin has some $455 million in outstanding in real estate loans, including a $48 million loan the company said Tuesday it made to Mendenhall-Millennium LLC for the construction of the $122 million Cannery hotel-casino in North Las Vegas.

Vestin's stock opened today at $7.45 a share and rose nearly 7 percent to $7.95 a share in early trading.