New $330 Million Class Action Suit Targets LandAmerica 1031 Exchange Services and Sun Trust Bank

Chicago Sun-Times news service published this deansguide article 1-21-09

In what must be the most frustrating of 1031 exchange collapses, clients of title insurance mainstay LandAmerica have filed a $330 million class action suit against  the failed LandAmerica Exchange Services, part of LandAmerica title, and Sun Trust Bank. According to the Richmond Times-Dispatch story the charges specifically focus on actions of “defrauding clients by using their money to pay off other clients.” That would sound like an old fashion ponzi scheme and have we not heard this story before in the Ed Okun 1031 Tax Group travasty?

Two Principles Named

According to the Richmond Times-Dispatch’s Emily C. Dooley, two top executives for LandAmerica 1031 Exchange Services were named in the suit a Stephen Connor and G.William Evans. “Evans is also the chief financial officer for LandAmerica Financial Group” according to the story.

The Final Final

According to Dooley’s report “The lawsuit claims that LandAmerica used money from new customers to pay off older customers whose money had become inaccessible because it was invested in auction-rate securities, a type of credit that froze in February.”

Remarked Robert L. “Rusty” Brace  California attorney for one of the victims: “Once that market failed, [LandAmerica Exchange Services] should have shut down.  .  . Our money was used to pay those other exchangers.”

Ed Okun vs. LandAmerica Exchange Services: Different Situation Same Results?

Due Diligence Warning: I am neither an attorney, tax accountant, nor legal entity of any kind. The information provided is not a call to action nor is it advice on how to handle your financial situation with LandAmerica Exchange Services or any other financial institution. Before entering a 1031 Exchange or any other investment vehicle perform your due diligence investigation.

According to MarketWatch.com article dated November 26, 2008, LandAmerica Financial Group filed for Chapter 11 Bankruptcy protection and will sell 3 of it’s units to FNF.

According to NewsDaily.com “LandAmerica files for chapter 11 bankruptcy protection:

“I am deeply disappointed over the need to file for bankruptcy protection for the LandAmerica holding company and the 1031 company,” Chief Executive Theodore Chandler

Elizabeth Callagnan one of the Ed Okun 1031 Advance ponzi victims points out:

“. . . their (LES customers) 1031 is filing for bankruptcy which means all those exchangers are going to find themselves and their lifesavings mired in the same bankruptcy court hell that the 350 (Train wreck victims nickname for Ed Okun’s ponzi scheme victims) robbed by Okun are now drowning in.”

The following letter was forwarded to me by Elizabeth. It is the alleged letter sent to LES exchange clients regarding their monies. If any other readers, clients of LES, have received the same notice please comment below.

“Dear Valued Customer:

We regret to inform you that, effective November 24, 2008, Land America 1031 Exchange Services Company, Inc. (“LES) is accepting no new customers and is terminating it’s operations. Although the total par value of our 1031 exchange funds exceeds the value of all funds received from our customers, portions of the 1031 funds are invested in ILLIQUID auction rate securities. Our inability to sell or borrow against these securities has precipitated our decision to terminate operations.

Q: Why are 1031 client funds invested in anything without their knowledge? If clients were given the option to provide their 1031 monies for investment into “guaranteed student loans” how many would approve such an investment? Btw what does the term “illiquid” mean?

LES has long invested 1031 deposits only in investment Grade Securities Rated A or stronger, including auction rate securities backed by federally guaranteed student loans. Our goal for the exchange funds has been to maintain the full liquidity necessary to meet customer with-drawl demands. The auction rate securities in our exchange funds, which were sold to us by certain financial institutions, were highly liquid for many years. As has been widely publicized, the auction rate securities market froze earlier this year, and that extenuating circumstance prevents us from liquidating the auction rate securities held in the exchange funds.


Q: Are the 1031 exchange clients made aware of the practice of LES of investing 1031 exchanger monies in auction rate securities market?

