“1031 Advance”: Private Exchange Company Missing in Action in Silicon Valley

Gordon Gekko, portrayed by Michael Douglas.

Courtesy http://en.wikipedia.org/wiki/Gordon_Gekko

Imagine that you are saving for your retirement. You have scrimped & saved, invested wisely in the stock market, and you have a nice home. Now imagine that you want to take advantage of the slow down, depending upon which micro real estate market you search, in home prices. You decide to upgrade to a better home by executing a 1031 exchange. You sell your house and move the capital gains into a new improved home without paying the nasty taxes associated with a normal real estate transaction.

Now imagine that you decide to choose the best possible company to execute this transaction; your decision is to go with a “private company” not affiliated with the major 1031 exchange companies in the industry. Maybe you were saving costs or maybe it was a referral through a reliable source. The point is that you went with the small guy-that was your choice.

Now imagine that the day of closing your 1031 exchange company misses funding. You panic and call the office & nobody answers your call; the voice mail system is absent with no way to leave a message. Now in a state of hysteria, you race down to the office to physically confront the company you entrusted with thousands of your dollars. When you arrive, you find the doors locked with the office looking rearranged. Before you completely melt down, you blast back home and search for the company web site: the web site is down. No forwarding address, no telephone contact information, no web site, no office, NO FUNDING, & no explanation. . .

That is the scenario being played out right now, as described to me by a well informed source, with a small private San Jose, California 1031 Exchange company: “1031 Advance.” Although rumors are running rampant around Silicon Valley right now, no representative of “1031 Advance” has attempted to answer the simple question: Where the Hell are You? Until a company representative comes forward, the rumors will persist and the reality will consist of the simple truth-this was a rip off.

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26 thoughts on ““1031 Advance”: Private Exchange Company Missing in Action in Silicon Valley

  1. KTNM,

    We would be grateful to you for any contributions. Information is hard to come by on this problem. . . could you enlighten us?

  2. Contact:
    For Media:
    Amy Greenfield, Esq.
    Van Prooyen Greenfield LLP
    (212) 289-6733
    agreenfield@vpgllp.com

    For Customers:(888) 804-1031

    FOR IMMEDIATE RELEASE

    THE 1031 TAX GROUP FILES FOR REORGANIZATION

    Chapter 11 initiated to aid return of funds to customers;
    James M. Lukenda named Chief Restructuring Officer

    May 14, 2007, New York — The 1031 Tax Group, LLC (“1031 TG”), a privately held consolidated group of qualified intermediaries for deferred like kind property exchanges, filed today for chapter 11 reorganization in U.S. Bankruptcy Court for the Southern District of New York (case number 07-11448-alg) in order to provide it with the necessary time to reorganize its affairs.

    In addition, 1031 TG announced today that it has named James M. Lukenda of Huron Consulting Group (“Huron”) as Chief Restructuring Officer. The Huron team led by Mr. Lukenda replaces five 1031 TG executives who recently left the company.

    “Huron is moving forward with the full support of The 1031 Tax Group to address the companies’ business and liquidity issues in an orderly way,” stated Mr. Lukenda.

    1031 TG cited liquidity issues in the decision to file, including the actions taken by several financial institutions in blocking access to 1031 TG’s funds.

    The Debtors estimate on a balance sheet basis that their assets exceed their obligations to customers and others. Prior to the filing, the owner of 1031 TG, Edward H. Okun, personally signed a guaranty for repayment of notes owed to the Debtors by entities controlled by Mr. Okun. Mr. Okun has agreed in principal to collateralize his personal guarantee with a collateral package in order to facilitate repayment of creditors’ claims. The Debtors anticipate that the proposed collateral package will be agreed to and documented within a short period of time.

    1031 TG is represented by Paul Traub and Norman N. Kinel, co-chairs of Dreier LLP’s Bankruptcy & Corporate Reorganization Department.

    1031 TG is a “roll-up” of several qualified intermediaries created to service real property exchanges under Section 1031 of the Internal Revenue Code. The Debtors are: The 1031 Tax Group, LLC; 1031 Advance 132 LLC; 1031 Advance, Inc.; 1031 TG Oak Harbor LLC; Atlantic Exchange Company, Inc.; Atlantic Exchange Company LLC; Exchange Management, LLC; Investment Exchange Group, LLC; National Exchange Accommodators, LLC; National Exchange Services QI, Ltd.; National Intermediary, Ltd.; NRC 1031, LLC; Real Estate Exchange Services, Inc.; Rutherford Investment LLC; Security 1031 Services, LLC; and Shamrock Holdings Group, LLC.

