STATUS OF USA INVESTMENT PARTNERS, LLC INVOLUNTARY BANKRUPTCY CASE AND OPPORTUNITY TO JOIN AS PETITIONING CREDITORS A chapter 11 involuntary bankruptcy petition was filed against USA Investment Partners, LLC (“USAIP”), on April 4, 2007. The petition was filed in the United States Bankruptcy Court, District of Nevada, Case No. 07-11821-LBR. The court has not yet entered an “order for relief,” which means USAIP is not yet a debtor under the Bankruptcy Code. USAIP has 20 days from the service of the involuntary petition and summons (April 5, 2007) to contest the filing. It could be some time before the court enters an order for relief or – if USAIP contests the filing and prevails – dismisses the case. The petitioners are USA Diversified Trust Deed Fund, LLC, USACM Liquidating Trust and Alabruj Investments, LLC. Other creditors of USAIP are welcome to join the petitioning creditors. In order to join the petitioning creditors, your claim must not be contingent as to liability and not subject to a bona fide dispute as to liability or amount (this means the claim must due from USAIP now not at some time in the future and must be in an amount that is not disputed by USAIP). A form to join is attached. It can be filled out, signed, and mailed to the following address: United States Bankruptcy Court Foley Federal Building 300 Las Vegas Boulevard South Las Vegas, Nevada 89101 The filing of the involuntary petition against USAIP became imperative when a receiver was appointed for USAIP in a lawsuit filed in California. USAIP consented to this relief. The petitioners believe that USAIP consented to a receiver in order to avoid the jurisdiction of the Bankruptcy Court in Las Vegas. NV. In fact, the receivership order not only appointed a receiver of USAIP’s assets, but it prohibited all persons from initiating bankruptcy proceedings against USAIP and perhaps stayed ongoing litigation in the Bankruptcy Court against entities in which USAIP has an ownership interest and for which USAIP is the manager. As a result, the petitioning creditors – who were on the verge of filing the involuntary bankruptcy petition – were forced to file an emergency motion with the California District Court seeking clarification that the receivership order did not prevent the petitioning creditors or any other parties in interest from (i) filing an involuntary bankruptcy petition against USAIP; and (ii) seeking the appointment of an interim trustee in the involuntary case. The California District Court entered an order making these and other clarifications on April 4, 2007 after a hearing on the petitioning creditors’ motion. Upon the entry of this order, the petitioning creditors filed the above-referenced involuntary petition against USAIP in the Bankruptcy Court. In conjunction with the involuntary filing, the petitioners filed an emergency motion to appoint an interim trustee and an order restricting USAIP’s operations pending appointment of an interim trustee. The gist of the motion was that USAIP has engaged in unlawful activities for the benefit of its two controlling equity holders, Joseph D. Milanowski and Thomas A. Hantages, to the detriment of its creditors and the creditors of its numerous affiliates, and that emergency relief was necessary in order to preserve USAIP’s assets and business records for the benefit of those creditors.
The Bankruptcy Court granted the emergency motion by order dated April 6, 2007. The Court appointed an interim trustee, Lisa M. Poulin, who is taking immediate possession of the property of the estate and will be responsible for operating USAIP’s business. Ms. Poulin will continue as interim trustee until the court enters an order for relief or dismisses the involuntary petition. Assuming an order for relief is entered, the creditors will need to seek the appointment of a permanent trustee under Chapter 11 of the Bankruptcy Code, a process that can be litigious and take several months. The petitioning creditors will ask that Ms. Poulin remain the interim trustee of USAIP until the Bankruptcy Court determines whether to appoint a permanent trustee. The court will hold an omnibus hearing and scheduling conference with respect to any pending matters in the case on Friday, April 27, 2007 at 9:30 a.m. Prior to that hearing, Ms. Poulin is required to prepare a preliminary statement to be filed with the Court that identifies any facts discovered by then pertaining to fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of USAIP and that identifies any cause of action available to the USAIP estate. If you would like a copy of that report or have any questions or concerns about the involuntary petition, please contact: Scott K. Brown Lewis and Roca LLP 40 N. Central Ave., Suite 1900 Phoenix, Arizona 85004 Tel. (602) 262-5321 Fax (602) 734-3866 sbrown@lrlaw.com