Courtesy James Burke (Gangster) Wikipedia
FoxBusiness.com published this article on my birthday February 5, 2008
One month into Q1 2008 California Bill SB 1007 is being trumpeted as the savior of swindled 1031 Exchange investors by the San Jose Mercury News:
“If a bill currently winding its way through the state Senate had been law even a year ago, Bay Area investors would not have lost millions of dollars when they entrusted their money to 1031 Advance of San Jose” this according to the Mercury’s Kathryn Conrad.
The reasoning behind this bold statement:
1. Requirement “. . . exchange facilitators to purchase $250,000 in errors and omissions insurance”
2. Requirement “. . . purchase a $1 million fidelity bond”
3. “Agree to a set of principles forbidding stealing from or misleading clients. . . “
4. “Refrain from commingling funds with those of their clients.
Conrad finishes by stating that violation of SB 1007 is grounds for a civil lawsuit.
Even more curious is California legislator Mike Machado’s statement:
“This bill corrects a loophole to make (rules governing exchange facilitators) consistent with the same type of fiduciary responsibility that you would place on any other agent providing financial services.”
Analysis: Wrong-Wrong-Wrong! I have received and documented dozens of stories about victims of San Jose’s 1031 Advance and the rest of the Ed Okun 1031 Tax Group. In addition I have received responses from 1031 exchangers, bankers, lawyers, and an associate editor of Forbes magazine.
I have spoken with the US Trustee handling the settlement of the case against Okun. In addition I have been contacted by attorneys representing Okun and at least two victims of this case so far.
Lastly I have received and published numerous suggestions, analysis, and advice from professionals in and outside the exchange industry trying to help the current victims and anyone considering a 1031 exchange.
The Answers: remain the same when it comes to avoiding a swindle by an exchanger and protecting your monies–You must have in place in the agreement complete transparency. Within this transparent relationship the investor must have the assurance that a “DUAL SIGNATURE” is the only method that funds can be moved from the account holding the monies during the transaction.
Final Word: No $250,000 errors and omissions insurance policy, $1million dollar fidelity bond, set of principles promising not to rip off investors, or promises to not commingle funds with client funds WILL EVER MAKE THE DIFFERENCE that a “DUAL SIGNATURE” clause will make in avoiding the embezzlement that Okun and Don McGhan (Southwest) perpetrated on their victims.