Breast Implant MEDICOR rips off Investors in Enormous Scam
Ilena Rose
and business partner of Don McGhan ... never seem to want the public
to know that about the company O'leary hawks implants for:
www.BreastImplantAwareness.org/patrickoleary.htm
Sunday, September 16, 2007
Retirement funds gone as firms go bankrupt
http://www.telegram.com/article/20070916/NEWS/709160397/1002/BUSINESS
Millions lost as unregulated entities collapse
By Erik Larson BLOOMBERG NEWS
There were no restrictions on what could be done with the money.
There’s a spectrum between throwing money on a gaming table and
investing in government securities.
Marsha Slotten’s bad news came in April by e-mail, from a tipster
warning that the company holding her retirement nest egg had
collapsed.
After racing in a panic to the office of Southwest Exchange Inc.
outside Las Vegas, she found a locked door and a sign saying the staff
was “in training.” It never reopened.
“I was devastated,” said Slotten, 58, who said she was forced to
cancel early retirement after the disappearance of $2.74 million she
made selling a strip mall. “I thought I knew what I was doing, but now
my nest egg, my retirement plan, is gone.”
The real estate broker is among hundreds of investors who lost the
proceeds of property sales because two companies went bankrupt during
criminal investigations.
The two were among thousands of mostly unregulated U.S. firms that
hold money between commercial-property sales. Their collapse led to
dozens of lawsuits and calls for regulation.
The intermediaries are known as 1031 exchanges, named for a provision
of U.S. tax law that defers capital gains taxes if the seller of a
property buys another like it within six months.
Exchanges are used by Fortune 500 companies, partnerships, individuals
and investment trusts. More than 338,500 sellers deferred $73.7
billion in taxes in 2004, the latest year for which accounting firm
Deloitte & Touche LLP has data.
Transactions must be handled by so-called qualified intermediaries
like 1031 exchanges, which have temporary custody of about $150
billion a year, an industry group says. They are unregulated in all
but one state.
The bankrupt firms’ owners are accused of using client funds to invest
in other businesses, emptying bank accounts of more than $250 million.
No criminal charges have been filed.
Southwest Exchange, based in Henderson, Nev., was forced into
liquidation owing customers about $100 million. It went into
receivership after the federal and state authorities started
investigating.
Ex-Chairman Donald K. McGhan is accused in a lawsuit of scheming to
buy Southwest Exchange and use its deposits to finance MediCor Ltd.,
his Las Vegas-based maker of breast implants, now in bankruptcy.
McGhan’s lawyer, Mark Dzarnoski, said his client denies any
wrongdoing, noting there was “no regulation” over what could be done
with the funds.
“There were no restrictions on what could be done with the money,”
Dzarnoski said. “There’s a spectrum between throwing money on a gaming
table and investing in government securities. McGhan’s use fell
somewhere between those endpoints.”
The U.S. Attorney’s Office in Richmond, Va., began a preliminary
investigation of the second company, 1031 Tax Group LLC, after it
couldn’t return $151 million to more than 300 investors, chief
restructuring officer James Lukenda said in court papers in May when
it filed for bankruptcy in New York.
Clients accused founder Edward Okun of using their money to finance
his own real estate ventures. Okun said in Bankruptcy Court papers he
borrowed the money. His lawyer, Howard J. Berlin, didn’t return a call
seeking comment.
A judge in Manhattan next month will consider 1031 Tax Group’s plan to
liquidate Okun’s real estate holdings and pay investors. Most
creditors will still owe the 15 percent tax they sought to defer, and
lose the chance to buy new property.
Exchange companies became popular during the mid-1990s after Congress
streamlined the deferral law. They charge fees of about $500 to $1,500
per transaction and take a share of the interest earned on the money
they’re holding.
Tax-deferral services are provided by institutions ranging in size
from banks such as Wachovia Corp. and JPMorgan Chase & Co. to
single-owner 1031 exchanges.
The Nevada and Virginia bankruptcies prompted calls for federal and
state regulation. Nevada, the only state with such rules in place,
increased its oversight.