We understand that this situation is detrimental to you, and we can only assure you that we have taken every reasonable step possible to avoid the problem, including pursuing numerous liquidity options to no avail. You will be provided soon with details regarding the establishment of a process for submitting claims relating to exchange funds.

This situation involves LES and not any other LandAmerica companies. Specifically, LandAmerica title insurers are highly regulated companies, with legal identities and assets completely separate from LES. These insurers have more than sufficient assets to meet their obligations to policyholder and escrow customers.

Q: Does the sentence ‘These insurers have more than sufficient assets to meet their obligations to policyholder and escrow customers’ guarantee that 1031 exchange clients of LES will have all of their invested monies returned to them in full?

Sincerely,

LANDAMERICA 1031 EXCHANGE SERVICES COMPANY, INC.”


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.

—————————————————

“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 Denied Freedom: Judge Payne Hammers Defense Attorney’s Explanation

Courtesy Gordon Gecko Wiki

Sensing his fleeting chances at freedom, 1031 Tax Group investment criminal Ed Okun made what looks to be his last feable attempt for release yesterday–he was denied! Okun’s attempt centered around a defense motion for release based on a 3rd party custodian (required terms for his release) a Mr. Alex Carrera. The defense attorney in the case, one of a long line who have come and gone no doubt at either taxpayer’s expense or that of Okun’s victims, originally proposed that Mr. Carrera would be present at the November 5 hearing: Carrera was a no show.

The following is the tip from ever present and well informed Okun victim Elizabeth Callanan. Elizabeth has been a huge source of information and guidance in my 1 1/2 years of coverage on the Ed Okun rip off and eventual prosecution. The following comment will give all involved a much clearer picture of what has just transpired. This comment came in the last 24 hours. Certain passages were highlighted for reader convenience:

“Judge Payne DENIED Okun’s motion for release. The 3rd party custodian (required for Okun’s release) originally proposed in the defense’s motion, an Alex Carrera, was a no-show at the hearing, despite the Defense’s new attorney (a private attorney with an office in Washington, DC, named Barry Pollack — so Okun now has THREE attorneys, including the two from the public defender’s office, at US taxpayer expense!)telling the Judge he’d spoken to Carrera the previous afternoon and had every reason to believe he would be there and couldn’t explain why he wasn’t. Interestingly, his absence could not have been a surprise to Simone Bolani (Okun’s Brazilian bride), since she’d recruited a substitute, Edwin Escobar, the night before the hearing (odd she wouldn’t have shared that information with her husband’s attorney, isn’t it?) who did appear in the courtroom. However, under questioning by the US Attorney, Escobar had to admit that he was apparently guilty of one of the same offenses with which Okun was originally indicted, namely asking Okun to pay him $10,000 he was owed for some reason in increments of less than that to avoid IRS reporting limits! Judge Payne must have thought that wasn’t the most stellar qualification for a third party custodian and denied the motion. He also expressed chagrin that Carrera, described in the defense motion as a “family friend,” had in fact only met Okun once, at Simone’s Feb 2008 birthday party, and had not seen Okun since. He cautioned the defense not to bring any further such motions unless they’d personally interviewed the proposed custodian and assured themselves of the facts being claimed and that they were in fact suitably qualified to serve in that capacity. Thanks to Judge Payne and the US Attorney (Michael Dry), it looks like Okun’s appearance at his criminal trial which begins Jan 19 has been assured.”

