Newport Bank Ousts CEO; Financier Drops Plan to Add $3 Million

Directors of American Interstate Bank have ousted Alvin C. Rice as chairman and chief executive, just nine months after the former Bank of America vice chairman was named to the post.

At the same time, Rice’s financial backer has abandoned his plan to pump $3.2 million into Newport Beach-based American Interstate to fuel its growth.

News of Rice’s ouster was sent to shareholders last week, shortly after they received copies of the bank’s annual financial statement, which promised new investment and business activities under Rice.

But it was those new activities--such as mortgage banking and business loans guaranteed by the federal Small Business Administration--that isolated Rice from the rest of the bank’s directors, said another director, Oakland lawyer Franklin Jeans.

Rice said Wednesday that he was ousted July 1 at a board meeting because the four other directors decided to “take control” after he had “turned the bank around strongly.”

Rice also said he believes his ouster was tied to the failure of his financial backer and longtime business associate, developer Joseph A. Duffel, to fulfill a promise to boost his $820,000 investment in American Interstate to $4 million.

Duffel was supposed to buy the additional stake in the bank on June 26, said Rice, who added he has not talked to Duffel or Jeans since his ouster and does not know why Duffel didn’t buy more American Interstate shares.

But Jeans, who is Duffel’s lawyer, disputed Rice’s characterization of events, saying that there is no deadline for Duffel to increase his stake in the bank and that the bank had turned a corner and begun operating profitably before Rice was hired.

And Duffel, who already owns about 9.9% of the bank’s stock, said he withheld his financing only after telling board members at the July 1 meeting that if Rice left the bank, he would not go through with his plan. Duffel, who received federal and state approval several months ago to buy controlling interest in the bank, was to have bought enough new shares to give him 48.3% of the stock.

“I thought that that little bank, with high-quality management, could go to the moon,” Duffel said. But, he added:

“The directors were unhappy with Mr. Rice, and I was going into it because Mr. Rice was going to be there.”

Without Rice, Duffel said, he decided to “just fold my tent and quietly creep away.”

Duffel, whose development business is based in Lafayette in Contra Costa County, said he plans to keep his current stock in the bank because “it’s (in) a great growth area and (is) a good little bank.”

Jeans, who sided with the other bank directors on key issues, said Rice “had a very aggressive acquisitions policy” and was especially hungry for non-banking financial companies, such as mortgage banking firms. American Interstate’s board was more interested in forming internal policies and concentrating on core business, he said.

Rice left Bank of America abruptly in August, 1978, after A. W. Clausen, then the bank’s president, said Rice had an “appearance” of a conflict of interest in his dealings with Duffel. Rice joined Imperial Bank a year later as chairman and chief executive and tripled its assets to $1.5 billion in three years before leaving to start a financial data services business.

Jeans said American Interstate has set up a search committee to find a new chief executive. Director William Harrison, who was chairman before Rice and Duffel came into the bank, is serving as chairman and president.

Harrison could not be reached for comment.