Tuesday, Aug. 4, 2009 | 6:14 p.m.
The owner of a Nevada investment company who misappropriated more than $50 million of client monies to fund loans for his own pet projects pleaded guilty today to wire fraud.
Joseph D. Milanowski, 48, of Las Vegas, entered a guilty plea to one count of wire fraud before Chief U.S. District Judge Roger L. Hunt.
Milanowski was released on a personal recognizance bond pending sentencing, said Greg Brower, U.S. Attorney for Nevada.
In his guilty plea, Milanowski agreed to serve up to 12 years in federal prison and agreed to make full restitution in an amount that the court will determine.
Judge Hunt set sentencing for 9 a.m. Oct. 23.
Milanowski was president and de facto chief operating officer of USA Commercial Mortgage Company, which did business as USA Capital from 1998 through April 2006, according to court records.
USA Capital raised money from investors to loan to developers for construction. In May 2000, USA Capital created the Diversified Fund to make secured loans to developers and to pay investors interest on the loans, court records said.
Milanowski and others told investors that all of the loans made by the Diversified Fund would be secured by first deeds of trust. Investors were also informed that no loans would be made to company insiders, that no loans larger than $20 million would be made once the Diversified Fund reached a certain value, that no loan would exceed 15 percent of the value of the fund and that the fund would not loan more than 25 percent of its funds to a single borrower.
On April 15, 2002, Milanowski created the 10-90 loan, which he used to fund private development and investment projects for himself and other company insiders and affiliates, court records said.
From about March 27, 2003 to about Nov. 12, 2004, Milanowski transferred about $22 million to 10-90 Inc., and to another entity he controlled to fund his own development projects, court records indicated.
Minakowski and others concealed the existence of the 10-90 loan from investors until Sept. 30, 2005, when Milankowski included it on a list of Diversified Fund's loan portfolio, in which he claimed that the 10-90 loan was secured by three master-planned communities in Southern California, court records said. However, he knew that the loan was not secured by those communities.
When USA Capital Mortgage Company and the Diversified Fund filed for bankruptcy on April 13, 2006, Milanowski had caused the Diversified Fund to attribute $55.9 million of its principal to the 10-90 loan.
The investigation of USA Capital is ongoing.
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