More information for those involved with Southwest 1031 Exchange, Arrow 1031 Exchange or Qualified Exchange Services (QES).
Yesterday I heard from Rob Egenolf, he is a real estate and tax attorney in Santa Barbara specializing in tax deferred exchanges. Full disclosure...he owns a competing Qualified Intermediary company.
Mr. Egenolf was exceptionally kind in sharing his wisdom on the situation. He has given me permission to post his comments here.
Here is some of what he had to say...
"One thing the victims might want to know is that if their exchanges fail in 2007, they will have a taxable event in 2007 even though the funds were "stolen" The deductible loss for the funds will probably not be deductible until they have been finally determined to be collectible and that will likely not occur until 2008 at the earliest.
Also, the bonds they had are likely not to provide any help either. They do not cover "owner" theft, and there is some question as to what was covered and whether or not the premiums were even paid.
People choosing a QI need to ask more questions about security of funds before choosing their QI. For instance, our company Amherst Exchange has always offered a full bank guarantee where the bank used (and we use several;) guarantee that the funds will be there when the replacement property is being acquired. A signature of the exchanger is necessary to move the funds so there is no risk at all of the type of loss we have seen
Also, one should make sure all fund are held in segregated accounts so it is easy to audit things and the exchanger will have prompt knowledge of any difficulty. Keeping funds in one co-mingled account only benefits QIs that keep all or part of the interest earned. In today's world, clients should insist that they get ALL interest earned on funds held."
Mr. Egenolf also gave me the contact information for an attorney who is filing a class action suit against QES. My hope is to contact him tomorrow to get further information to share with all of you.
Yesterday I started the list of those involved. Again, if you have been victimized you need to visit the website set up by the court appointed receiver.
Here are some other resources. Please contact me if you know of others or are involved in any way.
Nevada Real Estate Division - there are claim forms to be completed here
Copy of the Southwest Exchange Motion - from the klas-tv website
Marquis & Aurbach - firm representing many of the investor's
Nevada Secretary of State Securities Division 1- 800-758-6440
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