Former Douglas High School athletics director Steve Wilcox remembers clearly the point of no return: $50,000 of his retirement money lost.
"We were working on the deck in our house," said the 58-year-old Minden resident, "and I walked outside and told my wife, 'We're screwed. We're not going to get that money back.'"
It was the spring of 2006. Wilcox had just retired from the school district, and the Las Vegas lending firm he'd invested thousands of dollars into, USA Capital, had just declared bankruptcy.
Retired Gardnerville resident Paul Bradshaw, 68, invested $150,000 into the firm before it went belly-up.
"This was the largest bankruptcy ever filed in the state of Nevada "6,000 investors, $962 million in assets," Bradshaw said. "Yet these people are still walking around with our money. Where's the U.S. attorney? Where's the U.S. trustee? It's been three years. An FBI agent told me that these things take time. Well, I hope it happens within my lifetime."
Wilcox and Bradshaw said dozens of other people in Carson Valley, many friends and neighbors, were affected by USA Capital's demise. They accused the firm of running a giant Ponzi scheme, in which new investors' money was being distributed to old investors to maintain the appearance of pay-back.
"You can call these people the mini-Madoffs," Bradshaw said. "They kept it going till they ran out of money."
Both Bradshaw and Wilcox said they received 12 to 13 percent returns on their first investments. They thought their money was being used to make short-term, high-interest loans to developers, and were reassured the loans were backed by real estate collateral.
However, according to an April 24, 2008, article in the Las Vegas Review-Journal, USA Capital was actually peddling unsecured loans, despite telling investors the opposite. The article describes a lawsuit filed by the Securities and Exchange Commission against USA Capital President Joe Milanowski, who was reportedly siphoning funds to companies he was involved with.
Wilcox said the firm was essentially issuing loans to itself.
"We thought they were a middle man, not the whole ball of wax," he said. "Now they've lawyered up and kept their mouths shut."
What troubles Wilcox and Bradshaw more than anything is what happened during bankruptcy proceedings. They described a legal circus in which some elite investors were paid off, and the remaining assets juggled between dubious firms. They said the courts failed to protect smaller investors while attorneys from various parties enriched themselves.
"It was a lawyer feeding frenzy. They were just circling the pond," Wilcox said. "The whole thing was rigged up. Bankruptcy laws are written by lawyers and benefit lawyers. It's a slow drain. The longer it goes on, the more money they can drain out of the pool. And by the time it's done, there's nothing left."
Wilcox said he'll survive the $50,000 hit, but his faith in justice won't.
"Crooks are crooks and they'll always be out there," he said. "But this rocked my faith in the system. Those guys stole tremendous amounts of our money and they're still walking around and no one's in jail. Someone robs a 7-Eleven and a dozen cops go after them, while these guys are doing this stuff with impunity."
Bradshaw, who has a daughter in college, said he's relying on Social Security checks.
"I have no money left," he said.
But he's trying to keep things in perspective. He mentioned the countless other victims of the scheme, mostly retired folk, some who were depending on the money for cancer treatments, others who chose to take their own lives.
"It's like that saying, 'I was crying because I had no shoes, then I saw people who had no feet," Bradshaw said.
n Scott Neuffer can be reached at sneuffer@recordcourier.com or 782-5121, ext. 217.
