The state of Alaska has joined more than a dozen civil lawsuits alleging “widespread fraud” by the owner of an ATM business that serves Alaska Native village corporations and other small businesses.
In a lawsuit filed Wednesday in Anchorage Superior Court, the state accuses a man named James Dainis of fraud, civil conspiracy and violating the state’s consumer protection laws by pocketing money that belonged to ATM owners.
The suit asks a judge to require Dainis to return money owed to the owners, to levy financial penalties, and to issue an order prohibiting further similar actions.
Dainis operates a series of ATM-servicing companies, including Alaska ATM Service and Societe Financial LLC, that are also named in the lawsuit.
“This sad case highlights the incredible amount of damage that an unscrupulous person in the financial industry can cause,” said Attorney General Treg Taylor in a written statement announcing the lawsuit. “The Department of Law is committed to bringing bad actors to justice, but we also encourage small businesses to be careful who they do business with, and to regularly audit their financials.”
By phone, Dainis said he wasn’t aware of the lawsuit until informed by the Beacon and that each of the state’s claims is mistaken.
“We’ve been in this business since 2006,” he said. “It’s not a fraud scheme.”
He’s had problems with third-party processing firms, and some companies have gone unpaid, he said, but in each case, he said he’s worked to make the situation better.
“Given the fact that we’ve been in business for a long amount of time and we do service a wide base of customers around the state, it’s not fair and it’s a little nefarious to paint this as some sort of fraud scheme. Granted, there’s an issue with a handful of customers, but it doesn’t reflect our business overall,” he said.
The state is also accusing Dainis of defrauding partners that he sold business interests to. In one case, he allegedly sold contractual rights to 307 ATMs. Those rights didn’t exist, the state said, and he then failed to execute the deal.
With regard to those allegations, Dainis said he’s already settled one case mentioned by the state, and in others, the COVID-19 pandemic and resulting economic downturn affected his income just like it did many other businesses around the United States.
He expects litigation will resolve those problems, he said.
The state also alleges Dainis used two out-of-state firms as “shell companies” to hide assets from creditors.
Untrue, Dainis said. Those companies are actually one, and they’re holding firms used to own a parcel of property.
“There’s no office buildings or condominiums or multiple houses or anything like that,” he said.
In many parts of rural Alaska, an ATM is the only banking institution available, and the state’s complaint puts ATM issues at its center.
Court documents filed by the state and other plaintiffs explain how they believe the alleged fraud worked.
Ordinarily, a store will own the ATM on its property, then stock it with cash. A third-party processor records each transaction and is in charge of deducting money from the customer’s bank account and sending it to the ATM owner’s account.
According to the state’s lawsuit, Dainis would sell ATMs to small businesses, including rural stores, then function as a middleman. Payments from a third-party processor would go to accounts he controlled, and he would send the money on to the ATM owner’s account.
According to the state and more than a dozen other lawsuits, that didn’t always happen.
The Aleut Community of St. Paul Island said in July that “the defendants’ history and practice of engaging in deceptive and predatory business practices with businesses in remote Alaska is demonstrated by court records in similar legal actions against the defendants.”
A 2017 lawsuit filed by Qemirtalek Coast Corp. of Kongiganak in Southwest Alaska is similar to many of those cases.
According to attorneys representing QCC, “at least $80,000 that Alaska ATM should have deposited into QCC’s bank account … was missing from QCC’s bank account,” and the issues weren’t discovered for almost a year.
QCC tried to get its money back and a complete accounting of the problems, but when Dainis failed to cooperate to the company’s satisfaction, it sued.
In 2019, QCC claimed that Dainis’ conduct “is outrageous, done with malice and bad motives, wanton, willful, (and) in reckless disregard to the rights of QCC.”
In November last year, following almost five years of legal battles, it won a judgment of almost $100,000 against one of Dainis’ companies.
But since then, court records show that QCC hasn’t been able to collect, and earlier this month, a state judge issued a show-cause order requiring Dainis to explain why he hasn’t complied with the judgment.
“Hopefully, that’s resolved within the next few weeks here,” Dainis said. “That is something we’re going to settle for the full amount. The merchant’s not losing money, and we’re not asking them to settle for less than they were owed. We’re settling the matter and they’re being refunded what they were doing.”
Several other cases remain unresolved in court, and the state believes other small businesses may have experienced similar situations without its knowledge.
In addition to filing a lawsuit, the Alaska Department of Law is asking any ATM owners who believe they may have been defrauded by Dainis to send an email to email@example.com or to call 907-269-5200.
Originally published by the Alaska Beacon, an independent, nonpartisan news organization that covers Alaska state government.