Ed Okun Victim Cautions LandAmerica Victims, Challenges Government, Admonishes 1031 Exchange Industry

Note of Disclaimer: The following comment, story, and opinion(s) are that of the commenter Elizabeth Callanan and not that of deansguide or the author of deansguide Dean Guadagni. Those of you who have read this blog in the past know where I stand. I am a victim’s advocate and simply creating a place for victims or industry pro’s to communicate.

The following are opinions, experiences and stories of the trials and tribulations of the 1031 exchange industry from long time contributor and commenter Elizabeth Callanan one of the 350 “Trainwreck Victims” of the Ed Okun 1031 Tax Group Ponzi scheme. This is a warning, it is a plea, and it is her argument for the complete overhaul of the 1031 exchange industry–or it’s outright Abolishment.

Note: Not all of the 1031 exchange companies are bad, fradulent, or subversive. There are well respected, honest, and worthwhile 1031 exchange companies doing business.

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To Daniel Lowe and the other victims of the LandAmerica debacle,

You have my most heartfelt empathy.
Having been myself a victim of Ed Okun’s embezzlement of exchangers funds on deposit with the 1031 Tax Group, I truly feel your pain. I’m not an attorney, an accountant, and have no expertise apart from what comes of painful firsthand experience. It was in the hopes of warning other potential exchanger/victims that I started posting on Dean’s List and elsewhere.

At the end of the day, though, I agree totally with Yaco Tiamo, who has posted here. The entire 1031 industry is superfluous and that aspect of the IRS’ 1031 regulations should be expunged. It is a wildly unregulated industry that answers to no government oversight at any level (apart from some half-hearted oversight incorporated in a couple of recently enacted regs by a handful of states (Nevada, California?) and, as evidenced, by the recent spate of embezzlements or gross mismanagement puts all exchangers at great risk for no good reason. Doing a 1031 isn’t brain surgery. The forms are pretty standard and the process pretty simple, really.

Since the IRS has shown no interest in overseeing, licensing, demanding accountability from, providing meaningful insurance for (as the SEC does) or otherwise regulating the industry it created, it should kill it – NOW!

As to the LandAmerica victims, my (personal, not professional!!) advice in terms of investing in legal help is two-fold and in both cases I would act only collectively (except for those whose funds were held in traceable segregated accounts, who will no doubt make a serious (and perhaps successful) run at retrieving those funds, I see little point in acting individually — certainly not in bankruptcy, a self-funding and self-perpetuating legal and financial train wreck for everyone involved except the court appointed functionaries. (If you want to see the extent to which such a process can drag on ad nauseam with many billable hours just check out the history of the 1031 Tax Group case on either of these sites: http://www.committeeinfo.com/1031/index.htm (the official website for our Creditors Committee) or http://trustee1031taxgroup.com/component/option,com_frontpage/Itemid,1/ (the Trustee’s website).)

However, I WOULD hire a legal firm (on contingency if you can – since, by definition, you no longer have any money!) to:

1) GET YOUR CASE OUT OF BANKRUPTCY COURT!! That is a deep dark hole that will suck up every dime of funding available until there’s nothing but dust left. In the 19 months since Ed Okun put the 1031 Tax Group into “bankruptcy” (it was a criminal embezzlement plain and simple now being tried in a US Federal Court in Richmond which was known at the time the bankruptcy was filed in May 07 — the Feds having raided the offices in April 07 — and should never have been accepted as a legitimate bankruptcy to start with!) all of the various court-appointed functionaries have claimed MORE THAN $30 MILLION IN SO-CALLED “ADMINISTRATIVE FEES” and victims have received not one penny of their escrow funds. In fact, in an amazingly brazen and twisted miscarriage of justice, the Bankruptcy Court authorized attorneys for the so-Called “Debtors” (ironically the Dreier firm whose owner embezzled millions in escrow funds himself) to pursue a legal action to retrieve the only escrow funds that Okun himself had not been able to steal and the settlement cozily agreed to by the attorneys on both sides (and approved by the Court) provided for payment as well to the attorneys DEFENDING the bank where those funds were on deposit — the end result of which is that the costs of BOTH SIDES of that court case will be paid by Okun’s victims. (So, to our point of view we were mugged first by Okun and then by the Bankruptcy Court!) The only way to get that Bankruptcy action derailed is to get the Committee itself on board (not easy since the Committee’s attorneys will understandably vehemently argue against the prospect of losing their cash cow), but I’d consider that a first priority.

