I have search the net for an answer. I was only able to find articles explaining and defining per diem as an expense account used for travel expenses (which is my understanding of the term). I was NOT able to find one article related to per diem paying for overtime (non-travel) wages which lead me to question the legallity of it.

You are wondering if it's legal to use a bank account dedicated to payment of per diem to also pay overtime? I really don't think that, legally, it makes any difference. The employer could pay overtime with cash kept in a drawer, legally. Now, from an accouting practices point if view that may be a different matter; you would have to ask an accountant about that.