Tag Archives: Okun

Windfall for Lender – Or Will Natural Gas Discovery Benefit Victims of Ed Okun’s 1031 Tax Group Scam?

There’s a new ripple in the story of indicted 1031 exchange scammer Edward Okun, the 1031 Tax Group, and their victims.

Cordell Funding is a Miami-based hard money mortgage lender. Last fall, Cordell Funding sued Okun to recover $17 million it had loaned to Okun before his fraud-riddled real estate empire collapsed into bankruptcy actions and criminal indictments.

Cordell Funding initially sued Okun in a New York state court, but a federal judge transferred the suit to the U.S. Bankruptcy Court in Manhattan, where Gerard McHale, the court-appointed Chapter 11 trustee of Okun’s 1031 Tax Group, was selling off Okun’s assets.

As part of that bankruptcy case, McHale turned over the rights to several Okun properties to Cordell. One of the properties that McHale turned over to Cordell was the Shreveport Industrial Park, a nearly empty 42-year-old, 956,735-square-foot Class C industrial distribution building at 9595 Mansfield Road in Shreveport, Louisiana.

It wasn’t worth much — certainly not the $17 million that Cordell said it was owed by Okun.

Then natural gas was discovered in the area. 

In fact, it was discovered that under the Shreveport Industrial Park is the largest onshore natural gas field in North America.   It could hold as much as 20 trillion cubic-feet equivalent of natural gas reserves.

The mineral rights lease for the Sheveport Industrial Park is now valued at somewhere between $30 and $60 million.

And property values for the area have soared.

It looks like Cordell Funding got a windfall from the bankruptcy court. 

But when the natural gas field was discovered, bankruptcy trustee McHale went back to court to have the bankruptcy judge of the 1031 Tax Group vacate the order giving Cordell Funding rights to the Shreveport property. At the same time, McHale has asked the bankruptcy judge to approve a mineral rights lease with PetroHawk Energy for the benefit of the 1031 Tax Group victims.

Now whether Cordell Funding or the hundreds of creditors of the 1031 Tax Group gets the millions of dollars from the Shreveport natural gas discovery will be determined by the bankruptcy court.

UPDATE:

For the latest on Ed Okun (new federal indictments, plus the indictments of Laura Coleman and Richard B. Simring), click here.

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Property of 1031 Exchange Scammer Ed Okun Goes on Sale

High-end retail complex properties in Kansas and Texas owned by the notorious Edward H. Okun have been put up for sale by a federal bankruptcy trustee.

The properties are the 1.1 million square foot West Oaks Mall in Houston, Texas, and the 587,512 square foot Salina Central Mall in Salina, Kansas.

Okun is alleged to be behind the 1031 exchange scam run by The 1031 Tax Group (1031TG) that defrauded thousands of people out of millions of dollars.

Okun was arrested in Miami, Florida, last month and charged with mail fraud, bulk cash smuggling, false statements, and forfeiture from a scheme to defraud and obtain millions of dollars in client funds held by The 1031 Tax Group. 

Those who were defrauded by Okun’s 1031 Tax Group had hoped to recoup some of their missing funds from Okun’s remaining assets — including the West Oaks Mall and the Salina Central Mall — which were purchased from monies allegedly taken from victims in the 1031 exchange scam.

But the Okun-controlled companies that owned the malls declared Chapter 11 bankruptcy in October. 

It is now unclear whether the proceeds from the sale of the properties would go Okun’s 1031 exchange scam victims.

Both properties apparently have a long line of creditors.

The trustee in the bankruptcy case has hired Keen Consultants, the new real estate division of KPMG Corporate Finance, to market both properties.

You can read our earlier post on Okun and his 1031 exchange scam here.

 

 

Man Behind 1031 Exchange Scam Indicted for Fraud

The long awaited indictment of Edward H. Okun took place yesterday. 

Okun is alleged to be behind the 1031 exchange qualifed intermediary (QI) scam run by The 1031 Tax Group (1031TG) that defrauded thousands of people out of millions of dollars.

Okun was arrested last week in Miami, Florida, and charged yesterday by a federal grand jury in Richmond, Virginia, with one count of mail fraud, one count of bulk cash smuggling, and one count of false statements and forfeiture.

According to the indictment, from August 2005 through April 2007, Okun used 1031TG and its subsidiaries, all owned by Okun, in a scheme to defraud clients of millions of dollars through false pretenses.

The indictment alleges that 1031TG promised clients that their money would be used solely to effect 1031 exchange as outlined in the exchange agreements. Instead, Okun is alleged to have misappropriated approximately $132 million in client funds to support his lavish lifestyle, pay operating expenses for his various companies, invest in commercial real estate, and purchase additional qualified intermediary companies to obtain access to additional client funds.

The indictment also alleges that Okun instructed employees to withdraw $15,000 in cash from Investment Properties of America’s (IPofA) bank account, a company owned by Okun, and smuggle the cash to his personal yacht on Paradise Island in the Bahamas to avoid federal currency reporting requirements; and that Okun made material false statements under oath before the U.S. District Court for the Eastern District of Virginia relating to conversations he had with the chief legal officer of IPofA.

Federal prosecutors are seeking the forfeiture of all funds and assets owned by Okun that were derived from or connected to the misappropriation of approximately $132 million in funds held by 1031TG and of all funds and assets traceable to the $15,000 in cash he instructed to be smuggled to his yacht in the Bahamas.

If convicted of all the charges in the indictment, Okun will face a maximum of 30 years in prison and fines.

1031TG is only one of several QIs that have been in legal trouble in the past year, leaving investors with millions of dollars of losses.

The Federation of Exchange Accommodators, the qualified intermediaries’ industry-trade group, requires background checks of all members except those that are subsidiaries of publicly traded parent corporations. The FEA says it is working with the states and may reach out to federal regulators about enhancing oversight of the business. 

Especially in light of the erosion of investor confidence in the credit, banking, and mortgage industries, we think that oversight of 1031 exchange QIs is long overdue.

UPDATE:

For our post on the sale by a bankruptcy trustee of Okun’s West Oaks Mall in Houston, Texas, and Salina Central Mall in Salina, Kansas, click here.