A former chief financial officer for downtown-based American Business Bank is suing the bank, claiming she was forced out of her job after she raised concerns that senior executives were using company funds for personal expenditures.

In a lawsuit filed in California Superior Court in early April, Julie Verner alleged that Leon Blankstein, the bank’s chief executive, and Wes Schaefer, chief investment officer, had unlawfully used the bank’s corporate credit cards to pay for vacation cruises, hotel stays that weren’t related to work, down payments on vehicles, medical expenses, and luxury items such as jewelry and women’s lingerie.

Verner alleged in the lawsuit that Blankstein and Schaefer violated Regulation O, a federal rule that monitors the extension of credit by a bank to an executive officer, director or principal shareholder. She claimed Blankstein and Schaefer had each pulled a personal line of credit of $90,000 and cash advances on their salaries.

Verner, who served as chief financial officer at ABB from June 2016 to late 2017, said in the lawsuit that after she raised concerns about the expenses, she was demoted. Verner is seeking punitive damages.

ABB officials were served the lawsuit on May 13, about five weeks after it was filed, according to Suzanne Dondanville, the bank’s executive vice president and chief operating officer.

Dondanville declined to comment on the contents of the lawsuit, saying the litigation was pending. “We have received it. We can’t comment on it,” she said.

A case management conference is scheduled for Aug. 7, according to the court docket.

Through her lawyer, Elliott Jung, Verner declined requests for comment.

Experts said it’s not illegal for bank officers to borrow funds from a bank.

Robert Tammero Jr., a Reg. O expert with K&L Gates in Boston, said it’s difficult to assess in the ABB case whether there were violations of the regulation. “Reg. O violations do happen, both inadvertently and intentionally,” he said. “Certainly, these kinds of things have happened before at other banks.”

Tammero said violations of Reg. O are common, but the credit card use alleged in Verner’s complaint “is more egregious than a one-time mistake.”

ABB’s board of directors launched an audit and investigation into Verner’s concerns before demoting her to chief accounting officer in late 2017, according to the lawsuit.

According to Verner’s profile on LinkedIn Corp.’s website, she previously worked for accounting firm Grant Thornton in Irvine and for Las Vegas Sands Corp. At ABB, she served as vice president and assistant controller from October 2014 to June 2016, and chief financial officer from June 2016 until Oct. 30, 2017.

By December 2017, Verner said in the lawsuit, she “suffered a traumatic and psychological breakdown” due to stress related to the allegations she’d made, as well as her demotion.

Verner also alleges that bank executives discriminated against her due to her Vietnamese American ethnicity and her gender, paying her less than men who’d previously held the chief financial officer position.

She claimed she wasn’t invited to the bank’s yearly executive retreat and was excluded from a photograph of executives on the bank’s website.

Verner was placed on medical leave in December 2017 and terminated in January 2019, according to the lawsuit.

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