2) Get a class action going to pursue all the parties involved, including especially LandAmerica to force them to use the proceeds from the sale of its other two arms to repay the exchange funds it squandered on worthless investments.

I sincerely hope you are more successful than we’ve been to date in retrieving even a dime of our life savings. The key is acting collectively and getting a junkyard dog of an attorney who is willing to work on a contingency (which means you’ll get 25% less than you otherwise might, but most of Okun’s victims would happily settle for that today!). Unfortunately in bankruptcy there is absolutely NO incentive for settling anything quickly. It’s all about billable hours — for attorneys, for management companies, for accounting firms, and all the other hangers-on who can get their licks in. If I were you, I’d follow the lead of the creditors in the Southwest Exchange Case – which happened just a few months prior to our’s and in which there’s been a settlement of $92 million of the $97 million lost (minus the contingency and other costs incurred by the attorney) while WE HAVE NOTHING and dismal prospects ahead.

You’ve gotten off to a better start than we did, it appears. You have a website (noted above by one of your fellow victims), your Committee seems to communicate with you (our’s has maintained a nearly absolute silence and shares NO information whatsoever for reasons none of us can fathom), and I understand you’re collectively discussing a civil class action which I encourage you to pursue.

Good luck to you all — sincerely.

Investor’s Warning: Ed Okun, FEA, Bonding & Insurance Still Major Barrier To Entry

Reuters.com published this deansguide article on 11-8-08

When deansguide readers have important comments that effect and provoke the thought process on a particular issue–we listen. When the comment comes from a very reliable source, a trusted confidant, and someone very close to a “situation”–we listen. And when that person is Elizabeth Callanan, one of the ‘experts’ following the Ed Okun 1031 Tax Group debacle–we stand back and give her the floor.

Standards of Due Diligence

Elizabeth Callanan’s comment (11-9-08) and indictment of the 1031 industry’s lack of due diligence standards, the FEA’s less than honest assessment of their own insurance policies, and investor’s lack of investigation (electing to avoid massive taxes by choosing a 1031 exchange) is a cautionary warning-before you even think about this industry you must read this information.

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“I’m very interested in learning how prospective 1031 exchangers can “look at the longevity of ownership, management, and employees as well as bonding and insurance and experience.” In the case at least of the 1031’s quietly acquired by Ed Okun, who then proceeded to plunder the exchange funds held by each of them to acquire other 1031’s and finance his lavish lifestyle, nearly all of them had been in business for decades. The fact that the owners, in some cases known personally to exchangers over a long history of 1031 transactions, did not publicize or share with their client base the fact that they’d sold out to Okun and, in fact, remained on board in their former roles and capacities, along with their staffs, appears to have been part of a deliberate strategy (perhaps even a condition of the sale?) to hide from exchangers that any transfer of ownership had occurred. Where/how would a potential exchanger learn that ownership had changed? To what agency (federal, state, local) must a 1031 report its ownership. What requirements are there that demand that such information be published. What regulations or reporting exist governing the behavior and conduct of 1031’s at any level?

As to insurance, what should a prospective 1031 client look for in an insurance policy provided by a 1031? The fidelity bonds provided to customers of those acquired by Okun gave false assurances of coverage in the millions, but in fact, like the fidelity bond offered by the Federation of Exchange Accomodators (according to their website), “Q: How does the policy limit under the FEA Fidelity Bond apply to claims?
A: The policy limit applies on a “per occurrence” basis, meaning each separate loss event or series of related loss events has the full benefit of the policy limit. Losses are usually considered related, i.e. a single occurrence, if they arise out of the same set of circumstances. The limit does not apply per customer, per transaction or per account.” While exchangers to whom these Fidelity Bonds are routinely presented as some kind of assurance regarding the security of the funds held by the 1031 would reasonably interpret their transaction as the “per occurrence” covered by the bond value, FEA’s FAQ’s attempt to limit that coverage to each incident and insurers in the case of Okun are already attempting to construe him and his ongoing series of embezzlements from multiple 1031’s he acquired over time as a single occurrence. Since collectively he embezzled $150 plus million, these bonds are wholly inadequate in terms of providing any kind of security to exchangers. So, what should exchangers be demanding to see from prospective 1031’s they’re considering in order to assure themselves the 1031 is in fact a “safe harbor” and their funds will in fact not be absconded with? What regulations is the FEA promoting at any governmental level that would ensure the security of exchanger funds, the integrity of 1031’s, their owners and staff, and what penalties (criminal, financial, etc.) are they proposing in the event there is criminal activity?” –Elizabeth Callanan

Ed Okun or Michael Okun: What’s With The Okun Name And Scandal?