“The problem has put a pall over these types of transactions,” said
Michael Machado, a California state senator who proposed state
regulation to prevent bilking of investors.
On Aug. 6, the Federation of Exchange Accommodators, a national
industry organization, petitioned the Federal Trade Commission to
write nationwide rules for 1031 exchanges.
“It certainly concerns us that two companies are giving everyone in
the industry a black eye,” the Philadelphia-based federation’s
president, Hugh Pollard, said in an interview.
His group’s code of ethics says members should “keep the exchange
proceeds in a stable financial institution or other reliable
investment program unless the client expressly requests an alternative
investment.”
“Federal regulation would definitely be good for the industry,” said
Mary Cunningham, president of Chicago Deferred Exchange Co., which
handles $20 billion to $30 billion a year. “We’ve done a very good job
of self-regulating for the past 20 years, but a few dishonest people
have sprung up.”
FTC spokesman Mitchell Katz said the agency “will review the petition
and give it due consideration before responding.”
The industry has “no barriers to entry, so anybody can join the
industry and hold other people’s money,” said Gary Gorman, founder of
Denver-based 1031 Exchange Experts LLC.
“At least when you get a massage or a haircut, you know they have to
be licensed,” Gorman said.
Ilena Rose
and business partner of Don McGhan ... never seem to want the public
to know that about the company O'leary hawks implants for:
www.BreastImplantAwareness.org/patrickoleary.htm
http://www.bloomberg.com/apps/news?pid=20601103&sid=ary1hm_rkIgU&refer=news
Retirement Funds Vanish as Bankruptcies Hit Tax-Deferred Scheme
By Erik Larson
Sept. 11 (Bloomberg) -- Marsha Slotten's bad news came in April by
e-mail, from a tipster warning that the company holding her retirement
nest egg had collapsed.
After racing in a panic to the office of Southwest Exchange Inc.
outside Las Vegas, she found a locked door and a sign saying the staff
was ``in training.'' It never reopened.
``I was devastated,'' said Slotten, 58, who said she was forced to
cancel early retirement after the disappearance of $2.74 million she
made selling a strip mall. ``I thought I knew what I was doing, but
now my nest egg, my retirement plan, is gone.''
The real estate broker is among hundreds of investors who lost the
proceeds of property sales because two companies went bankrupt during
criminal investigations.
The two were among thousands of mostly unregulated U.S. firms that
hold money between commercial-property sales. Their collapse led to
dozens of lawsuits and calls for regulation.
The intermediaries are known as 1031 exchanges, named for a provision
of U.S. tax law that defers capital gains taxes if the seller of a
property buys another like it within six months.
Exchanges are used by Fortune 500 companies, partnerships, individuals
and investment trusts. More than 338,500 sellers deferred $73.7
billion in taxes in 2004, the latest year for which Deloitte & Touche
LLP has data, the accounting firm said.
$150 Billion Yearly
Transactions must be handled by so-called qualified intermediaries
like 1031 exchanges, which have temporary custody of about $150
billion a year, an industry group says. They are unregulated in all
but one state.
The bankrupt firms' owners are accused of using client funds to invest
in other businesses, emptying bank accounts of more than $250 million.
No criminal charges have been filed.
Investors' claims range from tens of thousands of dollars to more than
$20 million.
Southwest Exchange, based in Henderson, Nevada, was forced into
liquidation owing customers about $100 million. It went into
receivership after the federal and state authorities started
investigating its handling of clients' assets.
Ex-Chairman Donald K. McGhan is accused in a lawsuit of carrying out a
plan to buy Southwest Exchange and use its deposits to finance the
expansion of his MediCor Ltd., a Las Vegas-based maker of breast
implants now in bankruptcy. Creditors of MediCor and Southwest
Exchange may wage a court fight over the proceeds of a Sept. 18
auction of MediCor's assets.
Wrongdoing Denied
McGhan's lawyer Mark S. Dzarnoski said his client denies any
wrongdoing, noting there was ``no regulation'' over what could be done
with the funds.
``There were contracts, but there were no restrictions on what could
be done with the money once it was obtained,'' Dzarnoski said.
