Partners Trade Suits in Breakup : Courts: The two accuse each other of financially sapping their Westlake Village flooring firm. Their bank is sued and countersues.

It started out as a more or less typical partnership breakup, with one partner accusing the other of embezzlement after their company suffered an unexplained cash shortage.

The case involves a building subcontractor called Marshall’s Design Inc. in Westlake Village that claims it was looted of more than $500,000 between 1988 and 1990.

Now the dispute has grown into a complicated legal battle in Ventura County Superior Court among the subcontractor’s founder and current manager, Marshall Pepperman, his ex-partner Alex Shin and the company’s former bank, Premier Bank in Northridge.

Pepperman, 38, accuses Shin in a lawsuit of forging company checks and making unauthorized money transfers into Shin’s personal account at Premier. Pepperman is also suing Premier for allegedly doing nothing to stop the fraud. Meanwhile Shin claims in a countersuit that it was Pepperman, not Shin, who sapped the company of money and brought it to the brink of ruin.

Premier has filed its own countersuit against Pepperman and Shin. The bank argues in its suit that any fraud that may have occurred is the fault of Shin and Pepperman, not of the bank.

Pepperman’s lawsuit against the three-office bank claims among other things that Premier broke its own rules by allowing Shin to make money transfers without Pepperman’s authorization, as required by an agreement signed by the two men when they opened the company’s account.

But state banking regulators have reviewed Pepperman’s claim and concluded that Premier did not violate the state Banking Law. The Federal Deposit Insurance Corp. also looked into the matter and said it was for the courts to decide. And the Ventura County Sheriff’s Department has yet to present a case to the district attorney’s office after more than four months of an investigation instigated by Pepperman.

Shin, 44, left the subcontracting flooring firm in April, 1990, after Pepperman accused him of embezzlement, according to court documents. Shin has since moved to an undisclosed location in Northern California, according to his lawyer, Alex Gutierrez, and could not be reached for comment.

Both Premier and Shin, through his attorney, vehemently deny Pepperman’s claims and accuse Pepperman of trying to involve law enforcement officials, banking regulators and the media in a smear campaign. Shin has countersued Pepperman for alleged fraud and misrepresentation, among other things.

Premier’s president and chief executive, Simone Lagomarsino, declined comment on the merits of the suit.

None of the suits have come to trial and the discovery phase is scheduled to open this fall in the suits involving Pepperman and Premier.

Buried in the tangled web of litigation is a tale of how a once-flourishing friendship and business partnership went sour and the role, if any, that was played by a local bank that prides itself on helping small businesses.

Pepperman said in an interview that Shin first came to him in 1986 “on his hands and knees” looking for steady work for Shin’s Agoura flooring company. Pepperman, who started Marshall’s Design in 1982, said he decided to give Shin a few jobs and before long the two were a team. Shin’s Korean installers were more reliable and took greater pride in their work than did most other workers Pepperman said he’d encountered in his business designing and marketing residential flooring.

Soon Marshall’s Design was attracting contracts from big developers to furnish flooring for housing tracts. Helped by the pre-recession housing boom, the company saw sales shoot past $3 million in 1988, Pepperman said.

Eventually Shin went from being a subcontractor to a 25% partner in Marshall’s Design.

Hoping to expand their business, Shin, Pepperman and a third investor, Paul Lee, obtained a $100,000 loan for Marshall’s Design from Premier in 1988, according to Pepperman and attorney Gutierrez. Premier ultimately lent Marshall’s Design $250,000, and the bank is still owed $180,000, according to Pepperman.

But starting in spring, 1988, Marshall’s Design began experiencing cash shortages. To keep the company afloat, Pepperman and Shin from time to time lent it money from their personal accounts at Premier, according to both men.

In all, Shin lent the company more than $82,000, according to his lawyer Gutierrez. Shin got $40,000 of it back by, among other things, depositing checks made out to Marshall’s Design into his own account, with Pepperman’s blessing, according to Gutierrez. Also, Shin would call the bank to transfer money from the company’s account to his personal account, Gutierrez said.

As for the alleged forgeries, Gutierrez said Shin had the power of attorney of the company’s installers to sign their names to the backs of checks made out to them by Marshall’s Design. Shin deposited the checks in his personal account at Premier to cover payments that he had earlier made from his account to the workers, so the deposits were simply repayments, Gutierrez said.

“The only reason that was done was to expedite payment,” Gutierrez said.

Pepperman said in an interview that Shin never asked him to repay any loans and that therefore the money transfers and endorsements were unauthorized, whether or not Shin was owed money. Pepperman said in an interview that he has compiled an extensive list of all monies that went into and out of the company from April to December, 1988, and can prove that Shin was owed no money when he first allegedly started embezzling money in April, 1988.

Whatever the cause, there’s no dispute that the company ran into trouble beginning in 1988. It lost money the following year and in 1990, and Pepperman expects another loss this year.