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?