The trustee for USA Capital is seeking damages from three accounting firms, including Big Four giant Deloitte & Touche, which audited the hard-money lender before it collapsed with $960 million in 6,000 investors’ money.
Other prominent civil defendants in USA Capital lawsuits include Fertitta Enterprises, an investment company owned by the Fertitta family that co-owns and operates Station Casinos, and Wells Fargo Bank.
Bankruptcy Judge Linda Riegle on Tuesday approved a $1.5 million settlement payment by the Las Vegas accounting firm Beadle McBride & Reeves. Trustee Geoffey Berman also has reached an undisclosed settlement agreement with Piercy Bowler Taylor & Kern, another Las Vegas accounting firm.
Ralph Piercy of Piercy Bowler and a spokesman for Deloitte & Touche had no immediate comment. Beadle McBride didn’t return calls for comment.
Berman and his attorneys seek to recover money for the benefit of creditors who were victimized by what the lawsuit calls a “massive fraud” at USA Capital, which was owned and operated by Joe Milanowski and Tom Hantges. USA Capital and related entities filed for bankruptcy in April 2006.
Berman’s attorneys at Diamond McCarthy of Houston are pursuing a pending lawsuit in federal court against Deloitte & Touche. The plaintiffs seek compensatory damages, disgorgement of payments USA Capital made to Deloitte and punitive damages.
The lawsuit accuses Deloitte and Victoria Loob, former secretary-treasurer at USA Capital Commercial Mortgage, of accounting malpractice, and breaches of fiduciary duty. Attempts to contact Loob for comment failed.
The lawsuit claims that Deloitte helped in the fraudulent scheme at USA Capital by issuing unqualified audit opinions on USA Commercial Mortgage’s false and misleading financial statements for the years 1998 through 2001.
Deloitte found the USA Capital bookkeeping records “to be replete with inconsistencies, inaccuracies, errors and false statements,” according to the lawsuit. The giant accounting firm found numerous “red flags,” including lack of regulatory compliance, inadequate internal controls and lack of documents for related-party transactions.
The lawsuit said Deloitte learned that insiders withheld $7 million from Diversified Trust Deed Fund, a USA Capital investment company that is a second plaintiff in the lawsuit, before issuing an unqualified audit opinion for 2001. Diversified managed investments for 1,300 investors.
The lawsuit said Deloitte concealed its findings, issued unqualified audit opinions and then “orchestrated a quiet withdrawal” from the engagement with USA Capital.
The trustee is also suing Wells Fargo Bank, seeking more than $25 million in connection with USA Capital’s two trust accounts at Wells. One trust account was for deposits made by investors; a second was for interest and principal payments made by borrowers.
In yet another lawsuit, the trustee seeks to recover money from Fertitta Enterprises relating to a $5 million loan that the investment company made to the owner of the Marquis Villas condominiums of Palm Springs, Calif.
Contact reporter John G. Edwards at email@example.com or 702-383-0420.