    Background on The 1031 Tax Group, LLC
    The 1031 Tax Group, LLC is a consolidated group of qualified intermediaries doing business as 1031 Advance, Atlantic Exchange Company, Investment Exchange Group (IXG), National Exchange Services, Real Estate Exchange Services (REES) and Security 1031 Services (SOS1031).

    Background on Huron Consulting Group
    Huron Consulting Group helps clients effectively address complex challenges that arise in litigation, disputes, investigations, regulatory compliance, procurement, financial distress, and other sources of significant conflict or change. The Company also helps clients deliver superior customer and capital market performance through integrated strategic, operational, and organizational change. Huron provides services to a wide variety of both financially sound and distressed organizations, including Fortune 500 companies, medium-sized businesses, leading academic institutions, healthcare organizations, and the law firms that represent these various organizations. For more information, visit http://www.huronconsultinggroup.com.

    Background on Dreier LLP
    Dreier LLP was founded in 1996 by Marc Dreier as a more responsive and innovative alternative to traditional “large-firm” lawyering. Dreier LLP represents a wide range of institutional, entrepreneurial and individual clients in diverse sectors of financial, industrial and service-oriented markets. The firm’s principal practices are commercial litigation, real estate, bankruptcy and corporate reorganization, employment law, corporate and securities, entertainment and intellectual property. Dreier LLP’s Los Angeles affiliate, Dreier Stein & Kahan LLP, has its principal practice in entertainment and commercial litigation and corporate transactions. The firm’s affiliate Schlesinger Gannon & Lazetera LLP has an extensive practice in the area of trusts and estates law. Pitta & Dreier LLP is an affiliate which specializes in labor law, and Pitta, Bishop, Del Giorno & Dreier LLP specializes in government relations. In the 10 years since its founding, Dreier LLP, with its affiliate members, has grown to more than 150 attorneys, including 15 bankruptcy attorneys, with its principal office at 499 Park Avenue in Manhattan, and additional offices in Los Angeles; Santa Monica, California; Albany, New York; and Stamford, Connecticut. For more information, visit http://www.dreierllp.com.

    # # #

  3. Pingback: 1031 Advance: Setting the Record Straight ? Only Time Will Tell « DeansGuide

  4. My retired parents entrusted Steve Allred of 1031 Advance Inc. to be the Intermediary for their 1031 exchange. However, this afternoon, we were informed by our TIC Investment Broker, that the “holding company NEVER funded.” We will most likely miss our Escrow close on two properties and are in danger of missing our 1031 6-month close deadline. I understand we are not the only complaints about this group.

    My biggest fear is whether we will ever see this money again. If not, a more sad tragedy than anyone of us wants to consider!

  5. Kaira,

    Thank you for writing your story and adding a voice. I know it must be difficult and uncomfortable to relate this information; it is greatly appreciated by me and my few readers.

    I hope the above information I posted will help you in your quest to find answers for your parents. My latest post is Amy Greenfield’s entire comment sent to me yesterday. There are contact numbers and information on 1031 Advance’s seeming reorganization/restructure. I believe that Amy will be your best source of information going forward.

    Sincerely,

    dean

  6. Pingback: 1031 Advance: Huron Consulting Group to the Rescue ? « DeansGuide

  7. I have same question as Kaira: will I get my money back? That’s almost my whole saving.
    Do I need to hire a lawyer?
    Will Huron Consulting Group contact individual?

    Sincerely,
    Lynn

  8. Lynn,

    I am nothing more than a source of commentary on this sad situation. I can not advice you as to which step to take next. If I were in your position, I would go to my other articles re: 1031 Advance and I would both email and contact Huron. Huron is the reorganization company which left contact info for clients of 1031 Advance.

    I wish you the best on this tough situation. Would you kindly update us as to your experiences going forward? People are desperate for information and anything will help all involved.

    Thank you!

  9. Looking for articles on REES. We failed to close and spoke to Ed Okun several times. Where do I find other articles on REES, and do the articles that you mention (1031 Advance) pertain to REES also?

  10. Dear BS,

    As you so succinctly and eloquently “put it”, nobody wants to get screwed. Your question is a good one but I am neither a source of advice nor an attorney. I am just trying to provide information substantiated and in some cases unsubstantiated. Suffice it to say if you are even asking if you should “lawyer up” you have your answer.
    Best of luck; please keep us posted as to what your course of action will be in the future!

