Update–Haven Exchange President Dorothy Zink Sets The Record Straight: “Our Customer’s Signature IS Required Prior To Any Release of Funds”

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With this year’s 1031 Tax Group (Ed Okun) and Southwest Exchange (Donald McGhan) disasters fresh in investor’s minds, deansguide has focussed on providing information for investors to consider during their due diligence investigations of this investment strategy. Our recent installment spotlighted Haven Exchange and Union Bank’s “transparency program” aimed at making every step of the exchange process completely clear and under the investor’s control.

In my analysis, with the urging of other industry professionals comments, I posited the idea that true transparency can only be gained if an investor has in place a two signature clause on any exchange accounts holding their money. The two signature clause is the most fail safe approach, I have hear of to date, in preventing fraud or embezzlement during a 1031 exchange.

Below is a recent comment by Haven Exchange President Dorothy Zink. Dorothy has provided the missing link to the question: Does Haven Exchange and Union Bank provide a two signature clause for investors during the 1031 exchange transaction? We are happy to report that Haven Exchange and Union Bank do provide this very important feature in their transactions according to Dorothy’s comment below:

  1. Dorothy Zink | dorothyzink@havenexchange.com | havenexchange.com | IP: 65.60.65.2It can only be with great joy and relief that you receive the news that each one of Haven Exchange’s segregated exchange accounts ARE dual signature, qualified escrow accounts. Our customer’s signature IS required prior to any release of funds.The monthly statements are important because they prove the existance of the segregated accounts. Additionally, Fidelity Bond policies contain a “per occurrance” clause, and segreated accounts extend full bond coverage to each account.Since any difference in earnings paid to a commingled account seldom make it into the pocket of the Taxpayer, but are retained by the Qualified Intermediary, its mention by the Qualified Intermediary is rather misleading. Our customer’s monthly statements reflect the interest rate paid along with the amount. Transparency is beautiful.To quote Mark Twain, “We specialize in the return OF your principle, rather than the return ON your principle.”Nov 28, 8:25 PM — [ Edit | Delete | Unapprove | Approve | Spam ] — Haven Exchange’s 1031 “Transparency”: Will This Model Prevent 1031 Exchange Fraud or Embezzlement In The Future?

Remember always perform your due diligence with a qualified professional ie attorney, CPA, or investment advisor for added protection. Thanks again to Dorothy for bringing this important information to our readers.

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3 thoughts on “Update–Haven Exchange President Dorothy Zink Sets The Record Straight: “Our Customer’s Signature IS Required Prior To Any Release of Funds”

  1. Dean,
    Thought you and your readers would be interested in learning that US Bank has settled a class action suit filed by Southwest 1031 Exchangers (whose funds were stolen by owner McGhan in a fashion so like Okun’s plundering of our funds, it is eerie) with a $25 million payment (only part of the $95 million McGhan took). The details of the whole sordid mess are available online on the attorneys’ website at: http://www.hbsb.com/class_action_docs/sorrell_docs/LetterToAllClaimants032907.pdf
    It’s 82 pages long in easily readable English (not the usual hopelessly and needlessly arcane “legalese”) and should be read by everyone of Okun’s victims. The details are sickeningly similar to our situation, but cautionary to: anyone considering a 1031, to the IRS and states considering (FINALLY)the regulation and oversight of 1031’s, and to those representing us, Okun’s victims as a possible course of action (pursuing the banks that failed through negligence or connivance to prevent the wanton abuse of our exchange funds).
    Further to the other comments in this thread re the requirement for two signatures to move exchange funds from a segregated account, I think the Southwest Exhchange lesson is clear — one of the signatures MUST be that of the exchanger!

  2. Here is a great, I’m inclined to call it the definitive, article advising potential 1031 exchangers of the steps to take to ensure their funds are adequately safeguarded: http://www.expert1031.com/1031facts/articles/crej-cwb120507.html.

    In a nutshell, it advises that exchangers insist that their funds are deposited in a separate account (not a subaccount!) that requires the signature of the both exchanger and intermediary to move the funds and that requirement should be documented with a signature card signed off on by the bank itself (thus making the bank or financial institution liable as well if the funds are improperly transferred:
    “The easiest way is to verify whose tax identification number (or social security number) is on the account. If it’s yours, it’s a separate account; if it’s the intermediary’s then it’s a sub-account.

    How do you protect yourself? The most important thing is to make sure that your exchange money is in a truly separate account. Then make sure that your account requires dual signatures to withdraw money. There should be a form that sets out the signatures required to access the account. You should have a copy of this form in your files, and the form should be signed by an officer of the bank proving that the bank is aware of the dual signature arrangement and agrees to be bound by it.”

    Anyone who doesn’t follow the advice above is taking the serious risk that they’re funds will be stolen as they have now been in the 1031 fiascos well documented here. The provisions above should be incorporated into any regulations or guidance being drafted by the IRS or states and certainly the Federaton of Exchange Accomodators if in fact the latter are seriously intent on resurrecting any pretense of being a credibile authority with respect to promoting this industry’s ethics or best practices to safeguard exchangers’ funds. If exchangers INSIST on these provisions all 1031 “qualified intermediaries” will be forced to comply.

  3. Pingback: Update: 1031 Tax Group Victim Provides 82 Page Document on US Bank Settlement With Southwest 1031 Victims–”Details of the Whole Sordid Mess Are Available” « DeansGuide

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