December 16, 2010 - 12:00 am
A federal jury in Reno late Tuesday awarded $79,000 of compensatory damages and $6 million in punitive damages to plaintiffs who sued a New York firm servicing loans for failed USA Capital of Las Vegas.
The civil trial, which began in mid November, stemmed from a lawsuit brought by 36 plaintiffs who invested in hard-money loans originated at USA Capital.
USA Capital solicited investment money from individuals and used the money to make short-term loans to developers. Investors were attracted by double-digit interest rates and the backstop of having real estate as collateral for the loans. However, Joe Milanowski, former president of USA Capital, pleaded guilty to wire fraud and was sentenced earlier this year to 12 years in prison.
After USA Capital filed for bankruptcy in 2006, bankruptcy Judge Linda Riegle sold the loan servicing rights and other USA Capital assets to Compass Partners of New York. Silar Advisors also of New York later foreclosed on a loan to Compass Partners and took over the USA Capital servicing business.
The plaintiffs complained that Silar failed to manage 65 loans and $115 million in loan collections in the best interest of investors.
The jury awarded $79,000 in compensatory damages for Silar’s handling of only four of the 65 loans. It also set punitive damages at $6 million.
The jury verdict is subject to legal review by the judge.