Ed Okun Attempting Appeal For Freedom November 5: Victim Instructions Here

Newsflash: Ed Okun is attempting a final bid for his freedom with a renewed appeal for release. The news came from original Ed Okun “Train Wreck Victim” Elizabeth Callanet. This is an outrageous and disturbing turn of events that every victim should be aware is happening. Elizabeth’s request is in accordance with deansguide’s approval as one of the only sites certified to deliver important information to the victims of these heinous crimes. The following is Elizabeth’s message in it’s entirety:

——————————————————–

“Okun’s renewed appeal for release pending his criminal trial in Jan will be heard in Richmond this Wed, Nov 5, at 1:30pm (New courthouse address: 701E. Broad St. 7th Floor). If any victims plan to attend they should let Kim Ulmet, the Victims’ Assistance Specialist ( contact information provided below). She’s very helpful and informative about the players and the proceedings and will ensure victim’s get to the right courtroom and/or know if the hearing has been delayed, relocated, etc.

In addition, several of Okun’s victims are asking the Court to permit telephonic participation (i.e. a service that would permit Okun/Coleman’s victims around the country to listen to the criminal proceedings by phone) since, thanks to them(Okun-Coleman), none of the them (victims) can afford to actually travel there! Any victims having interest in listening to the trial by phone (there is a cost, but it applies only to the length of time during which one listens, and one could listen to some or all of just some sessions and not others), they should write to the court asking that they approve of using that service (a first for this court jurisdiction).

Write, FAX or email letters to Kim at the address below and she will make sure they get forwarded to the appropriate office:”

Kim Ulmet, Victim/Witness Specialist
United States Attorney’s Office
600 E. Main Street
Suite 1800
Richmond, VA 23219
Fax (804) 771-2316
email: kimberly.Ulmet@usdoj.gov

Very Important Notice to Okun Victims Regarding Your Address:

“On a final note, 1031 victims are receiving in the mail copies of a proposed settlement between the Trustee (McHale) and Cordell. Any victims who have not received it, should write to McHale, the Trustee at jerrym@trustee1031taxgroup.com , to let him know that he ( and perhaps the bankruptcy court) don’t have your address/or your correct address. To ensure the Bankruptcy court has your correct information, also write to:”

Kathleen Farrell-Willoughby
Clerk, U.S. Bankruptcy Court
One Bowling Green
New York, NY 10004-1408

“It is vitally important they have your contact information if and when there is any kind of of settlement (we shouldn’t all hold our breaths!) and to receive these updates in the interim. Many of the court documents are available on the Trustee’s website at:”

http://trustee1031taxgroup.com

A big thank you to Elizabeth for her announcement. Our hopes and prayers are with all the victims for some good news in these tough times!

U.S. Trustee McHale “Continuation of Bankruptcy-Criminal Proceedings Collectively Serving The Interests of Justice”

United States Trustee Gerald McHale recently brought suit against Wachovia Bank, and affiliates, for the recovery of “$43 million of conveyances allegedly made to Wachovia in the form of cash and mortgage liens, and the imposition of equitable liens and constructive trusts on several properties in which Wachovia continues to hold liens, or the proceeds therefrom.” Allegations abound that Wachovia not only helped Ed Okun in his scheme but perpetuated it’s continuation despite their (Wachovia’s) knowledge that Okun was violating many banking laws in his business practices.

Today Gerald McHale announced that he has filed a “Statement of Position and Response” to judge Payne’s order in the Ed Okun criminal case. The statement was filed in regards “to the effect of the pending bankruptcy cases of the 1031 Debtors on the likely availability of funds for the purpose of restitution in the criminal case.” The statement was filed October 15, 2008.

3 Key Points

1. McHale agrees “concurs” with the presentation set forth in the Government Statement filed September 12, 2008. See US vs Okun (Government Position) pdf bottom of article.

2. McHale submits that the continuation of the bankruptcy proceedings and the criminal proceedings “are collectively serving the interests of justice and judiciary effciency.”

3. McHale asserts that “Victims of the criminal case are better served by the bankruptcy process which is well underway and has already resulted in the liquidation of many tangible assets and other recoveries.”

Sad But True

The saddest but most likely true statement is the one McHale uttered at the end of his announcement:

“Victims could see some recovery through the bankruptcy process sooner than the time that would be required for the defendant’s convictions in the criminal case will be final.”

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