Bankruptcy Judge Linda Riegle on Wednesday refused to allow Rolland "Ron" Weddell and his company, Spectrum Financial Group, to proceed with a jury trial against USA Commercial Mortgage, one of several related bankrupt companies with $962 million in investor assets.

Weddell sued the private lending company in 2001, claiming that USA Commercial and others conspired to cheat Weddell and others of millions of dollars. The fraud allegedly happened in connection with loans USA Capital and related companies made to a home building company, American Communities.

The lawsuit accuses the defendants of obtaining money through fraud and malicious injury. Spectrum Financial made a guarantee on loans from USA Commercial and the bankruptcy estate may try to make Spectrum pay because of that guarantee.

USA Commercial is one of five companies known jointly as USA Capital. It was the largest private lender in Nevada but became insolvent and filed for bankruptcy in April.

USA Capital used money from individual investors to make short-term loans, so-called trust deeds, to developers. Many of those borrowers stopped paying interest, although USA Capital told regulators that all of its 115 loans were performing.

Spectrum's attorney, Elissa Cadish, told Riegle that she expected a three-week jury trial and confirmed Riegle's estimate of $100,000 in attorneys fees and costs each day of the trial.

Riegle denied the request, noting that Spectrum could win a judgment and be unable to collect, because USA Capital may be unable to pay unsecured creditors.

Lenard Schwartzer, an attorney for USA Capital, suggested that Spectrum file a claim against the USA Capital estate.

Riegle agreed, but she allowed Spectrum to proceed with a jury trial against USA Capital owners Tom Hantges and Joe Milanowski, as well as other defendants that are not in bankruptcy.

Annette Jarvis, another attorney representing USA Capital, told the judge that interim managers are preparing to mail the first checks to USA Capital investors since the bankruptcy filing. Jarvis said she expects the checks to go out late this week or early next week.

The amount being distributed was reduced by $3 million to $65 million so that investor committees and the debtors have time to review facts surrounding the $3 million. Jarvis hopes that the $3 million can be included in a later distribution to investors.