LAS VEGAS (AP) - The federal government is accusing former USA Capital President Joe Milanowski of mortgage fraud and securities violations that contributed to the company's collapse, and seeking to recover "ill-gotten gains."
A Securities and Exchange Commission lawsuit filed Wednesday in U.S. District Court in Las Vegas alleges that Milanowski, 46, of Las Vegas, violated several provisions of a securities prospectus for a trust fund and misused money in the fund.
The SEC lawsuit focuses on USA Capital Diversified Trust Deed Fund, which raised $150 million from 1,900 investors from May 2000 to September 2005. USA Capital investors also made investments in individual loans. Much of the money in the fund was siphoned off for loans to companies in which Milanowski had a stake, the lawsuit said.
Milanowski's attorney, Brent Baker of Salt Lake City, said he wondered why the SEC failed to name USA Capital founder Tom Hantges.
Hantges left USA Capital before it filed for bankruptcy in April 2006, and relied on Milanowski to manage its day-to-day operations.
Baker told the Las Vegas Review-Journal that Milanowski has been working with lawyers on USA Capital bankruptcy cases "trying to do
the right thing and get the money back to investors."
The firm was handling loans totaling $962 million when it filed for Chapter 11 bankruptcy. Creditors include 6,800 investors in short-term mortgage loans.
The lawsuit claims that Milanowski failed to register the USA Capital Diversified Trust Deed Fund with the SEC, as required, and accuses him of two fraud violations.
It seeks civil penalties and asks U.S. District Judge Kent Dawson to order Milanowski to forfeit "ill-gotten gains from his illegal conduct."
(Copyright 2008 by The Associated Press. All Rights Reserved.)