``There's a spectrum between throwing money on a gaming table and
investing in government securities. McGhan's use fell somewhere
between those endpoints, and what's going to be determined in court is
whether or not that's OK.''
The U.S. Attorney's Office in Richmond, Virginia, began a preliminary
investigation of the second company, 1031 Tax Group LLC, after it
couldn't return $151 million to more than 300 investors, chief
restructuring officer James Lukenda said in court papers in May when
it filed for bankruptcy in New York.
Clients accused founder Edward Okun of using their money to finance
his own real estate ventures. Okun said in Bankruptcy Court papers he
borrowed the money to invest in businesses and ``activities of
entities he owned and controlled.'' His lawyer Howard J. Berlin didn't
return a call seeking comment.
Paying Investors
A judge in Manhattan next month will consider 1031 Tax Group's plan to
liquidate Okun's real estate holdings and pay investors.
Even those lucky enough to get reimbursed for their lost sale proceeds
almost all missed the six-month deadline and will owe the 15 percent
tax they sought to defer. Okun's lawyer Norman Kinel is preparing to
defend suits against 1031 Tax Group over the tax payments, according
to court papers.
Most customers, including Slotten, also lost the chance to buy
property they sought. She planned to acquire two new buildings housing
Walgreen Co. drugstores and live off the revenue. Instead, she
returned to her job as a real estate broker and is taking finance
classes to enter a new field.
Exchange companies became popular during the mid-1990s after Congress
streamlined the deferral law. They typically charge fees of about $500
to $1,500 per transaction and take a share of the interest earned on
the money they're holding. Some are paid incentives by banks for
opening new accounts.
Range of Sizes
Tax-deferral services are provided by institutions ranging in size
from banks such as Wachovia Corp. and JPMorgan Chase & Co. to
single-owner 1031 exchanges.
The Nevada and Virginia bankruptcies prompted calls for federal and
state regulation. Nevada, the only state with such rules in place,
increased its oversight.
``The problem has put a pall over these types of transactions,'' said
Michael Machado, a California state senator who proposed state
regulation to prevent bilking of investors.
On Aug. 6, the Federation of Exchange Accommodators, a national
industry organization, petitioned the Federal Trade Commission to
write nationwide rules for 1031 exchanges.
``It certainly concerns us that two companies are giving everyone in
the industry a black eye,'' the Philadelphia-based federation's
president, Hugh Pollard, said in an interview.
His group's code of ethics says members should ``keep the exchange
proceeds in a stable financial institution or other reliable
investment program unless the client expressly requests an alternative
investment.''
Support for Regulation
``Federal regulation would definitely be good for the industry,'' said
Mary Cunningham, president of Chicago Deferred Exchange Co., which
handles $20 billion to $30 billion a year. ``We've done a very good
job of self-regulating for the past 20 years, but a few dishonest
people have sprung up.''
FTC spokesman Mitchell Katz said the agency ``will review the petition
and give it due consideration before responding.''
The industry has ``no barriers to entry, so anybody can join the
industry and hold other people's money,'' said Gary Gorman, founder of
Denver-based 1031 Exchange Experts LLC.
``At least when you get a massage or a haircut, you know they have to
be licensed,'' Gorman said.
The New York bankruptcy case is In re The 1031 Tax Group LLC,
07-11448, U.S. Bankruptcy Court, Southern District of New York
(Manhattan). Southwest Exchange customers have made claims in the
MediCor case, In re MediCor Ltd., 7-10877, U.S. Bankruptcy Court,
District of Delaware (Wilmington).
Ilena Rose
and business partner of Don McGhan ... never seem to want the public
to know that about the company O'leary hawks implants for:
www.BreastImplantAwareness.org/patrickoleary.htm
Sunday, September 16, 2007
Retirement funds gone as firms go bankrupt
http://www.telegram.com/article/20070916/NEWS/709160397/1002/BUSINESS
Millions lost as unregulated entities collapse
By Erik Larson BLOOMBERG NEWS
There were no restrictions on what could be done with the money.
There’s a spectrum between throwing money on a gaming table and
investing in government securities.
