Bill Bullard takes questions Tuesday during a meeting on USA Capital's reorganization plan at the Atrium Suites hotel. Photo by John Locher.

Investors who bought short-term mortgage loans brokered by USA Capital are shouting mad and divided over the best strategy for recovering some of their assets.

The Direct Lender Committee, which represents investors in short-term mortgage loans, presented arguments for approving a proposed reorganization plan for USA Capital on Tuesday during a meeting at the Atrium Suites hotel. But representatives of the Lender Protection Group met investors outside the hotel conference room, urging them to vote against the plan.

Inside the meeting, investors often shouted over who could speak next or whether to support the plan.

The stakes are high.

USA Capital controlled $962 million in investor assets in April when it became insolvent and filed for Chapter 11 bankruptcy protection, which would allow it to reorganize. The company solicited money from investors to make short-term loans to developers in return for double-digit interest rates. About 6,000 investors around the country entrusted money to USA Capital.

Since the bankruptcy filing, "we have been brown mushrooms, kept in the dark and fed nothing," said investor Howard Connell, referring to the secrecy that has surrounded negotiations by investor committees. "We are having stuff shoved down our throats at the 11th hour. We should have the right to say something."

Connell said he would be "destitute within the next six months" because of losses at USA Capital.

As Connell expressed frustration, Monica Fuller, an investor who favors the reorganization plan, expressed impatience.

"Let's get on with it," she said. "If you sit around and boo-hoo for another three months, nothing is going to happen."

Some investors bought fractional interests in the secured loans, sometimes called trust deeds, but others invested in one of two funds that operated like mutual funds for trust deeds.

Bill Bullard, Direct Lender Committee chairman and investment chief for the private investment company of Fertitta Enterprises, recommended investors vote for the reorganization plan. But Morris Mansell, an investor with the Lender Protection Group, opposed the plan for several reasons.

Mansell said investors whose money was stolen should be repaid before lawyers get paid. But another speaker said no lawyer would ever participate in a bankruptcy case if the lawyer knew he might not get paid for his work.

If the reorganization plan is defeated, investor committees will need to start negotiating on a new reorganization plan. Otherwise, the estate will be liquidated and assets will be divided among secured and unsecured investors on a prorated basis, Bullard said.

"The longer this thing goes on (in bankruptcy court), the more the attorneys are going to get paid," Bullard said.

Bullard wants Silver Point Capital of Greenwich, Conn., or another bidder to take over loan servicing for the assets controlled by USA Capital, replacing the interim management at USA Capital. Silver Point, a hedge fund, has the assets to start foreclosure against delinquent borrowers, unlike the debtor company, Bullard said.

"(Silver Point's owners) have deep pockets. USA Capital is no longer in business," said investor Ron Sharpe.

Sharpe urged others to support the reorganization plan, saying he already has recovered $500,000 of his $1 million investment with USA Capital.

Silver Point or another bidder will buy assets from USA Capital First Trust Deed Fund and will have financial interests aligned with direct lenders, Bullard said.

Bankruptcy Judge Linda Riegle has scheduled an auction for Silver Point and two other bidders at 9:30 a.m. Thursday.

Yet, if investors reject the reorganization plan, Silver Point has the right to walk away from the deal, Bullard said.

Some investors, including Mansell, complained that they were paying too much for loan servicing fees, but others argued that 1 or 2 percentage points was a small sum compared with the total owed investors.

Doris Stevenson said she invested both in USA Capital loans and loans brokered by another failed private lender, Global Express Capital.

Stevenson suggested USA Capital investors may do relatively well compared to those who bought loans through Global Express. Stevenson said she had $170,000 invested with Global Express, has recovered $20,000 and is awaiting one last small payment three years after a federal judge put Global Express into receivership.