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Lender Criticizes Casino Executives, Vestin Says Castaways Misspent Loan

One day after the Castaways' owners filed for Chapter 11 bankruptcy protection from its creditors, its biggest creditor came out swinging.

Las Vegas-based Vestin Mortgage issued a Friday statement criticizing Castaways management for squandering part of its $20 million Vestin loan.

The high-interest lender also implicitly questioned Thursday's decision by a bankruptcy court judge to allow the property to borrow $1 million in order to meet current payroll expenses for 830 workers and keep the Fremont Street property's doors open.

The $1 million USA Capital loan OK'd by U.S. Bankruptcy Judge Linda Riegle would get priority over Vestin's mortgage claim if the Castaways is sold, a prospect Vestin lawyer Candace Carlyon told the judge would put its investment at risk.

"The court ruled without allowing Vestin the opportunity to collect and present evidence showing why this borrower's considerable equity mysteriously disappeared under the current management," Vestin outside spokesman Steve Stern noted in a statement.

"Vestin's number one priority is to protect its investors," the statement continued. "We hope that the bankruptcy judge does not turn a deaf ear to the interests of thousands of individual investors who rely upon the income and the collateral from one of the largest loans in the Vestin portfolio."

Castaways lawyer Gerald Gordon declined to comment.

Carlyon said Castaways' Thursday emergency loan request put Riegle on the spot.

"The judge was in a difficult position: allow the loan or the Castaways closes," Carlyon said. "But this is investor money, the investments of regular working people, schoolteachers."

Carlyon said Vestin lawyers plan to conduct discovery before the bankruptcy case's next scheduled hearing on July 16.

"We'll ask (Castaways bosses) what happened to the money," she said.

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