Bankruptcy court officials plan to go to trial this year against several civil defendants, including Wells Fargo Bank and possibly accounting firm Deloitte & Touche, in efforts to recover money for victims of fraud at hard money lender USA Capital.
USA Capital solicited money from investors and used it to make loans to developers. The company was managing $962 million in investments for 6,000 investors when it filed for bankruptcy court protection in 2006.
Former USA Capital President Joe Milanowski was sentenced on Friday to 12 years in prison for wire fraud at the company. Milanowski pleaded guilty as part of an agreement that he cooperate with the U.S. Attorney's office.
Chief District Court Judge Roger Hunt earlier said he might reject the guilty plea agreement and sentence Milanowski to a longer prison term.
At a hearing Friday, Allan Diamond, an attorney for bankruptcy trustee Geoffrey Berman, urged the judge to consider the help Milanowski could give in trials of third parties involved with USA Capital.
Diamond said Milanowski would have incentive to cooperate in pursuing judgments against several third parties if he received a lower sentence.
"With Mr. Milanowski's cooperation, we maximize the opportunity of success in these cases," Diamond said.
Wells Fargo Bank, the defendant in a lawsuit pending in bankruptcy court, provided banking services for 15 companies affiliated with USA Capital. Deloitte & Touche is being sued in connection with audits it conducted at USA Capital.
Other civil defendants received money from USA Capital that the plaintiffs argue should be returned to the USA Capital bankruptcy estate or to a USA Capital investment fund for the benefit of all creditors and investors. These defendants are former Anchor Gaming CEO Stan Fulton; Fertitta Enterprises, which is owned by members of the family that runs Station Casinos; Anthony and Susan Monaco; and David Fogg.
Geoffrey Berman, trustee for the USA Capital liquidating trust, said he has recovered and distributed $20 million to investors and creditors. Administrator Michael Tucker said he has made three distributions totaling $20 million to investors in a mortgage loan pool called USA Diversified Trust Deed Fund. That represents 13 percent of the total invested in Diversified, he said.
John G. Edwards at firstname.lastname@example.org or 702-383-0420.