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April 21, 2006
Mortgage lender goes bankrupt; investors say they are 'stunned'By THE ASSOCIATED PRESS
The lender, with $950 million in assets, filed for bankruptcy court protection on April 13. The company raised investment funds to make short-term mortgage loans secured by real estate development and commercial properties. Investors were attracted by interest rates of 12 percent to 14 percent on their investments and by the relative security of having real estate for collateral. It's the latest in a series of private lenders who have failed in Las Vegas, including Harley Harmon Mortgage, Interstate Mortgage Group and Global Express Capital. ``Unbelievable,'' said investor Rich Maiorana, 55, who invested $50,000 in a USA Capital fund. The bankruptcy filing ``just makes them look to be terribly dishonest,'' Maiorana said. Phyllis Resler, a widow and great-grandmother, works part time for a church to supplement her Social Security benefits. She has $56,000 invested with the USA Capital. ``Help,'' she said, laughing nervously. ``I can't earn and replace what I have at age 69. That will take a lifetime.'' Robert Ulm, a retired airline pilot living in Georgia, said he invested $200,000 with USA Capital and feels betrayed. ``It's illegal. It's a fraud. It's a cheat. It's a scam. That's what I think,'' Ulm said. Ulm invested money in six loans, called trust deeds, secured by warehouses in Albuquerque, N.M., and other types of property in Sacramento, Calif., and Reno. Ulm was surprised, because the company seemed to have a good reputation when Ulm learned about it from a financial adviser while living in California. ``They never missed a payment to me,'' he said. It's too soon to know how much money investors will recover and how it will be divided among them, said Greg Garman, an attorney with the law firm Gordon & Silver, which is representing 50 investors in USA Capital funds. Lenard Schwartzer, an attorney for USA Capital, told bankruptcy Judge Linda Riegle on Monday that the company continued making distributions to all of its 3,600 investors even though many borrowers stopped paying interest on their loans. In a hearing Monday afternoon, Riegle limited payments to $2,500 per employee in wages earned before the bankruptcy, and prohibited salary payments to sales people who raised money for $127 million in loans originated in the first quarter of this year and to insiders, such as owners Thomas Hantges, Joe Milanowski and Paul Hamilton. The judge appointed Thomas Allison, a business turnaround expert from Chicago, as interim chief restructuring officer. Allison and a spokesman with USA Capital did not return calls for comment. Investors will be receiving forms in the mail from the bankruptcy court or USA Capital, Garman said. They should complete the forms and provide photocopies of documentation of their investments in order to recover money they invested with USA Capital, he said. |
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