    Dean

  11. S,

    If you have a moment, read my other articles on this mess. From what I have heard, Okun claims that he will personally make good on all outstanding debts left by the 1031 Advance ripoff. Your guess is as good as mine!

  12. Orkun’s attorney is no help at all and “reorganization” sounds like a nice term for what could be FRAUD.

    The group of us are banding together and we have a LOT more information than the rest of you. Let’s just say Orkun has a very interesting and “varied” history. Wanna see a photo of the guy? http://www.foytracing.com/IndyCar/2006_reports/IC_rr_IPoA.html (nice of him to brag about his 1031 group).

    For those who are not clued in, feel free to contact the Santa Clara DA’s office for more information and forms to file. Ask them regarding the email group to join or for a contact that will give you more info (I’d rather not have to screen people).

  13. Kaira,

    I remember your story and I am very happy you came back with information. If you would elaborate even more for the rest of the readers who are not as tuned in it would be a great help!

    Best wishes to you and your folks. My parents are retiring this year and I do not know what I would do if they were in your family’s position–I would want retribution and compensation that is for sure.

  14. ARE ALL THE ACCOUTS OF ANY 1031 COMPANY UNDER THE IXG UNBRELLA CLOSING DEALS IN JUNE? I THOUGHT ALL THE COMPANYS ACCOUNTS WHERE FROZEN?

  15. BS,

    I think that you might wish to contact the Santa Clara County District Attorney’s office for more information. I can’t answer your questions. If you check out Kaira’s comment above yours she provides some solid information–good luck.

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  18. MADOFF + STANFORD + DREIER + SATYAM + ALBERT HU = PROSKAUER ROSE
    Investors who have been burned in these scams should start to seek redress from the lawyers who were involved with these scams. I personally have been trying to notify regulators and authorities of a ONE TRILLION DOLLAR scam that is putting states like New York and Florida at huge risk, as well as, companies like Intel, Lockheed, SGI and IBM. The states and companies involved in the fraud fail to acknowledge the risk exposing shareholders and citizens to impending liabilities. Investigators, courts and federal agents ignoring the crimes and evidence, including a car-bombing attempt on my life. I know how Harry Markopolos felt trying to expose Madoff in a world without regulation.
    Did I hear Proskauer Rose is involved in Madoff (involved many clients too) and acted as Allen Stanford’s attorney. Investors who lost money in these scams should start looking at the law firm Proskauer’s assets for recovery. First, Proskauer partner Gregg Mashberg claims Madoff is a financial 9/11 for their clients, if they directed you to Madoff sue them. Then, Proskauer partner Thomas Sjoblom former enforcement dude for SEC and Allen Stanford attorney, declares PARTY IS OVER to Stanford employees and advises them to PRAY, this two days before SEC hearings. Then at hearings, he lies with Holt to SEC saying she only prepared with him but fails to mention Miami meeting at airport hanger. Then Sjoblom resigns after SEC begins investigation and sends note to SEC disaffirming all statements made by him and Proskauer, his butt on fire. If you were burned in Stanford sue Proskauer.

    Proskauer Rose and Foley & Lardner are also in a TRILLION dollar FEDERAL LAWSUIT legally related to a WHISTLEBLOWER CASE also in FEDERAL COURT. Marc S. Dreier is also a defendant in the Federal Case.
    The Trillion Dollar suit according to Judge Shira Scheindlin is one of PATENT THEFT, MURDER & A CAR BOMBING. For graphics on the car bombing visit http://www.iviewit.tv.
    The Federal Court cases
    United States Court of Appeals for the Second Circuit Docket 08-4873-cv – Bernstein, et al. v Appellate Division First Department Disciplinary Committee, et al. – TRILLION DOLLAR LAWSUIT
    Cases @ US District Court – Southern District NY
    (07cv09599) Anderson v The State of New York, et al. – WHISTLEBLOWER LAWSUIT
    (07cv11196) Bernstein, et al. v Appellate Division First Department Disciplinary Committee, et al.
    (07cv11612) Esposito v The State of New York, et al.,
    (08cv00526) Capogrosso v New York State Commission on Judicial Conduct, et al.,
    (08cv02391) McKeown v The State of New York, et al.,
    (08cv02852) Galison v The State of New York, et al.,
    (08cv03305) Carvel v The State of New York, et al., and,
    (08cv4053) Gizella Weisshaus v The State of New York, et al.
    (08cv4438) Suzanne McCormick v The State of New York, et al.

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