Marsha Slotten’s bad news came in April by e-mail, from a tipster
warning that the company holding her retirement nest egg had
collapsed.
After racing in a panic to the office of Southwest Exchange Inc.
outside Las Vegas, she found a locked door and a sign saying the staff
was “in training.” It never reopened.
“I was devastated,” said Slotten, 58, who said she was forced to
cancel early retirement after the disappearance of $2.74 million she
made selling a strip mall. “I thought I knew what I was doing, but now
my nest egg, my retirement plan, is gone.”
The real estate broker is among hundreds of investors who lost the
proceeds of property sales because two companies went bankrupt during
criminal investigations.
The two were among thousands of mostly unregulated U.S. firms that
hold money between commercial-property sales. Their collapse led to
dozens of lawsuits and calls for regulation.
The intermediaries are known as 1031 exchanges, named for a provision
of U.S. tax law that defers capital gains taxes if the seller of a
property buys another like it within six months.
Exchanges are used by Fortune 500 companies, partnerships, individuals
and investment trusts. More than 338,500 sellers deferred $73.7
billion in taxes in 2004, the latest year for which accounting firm
Deloitte & Touche LLP has data.
Transactions must be handled by so-called qualified intermediaries
like 1031 exchanges, which have temporary custody of about $150
billion a year, an industry group says. They are unregulated in all
but one state.
The bankrupt firms’ owners are accused of using client funds to invest
in other businesses, emptying bank accounts of more than $250 million.
No criminal charges have been filed.
Southwest Exchange, based in Henderson, Nev., was forced into
liquidation owing customers about $100 million. It went into
receivership after the federal and state authorities started
investigating.
Ex-Chairman Donald K. McGhan is accused in a lawsuit of scheming to
buy Southwest Exchange and use its deposits to finance MediCor Ltd.,
his Las Vegas-based maker of breast implants, now in bankruptcy.
McGhan’s lawyer, Mark Dzarnoski, said his client denies any
wrongdoing, noting there was “no regulation” over what could be done
with the funds.
“There were no restrictions on what could be done with the money,”
Dzarnoski said. “There’s a spectrum between throwing money on a gaming
table and investing in government securities. McGhan’s use fell
somewhere between those endpoints.”
The U.S. Attorney’s Office in Richmond, Va., began a preliminary
investigation of the second company, 1031 Tax Group LLC, after it
couldn’t return $151 million to more than 300 investors, chief
restructuring officer James Lukenda said in court papers in May when
it filed for bankruptcy in New York.
Clients accused founder Edward Okun of using their money to finance
his own real estate ventures. Okun said in Bankruptcy Court papers he
borrowed the money. His lawyer, Howard J. Berlin, didn’t return a call
seeking comment.
A judge in Manhattan next month will consider 1031 Tax Group’s plan to
liquidate Okun’s real estate holdings and pay investors. Most
creditors will still owe the 15 percent tax they sought to defer, and
lose the chance to buy new property.
Exchange companies became popular during the mid-1990s after Congress
streamlined the deferral law. They charge fees of about $500 to $1,500
per transaction and take a share of the interest earned on the money
they’re holding.
Tax-deferral services are provided by institutions ranging in size
from banks such as Wachovia Corp. and JPMorgan Chase & Co. to
single-owner 1031 exchanges.
The Nevada and Virginia bankruptcies prompted calls for federal and
state regulation. Nevada, the only state with such rules in place,
increased its oversight.
“The problem has put a pall over these types of transactions,” said
Michael Machado, a California state senator who proposed state
regulation to prevent bilking of investors.
On Aug. 6, the Federation of Exchange Accommodators, a national
industry organization, petitioned the Federal Trade Commission to
write nationwide rules for 1031 exchanges.
“It certainly concerns us that two companies are giving everyone in
the industry a black eye,” the Philadelphia-based federation’s
president, Hugh Pollard, said in an interview.
His group’s code of ethics says members should “keep the exchange
proceeds in a stable financial institution or other reliable
investment program unless the client expressly requests an alternative
investment.”
“Federal regulation would definitely be good for the industry,” said