CEO exits Las Vegas bank for marijuana startup

Mona Shield Payne

President and CEO John Sullivan is shown at First Security Bank in Las Vegas Tuesday, September 9, 2014.

John Sullivan made a name for himself as medical marijuana investors’ go-to banker in Las Vegas, taking dozens of clients while other lenders refused to jump in.

Now, Sullivan has left his job and apparently joined the nascent industry.

Sullivan, who helped turn around First Security Bank of Nevada, a small lender that neared collapse during the recession, has resigned as president and CEO, board chairman Jason Awad said this week.

Awad, First Security’s majority owner, has taken the CEO’s spot, and chief credit officer Nancy DeCou has added the president’s title.

Awad said he doesn’t know what Sullivan is doing now but believes he’s working for a marijuana-related business.

According to a report last week from news site Marijuana Business Daily, Sullivan joined Integrated Compliance Solutions, a marijuana-focused financial services startup in Las Vegas.

He is the president and chief executive, according to the news site, which quoted Sullivan as saying he’s excited to see an industry created.

“It’s sort of brand new,” he said. “It’s like the dot-com explosion 20 years ago.”

His company could not be located for comment.

Under Sullivan, First Security went from a young bank on the verge of failure to one with new investors and growing profits.

Founded in early 2007, First Security focused heavily on financing the booming real estate industry. But after the economy collapsed, banks across the country were shut down in waves, and First Security was drowning in red ink.

It lost $3 million in 2009 and $8.4 million in 2010. By spring 2011, it had about $16 million in delinquent loans and faced a strong possibility of getting shut down by regulators, Sullivan has said.

Sullivan was hired in spring 2011. After initial fundraising efforts failed, he recruited Awad, a Las Vegas attorney and entrepreneur, to inject sorely needed capital. Awad led a group that invested $14 million cash that year.

Since then, First Security has been consistently profitable, with $167,000 in net income in 2011, $420,000 in 2012, $1.5 million in 2013 and almost $2.8 million last year, federal records show.

Sullivan also made a big push into medical marijuana, an industry stuck in legal limbo and, investors say, desperate for bankers.

Marijuana is legal for medical purposes in Nevada and other states — and allowed for recreational use in a few of them — but banned under federal law. Congress has deemed it a “Schedule I” substance, meaning it has high potential for abuse and no accepted medical use, similar to heroin, LSD and ecstasy.

Locally, would-be medical marijuana businesses are being licensed and inspected but haven’t opened their doors.

Under President Barack Obama, federal prosecutors show no interest in overriding states to shut pot companies down and potentially arrest them, but even supporters say the feds could reverse course.

As a result, most banks won’t lend to marijuana companies or accept their deposits.

“Our policy of not banking marijuana-related businesses is based on applicable federal laws,” Tony Timmons, a Wells Fargo Bank spokesman in Las Vegas, said last fall.

Meanwhile, not all credit-card companies will process marijuana purchases, leaving dispensaries and other pot businesses with stacks of cash and few places to safely deposit them. Stories abound of dispensary owners keeping duffel bags filled with cash in their basement or in their store.

Last fall, Sullivan said First Security had taken more than 50 clients who were looking to open medical marijuana companies. As far as he knew, his bank was the only one in Southern Nevada serving the new industry. He gained notoriety for the work, with reports about him by local and national news outlets.

He said he knew the risks of taking such clients but viewed it as a legitimate line of commerce and a moral imperative to provide medicine to the sick.

Asked if First Security would continue banking the industry or back out, Awad, the new CEO, said the lender will keep serving small businesses, including medical marijuana companies.

“We believe it’s a legitimate business,” he said.

Business

Share