NationsBank Corp.'s exposure in an apparent car leasing fraud may reach as high as $36 million, though the bank says its actual losses will be "substantially" less.

The case, now being litigated in two north Georgia courts, involves NationsBank and a depository customer, used-car wholesaler Issac Leaseco Inc. of Cumming, Ga.

On July 12, NationsBank filed suit against Issac Leaseco in Forsyth County Superior Court north of Atlanta, alleging that the firm had defrauded the bank of up to $36 million, according to the Fulton County Daily Report, a regional legal affairs newspaper.

Issac Leaseco then filed for Chapter 7 bankruptcy on Aug. 1, according to the legal publication. During bankruptcy proceedings last week in federal court in Gainesville, Ga., attorneys representing Issac Leaseco denied that the company had committed any fraud against NationsBank.

NationsBank spokesman Dick Stilley declined to discuss specifics, due to the ongoing litigation. But Mr. Stilley did say NationsBank expects limited financial damage.

"We're not sure we're going to have any loss," Mr. Stilley said. "We anticipate having access to assets of the customer that will substantially reduce our exposure. In a worst-case scenario, the loss would not be material."

During last week's bankruptcy hearing in Gainesville, according to the legal publication, NationsBank won the appointment of a bankruptcy trustee to take control of Issac Leaseco.

While U.S. Bankruptcy Court Judge Robert E. Brizendine did not rule on the fraud question, he did tell the court, "Someone took advantage of this bank."

Issac Leaseco opened an account with NationsBank in February 1994 to handle deposits related to the company's used car business. NationsBank alleged in court that Issac Leaseco used deposit drafts from a fictitious bank account in Florida to inflate its balances and benefit from the float.

Attorneys for Issac Leaseco countered that the deposit relationship, known as a "program draft," was entirely legitimate.

NationsBank began investigating the Issac Leaseco account when the company complained about excessive service charges that NationsBank subsequently traced back to a computer programming error.

News of the Issac Leaseco case appears just five months after NationsBank revealed it had been caught up in the Signet/Philip Morris loan scandal. NationsBank took a $40 million charge in the first quarter to cover its $61 million exposure to that alleged fraud, which involved computer leasing.

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