Chicago Sun-Times published this deansguide article September 11, 2008

A New York man, Michael Okun, was recently arrested for bilking a Hillsborough, California woman of $510,000 in a ponzi scheme disguised as an investment vehicle. Okun contacted the victim in 2001 and brought the scheme into full swing according to a San Francisco Chronicle story. Does Ed Okun have a evil twin, lost son, or family member here? Here is why I keep writing about rip offs

What Happened?

1. According to a San Francisco jury indictment, Okun wrote a letter to the victim claiming to have a patent for a search engine and was working on a deal with Microsoft related to developing the technology

2. Okun claimed he was amongst a group of investors “ trying to raise $25 million to secure Microsoft’s participation and persuaded her to wire $260,000 to a New York bank account in the name of Media World Communications,” the indictment said

3. Over the course of the next 2 years Okun recruited a second investor with the idea of paying off the original investor with the new investors initial cash investment: a typical ponzi scheme

Analysis

Although the amounts of money are far below the levels of Ed Okun, is it just coincidence that two men with the same name ran ponzi schemes on investors? The name Okun is not Smith. Is there a connection between the two men? Three things are clear in this case different and similar from the Ed Okun case:

1. Due Diligence: the Hillsborough victim: never performed any due diligence on Michael Okun, search engine technology, or where her money was being sent. The cash was going directly into Okun’s personal bank account just like the money that Ed Okun was stealing went into his personal accounts onshore and maybe offshore

2. “Player”: Google search of the name Michael Okun and nothing comes up on page one today about this con artist. Imagine if the Hillsborough investor had performed a Google search in 2001 and nothing showed up on a search query. That would not be out of the norm for that time period, except for the fact that Michael Okun claimed to be a player. He should have showed up somewhere with a trail of former clients, investment firms, employment history, or something to investigate

3. Denial: everyone wants to believe they are not being ripped off. It is this embarrassment factor, that allows the Michael Okun’s and Ed Okuns of the world to continue their schemes. It is also the reason a person loses more than the initial investment

Realtors Choose Your Blogging Platform By Performing Due Diligence: TopTenReviews.com

Reuters.com published this deansguide article August 3, 2008

Who is this man and how will he change your life? For the answer go to the bottom under “Recommendation”

The following is a blog services review with a rich variety of information reviewed so that you can evaluate which blogging platform is best for your blog. The review is done by TopTenreviews.com a site with massive traffic and the page views to it back up. I provide a quick Analysis and My Recommendation at the end of the article.

Top Ten Review’s Categories

1. Software

2. Electronics

3. Web Services

4. Movies

5. Music

6. Video Games

Top Ten Review’s Blogging Platform Review

Platforms: WordPress; Type Pad-Blogger; Yahoo 360; AOL Journals; Windows Live Spaces; Xanga; Live Journal; Vax; and Myspace

Reviewer Comments: In this section you can read user reviews good and bad

Rank: Gold, Silver, Bronze are awarded the top 3 Services

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Note: The systems is similar to Consumer Reports with a matrix of features rated and benefits provided. It is very through and complete

Additional Information

As if this was not enough, Top Ten provides you with two sections to consider:

1. Why Blog?: A featured section on the benefits of blogging and why you should be doing it

2. What to Look for in a Blog Service: This is a great place to begin and is located at the bottom of the review page here

Analysis

This is one of the best formatted reviews I have seen of Blog Services aka Platforms. It addresses most everything you need to consider before establishing your blog.

Recommendation

I like WordPress and I would not use any other blog platform. I am also biased because I have utilized WordPress for nearly a year and a half. It is the simplest services to utilize in regards to the technology learning curve and it also supports rich back end traffic analytics for your blog

Question under the picture at the beginning of this article: Who is this man and how will he change your life?

Answer: WordPress creator Matt Mullenweg