In what has to be either the most naive statement I have ever heard or the worst omission of basic information attributable to a public official, California Democratic Senator Mike Machado summed up the recent 1031 Advance San Jose fiasco as follows:
“It appears the consumers are not protected. . . This is unforgivable. We’re looking at how best to address that.” Ah ok everyone all together now: Duhhhhhhhhhhhhhhhhh What did he say?
“Machado said he was “appalled” to learn that investors who sell property in popular transactions known as 1031 exchanges entrust their money to so-called qualified intermediaries but are left vulnerable to loss because the intermediaries are not regulated by law.”
Now here is why I find this statement so utterly irresponsible: Mike Machado “chairs” the Senate’s Banking, Finance, and Insurance Committee.
Are you &%#$*@ kidding me? This man is on one of the most important committees for the Banking-Finance-Insurance industries and he is NOT aware of the lack of regulation in the 1031 Exchange industry?
Maybe if Senator Machado had read Pat Kitano’s fine piece “1031 Exchange Companies are not Regulated.” He could have saved himself from “himself.”
Of course there are very reputable 1031 exchange companies with the proper insurance and bonding in place. But frankly my message to consumers is it’s best to either “lawyer up” or have someone else do the proper due diligence.
To those folks out there ready to pounce on me with “the Qualified Intermediaries police themselves or Qualified Intermediaries have regulations in place” save it-please. Tell that to the people that have yet to find out where their collective $151,000,000 worth of assets now reside.
Machado went on to say that he hoped to have “something to talk about” regarding consumer protection by month’s end (May). When visiting Machado’s website the most prominent piece of information is a youtube video regarding: Preservation of the Delta Waterways. I guess he is still working on something?
“United States Rep. Zoe Lofgren, D-San Jose, said she will raise the issue with the appropriate committees in Congress.” Yet when searching Lofgren’s website, nothing is mentioned in her press releases (5 in all) since May 15, 2007 regarding the lack of 1031 regulations.
In a wonderfully obvious statement Lofgren continued: “It’s terrible that innocent people have lost their money to an intermediary.”
Maybe it’s time for Californians to send a message to these public officials ?