SEATTLE A federal bankruptcy judge has named an independent trustee to oversee bankrupt motorcoach operator and investment fund manager Darren Bergs bus companies and personal assets.

Appointment of the trustee was requested late last month by both Berg and the investors in seven Berg-run mortgage-investment funds - also now in bankruptcy.

Berg said in a statement he provided Bus & Motorcoach News that he had favored the appointment of a trustee since he filed for personal bankruptcy protection.

At the same time, investors in real estate funds that had been managed by Berg said a trustee was needed because there is "compelling evidence of fraud and dishonesty" by Berg.

In court documents, attorneys for Bergs investment-fund creditors also maintained that a court-appointed trustee was needed because some of the $200 million they invested "was used for purposes having nothing to do with the funds, including a lavish lifestyle for Mr. Berg."

Berg, founder of MTR Western coach company and the Meridian Group investment conglomerate, filed for Chapter 11 bankruptcy protection in late July, but has retained control of his personal assets, including five bus-related companies. (See Aug. 15 Bus & Motorcoach News.)

If Berg remained in control of the bus companies, his most valuable assets, there was "definite risk" he could divert revenue from them to pay his personal expenses and lawyers, reducing the companies ultimate value to creditors, attorneys for the creditors argued.

Bankruptcy Judge Samuel Steiner agreed to appoint a trustee only after lawyers for Berg and his creditors stipulated Berg could keep any income he has earned or will earn after entering bankruptcy.

In his statement, Berg suggested he will need cash "a lot of cash" to pay his attorneys.

Bergs base annual salary from the bus companies is $180,000, said Richard Birinyi, one of his attorneys. Bergs other assets include two software companies, a home on Mercer Island, two boats, and two airplanes.

Judge Steiner named Seattle bankruptcy attorney Diana Carey as trustee of Bergs personal bankruptcy. She will be monitoring the operation of Bergs companies, including MTR Western.

One of the creditor lawyers, Alan Smith, said there was "very little chance" the trustee would retain Berg to run the companies.

Berg refuted that statement. "Alan Smith . . . doesnt know the first thing about what hes talking about when he makes this comment," Berg asserted.

Bergs business empire began to collapse earlier this summer. Investors in several of his investment funds, which bought high-risk, unconventional mortgages, forced those funds into bankruptcy after scheduled interest payments were missed. Lawsuits filed by the investors charged Berg had misled them.

An attorney for one group of investors said in a court filing that the bankruptcy trustee representing the investment-fund creditors "has uncovered financial irregularities regarding the funds and other entities controlled by Berg."