Interim managers at bankrupt USA Capital on Wednesday said they have not started foreclosure on properties that secured delinquent loans and have "not yet" filed lawsuits to recover assets from the owners of the bankrupt private lender.

USA Capital chief restructuring officer Thomas Allison said he may yet foreclose on some properties and may sue former owners, who include Tom Hantges and Joe Milanowski.

Allison was responding to questions from Rob Charles, an attorney for a committee representing unsecured creditors, during a hearing at Cashman Field. Several hundred investors attended the hearing, straining to hear the latest information about $962 million in assets that USA Capital controlled.

USA Capital became insolvent and filed for bankruptcy in April, tying up the assets of thousands of investors around the country. The private lender solicited money from individual investors to use in funding short-term mortgage loans secured by real estate.

Investors were attracted by double-digit interest rates and the relative security of having real estate as collateral. Borrowers, including developers such as Hantges and Milanowski, rely on private lenders to help them raise money quickly for projects.

Allison, a Chicago-based turnaround expert, was hired to take over and continue operating USA Capital during bankruptcy.

At the hearing Wednesday, Allison was asked repeatedly why he had not started foreclosing on property that secures delinquent loans. Allison said it sometimes is better to give borrowers an opportunity to repay the amount owed, rather than encountering delays and costs associated with foreclosure.

Allison said he had "not yet" filed any lawsuits against Hantges and Milanowski in an effort to win judgments on behalf of USA Capital investors. He said he first wants to investigation Hantges and Milanowski for information about their personal net worth and assets.

"If you don't sue them, we will," said Rob Charles, an attorney representing a committee of unsecured creditors.

Several investors questioned about criminal prosecution of the former owners of USA Capital. August Landis, assistant U.S. Trustee, said government procedures call for his office to refer potential criminal matters to the U.S. Attorney's office for possible prosecution.

Allison said it was better for investors if Milanowski, who has been cooperating with the restructuring team at USA Capital, remains free for now.

"It would be very difficult for (Milanowski) to attend meetings if were behind bars today," Allison said.

Allison said he could ask the judge to liquidate the assets of USA Capital affiliated companies, "wind down" operations for future closing or try to keep part of the company as a going concern.

He favors trying to continue to operate USA Commercial Mortgage as a going concern, using institutional loans, rather than money from individual investors, to make short-term mortgages.

USA Commercial Mortgage collects and distributes interest and principal payments to investors, as well as originating new loans.

"That, to my mind, would be the vest way to harvest value to distribute to people in this room," Allison told investors.

Allison mentioned that USA Capital has a pension program for employees, medical insurance program and long-term disability insurance for workers. The executive said he is looking for ways to recover money from the three programs for the benefit of investors.

Several people asked about the timing of the first distribution of cash. USA Capital will ask Bankruptcy Judge Linda Riegle to approve the first distribution of an undetermined amount on Aug. 4. Attorney Lenard Schwartzer said he expected the payments to be made by late August or early September.