Bankruptcy Judge Linda Riegle on Tuesday ordered the appointment of a trustee to prevent a man with reputed ties to crime boss John Gotti from taking millions of dollars in assets that may belong to investors in a USA Capital mortgage loan fund.

The judge ordered the appointment of a trustee to protect the interests of investors in the USA Capital Diversified Trust Deed Fund in Hotel Zoso, a property in Palm Springs, Calif.

Attorneys for investors in the trust fund feared that Tom Hantges and Joe Milanowski, the owners of USA Capital, would use the proceeds from the sale of the hotel to pay a personal debt to Salvatore Reale, a reputed former associate of Gambino crime family boss John Gotti. Hantges and Milanowski owe Reale $9.8 million, according to a court document.

"Here (USA Capital) robbed me, and I'm standing in line with everyone else," Reale told Review-Journal columnist John L. Smith this month. Reale has liens not only against Hotel Zoso but also the Royal Resort at 99 Convention Center Drive.

USA Capital was a private lender that solicited money from individual investors, including Reale, and used the money to make short-term, or trust deed, loans to developers. USA Capital became insolvent and filed for bankruptcy court protection in April.

USA Capital interim manager Tom Allison is asking Riegle to approve a reorganization plan for USA Capital after a hearing that started Tuesday and concludes Thursday.

In a separate but related case, however, Allison and his attorneys are seeking to gain control of assets that are held in other companies for the benefit of USA Capital investors and creditors.

Earlier this month, USA Capital attorneys Lenard Schwartzer and Jeanette McPherson filed petitions to force two companies controlled by Hantges and Milanowksi into involuntary bankruptcy.

The judge last week ordered the appointment of a trustee in the involuntary bankruptcy case of Tree Moss Partners, which owns 66 condominiums in Palm Springs, Calif. On Tuesday, she ordered the U.S. Trustee's office to name a trustee in the involuntary bankruptcy case of USA Investors VI which owns Hotel Zoso, a property next to the condos.

Riegle acted to protect investors in the Diversified fund.

The Tree Moss case stems from an $11.5 million loan that the Diversified fund made in 2000 for the Palm Springs condos.

The Diversified fund foreclosed on the condos and was the high bidder at the foreclosure sale of the condos. Then, the fund, which Hantges and Milanowski controlled, turned over ownership of the condos to Tree Moss, and Tree Moss gave the fund an unsecured note for $22 million.

Allison, USA Capital's chief restructuring officer, filed a statement with the bankruptcy court, saying he repeatedly asked Milanowski to return ownership of the condos to the bankrupt estate of USA Capital for the benefit of creditors.

Tree Moss now has agreed to sell the condos to Sunrise Real Estate Investment Group for $17 million. The closing was scheduled for today.

During a hearing Tuesday, Russell Walker, a Salt Lake City attorney representing Milanowski, objected to the appointment of a trustee for USA Investors VI.

"Why should they trust you now?" Riegle asked.

Walker said: "We haven't done anything but cooperate. The trust commission could be astronomical with regard to this property."

Walker suggested a trustee might delay the sale.

Schwartzer said: "There is no delay, and the cost is something we're willing to bear."

The Diversified fund's interest in Hotel Zoso stems from its loan and later foreclosure on a Sheraton Hotel in Salt Lake City.

USA Investors VI took ownership of the Sheraton and became indebted to the Diversified fund for $6.6 million.

Later, USA Investors VI also became owner of Hotel Zoso. In 2004, 169 investors bought fractional interests in a $10.5 million trust deed loan to USA Investors VI for Hotel Zoso. These direct lenders and Diversified fund investors are waiting to get repaid.

Milanowski has been unwilling to sign documents that "would assure the excess proceeds from the Hotel Zoso will be paid to Diversified," Allison said.

More ominously, Allison said, he learned that a trust belonging to Reale had a lien on Hotel Zoso to recover $9.8 million that Hantges and Milanowski owe Reale.