Goodfellas in the tech park
Reno as an emerging tech hotspot? Maybe. But buyers beware—investors could end up sleeping with a high-tech horse head
Anyone in Reno with a bit of extra cash to invest might have noticed the ads. A sleeping couple seeming snug and secure, trusting that money invested in a USA Capital investment fund is safe and earning plenty of interest.
Their sleep might be a bit more troubled if they took a short road trip to USA Capital’s office in Reno’s South Meadows. Or if they read the Las Vegas newspapers, where they might find that USA Capital is a business affiliate of USA Commercial, the defendant in a recent 47-claim complaint filed in federal court in May. The complaint alleges everything from racketeering to crime-family connections for the multi-faceted firm.
But first, let’s take that drive. Take the South Meadows Parkway exit off Highway 395. There, you’ll see the poster child for the tech park, International Game Technology. The business is still riding high, with recent news of a proposed merger and the purchase of Anchor Gaming for $1.3 billion in stock. IGT stocks closed at $53.62 on Monday, way up from the 52-week low of $26.88.
Neighboring business histories are not as remarkable.
The building that was once home to the now-bankrupt Data Engines is empty. In mid-July, the few cars parked in a lot designed for hundreds probably belong to the staff of Stremmel Auctions, the outfit that will be selling thousands of pieces of computer hardware at a bankruptcy auction Aug. 9.
Across the street is iGo. Let’s just say things aren’t looking good there, with more layoffs and the probability of being de-listed from NASDAQ. And on the door of First Nevada Insurance Company, a state liquidation order is taped.
All in all, it seems like there’s plenty of room for growth in Reno’s tech sector.
Yet developers at USA Commercial are intent on building another 750,000 square feet of high-tech office space right down the street. Demand or no demand, the Reno Tahoe Tech Center, a $150 million, 70-acre park, could be open for business by March.
“We believe there’s plenty of opportunity for everyone,” says Joseph Milanowski, president of USA Capital and chief operating officer of USA Commercial. “We have a superior site next to the South Meadows Business Park, visibility and access to the freeway. We believe we have a superior product with some of the technology we’re bringing in there.”
Demand is likely the least of problems for USA Capital, a mortgage brokerage that also does business as USA Commercial Mortgage Company and USA Commercial Real Estate. The business appears to be the affiliate of more than 20 other companies, including Tanamera Resort Partners.
USA Commercial lends investor funds to developers and builders. One of its funds, the USA Capital Diversified Trust Deed Fund, is pitched as a great way for income-oriented investors to get the kind of double-digit returns usually associated with high-risk, real estate-secured loans.
On May 30, Las Vegas builders Bob and Cheryl Porter, owners of the near-bankrupt American Communities, were among about seven businesses that filed a civil complaint against USA Commercial. The Porters allege that the lending company lured them into bankruptcy by delaying loans and charging exorbitant fees.
“One $5 million loan, secured with American Communities real estate holdings, was made at 15 percent with five points,” reports columnist John L. Smith of the Las Vegas Review-Journal.
Also among the 47 claims is the charge that USA Commercial—specifically owner Tom Hantges—is doing business with an investor named Salvatore Reale, a name linked to prominent crime families in the United States. On May 14, 1999, the claim alleges, USA brokered a loan between American Communities and Reale, the lender, for about $1.9 million.
“Plaintiffs … believe that Mr. Reale is a lieutenant in the Gotti crime family, who was at one time John Gotti’s man at John F. Kennedy International Airport in New York, and has been convicted of loan sharking,” the claim states, citing articles in the New York Daily News and the Portland Free Press.
The complaint alleges that Hantges told the Porters that Reale was “connected"—and that their lives might be in danger if the loan was not repaid promptly. From there, the Porters’ story, as recounted in the complaint, sounds like a low-budget gangster flick:
“On Jan. 18, 2001, in the evening after dark, a large, imposing, muscular man dressed in a suit, identifying himself as ‘Bobby,’ came to the door of the Porters’ residence, claiming to have been sent by Hantges to be sure that the Porters were all fine and healthy. Bobby also provided one of Hantges’ business cards. … The Porters felt threatened by this strange behavior … and filed a suspicious incident report with the Henderson Police Department and the FBI.”
USA Capital’s Milanowski says that the firm was unaware of Reale’s reputation.
“All we know is that he was an investor, referred to us and treated like any other investors we have,” Milanowski says. “It was only that loan that we brokered with him.”
You mean there are questionable investors in Nevada?
“Anytime there are huge sums of money, there is always the potential element of illegality—even in banking or casinos,” says Tom Cargill, an economics professor at the University of Nevada, Reno.
The complaint seeks action against USA Commercial under a federal anti-racketeering law—RICO—because USA Commercial used “extortionate means of collecting loans” and, the complaint alleges, was involved in “racketeering activity” and “criminal syndicates.” Reno attorney Donald Pope says that a RICO suit can be established whenever two or more criminal acts are attempted for the same purpose.
“It doesn’t have to be Eliot Ness shutting down Al Capone,” he says. “Clearly, in this case, two private parties are trying to scare each other. Nevertheless, you don’t get to threaten people to repay a loan, even if the loan might be shady—or the people might come from Sicily.”
USA Capital is attempting to raise $30 million from Northern Nevada investors, some even in what USA Capital’s regional vice president Michael Johnson refers to as the Million Dollar Club. Members, Johnson boasts, include casino owner John Ascuaga.
But investing in USA Capital seems iffy given the nature of the lawsuit and the idea of developing an arguably unneeded technology business park across from an already defunct venture.
When the ground broke for the new Reno-Tahoe Tech Center in late May, tech hawkers like Chuck Alvey, president and CEO of the Economic Development Authority of Western Nevada, were glowing with pride.
A Milken report identifying Reno as one of the six greatest emerging tech cities would surely “contribute to the confidence of local business leaders Tom Hantges and Kreg Rowe, as they embark on this exciting new project,” Alvey wrote June 3 in a Reno Gazette-Journal column that runs with the classified advertisements.
Yet, while Alvey effuses and Milanowski of USA Capital says he is content with the company’s market analysis, others question whether Reno can really become a happening tech community without some serious changes to Northern Nevada’s infrastructure, including education and work force development.
“The addition of more tech companies is a worthy goal,” Cargill says. “But using the Milken study to hype the idea that Reno is on the verge of becoming the next Silicon Valley of the Sierra is grossly inaccurate.”
The number of high-tech specialists and companies in and around Reno is dismal, Cargill says.
“The infrastructure isn’t here,” Cargill says. “Low taxes and cheap labor just isn’t enough.”
Deidre Pike contributed to this story.