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The U.S. Senate is on the brink of approving some of the most sweeping economic reforms our nation has ever seen. Supporters say the Wall Street reform bill, set for approval by the Senate this week, will help protect everything from our credit cards to our mortgages. But critics say this massive bill will only make our economic system more complicated, and could hurt consumers in the long run.
Sorting out this 2,500-page bill is nearly impossible for the average person. So let's focus on one piece of it that could mean some trouble for everyday investors like you, regarding a 1031 property exchange. You may have never heard of this tax code, but in just the past four years, victims of 1031 fraud, including some in our state, have been ripped off of almost a billion dollars total.
That's a lot of money, but it's not much compared to the trillions the Wall Street reform bill is dealing with. And that's where the big concern emerges for 1031 victims and other critics of this economic reform. With so much focus on Wall Street, smaller investors may be getting lost in the shuffle.
Darlin' Boudreau's name speaks to her roots in the South, but she lost her retirement fund and her dreams right here in the Northwest. "I was devastated," she says between sobs. Four years ago, she sold a commercial building she owned in Port Angeles. Normally, any gain on that sale would be taxed. But Darlin' had learned how to defer that gain with a 1031 exchange. With a 1031, you sell your property and give the money to a qualified intermediary, or a QI. Within 45 days, you have to find a similar property of equal or greater value to make an exchange. Darlin' did just that. But when she went back to her QI, her money was gone. She was left with two awful questions: "How could this happen? How could this be true?"
The truth was, Edward Okun had taken over the company holding Darlin' Boudreau's money, and ripped her off. He threw lavish parties like a $200,000 wedding and bought mansions and private jets with investors' money instead of holding it for their property exchanges. Okun ended up getting 100 years in prison for taking $126 million from hundreds of people across the country. And while the vast majority of 1031's are not scams, industry insiders say a fraud like Okun's could easily happen again.
Michael Halloran from NES Financial says, "We need to find ways to protect consumers so other people can't steal their money." NES is one of the top providers of 1031's in the country. He's calling for federal regulation of his industry--not a common move in the business world. Halloran says he needs that help to regain investors trust. The 1031 industry has shrunk to a quarter of its former size. And he says right now, Congress is concentrating too much on bigger banks, leaving 1031 investors out in the cold. He says, "On a federal level, most people think this is too small of an issue. The economy has been so battered and there's so much legislative noise, it's tough to get people to pay attention."
Senator Maria Cantwell is on the Senate Finance Committee, but she wasn't immediately aware of the concerns about 10-31's when Q13 FOX News spoke with her last week. Her office did point out that 1031's are mentioned in the financial regulatory bill as the subject of a study. 1031 victims say that's not nearly good enough, but Senator Cantwell says she's not done with economic reform. She says, "I think the american public is on to this. They know that any kind of off-book accounting, any kind of scheme that's trying to evade realAtransparency is going to cause havoc for us in the future."
Darlin' Boudreau says she's seen enough havoc already. Without a law that has some teeth in it, she's worried for all would-be investors in the future. She says, "I fear for the unknowing victims that are yet to be had out there, or are being had as we speak. It's been a nightmare, and it isn't over."
For more information about 1031's, and how they work, take a look at the IRS website. For details on winners and losers when it comes to the regulatory reform bill, check out this breakdown from CNN. For the White House's explanation on financial reform, click here.
Sorting out this 2,500-page bill is nearly impossible for the average person. So let's focus on one piece of it that could mean some trouble for everyday investors like you, regarding a 1031 property exchange. You may have never heard of this tax code, but in just the past four years, victims of 1031 fraud, including some in our state, have been ripped off of almost a billion dollars total.
That's a lot of money, but it's not much compared to the trillions the Wall Street reform bill is dealing with. And that's where the big concern emerges for 1031 victims and other critics of this economic reform. With so much focus on Wall Street, smaller investors may be getting lost in the shuffle.
Darlin' Boudreau's name speaks to her roots in the South, but she lost her retirement fund and her dreams right here in the Northwest. "I was devastated," she says between sobs. Four years ago, she sold a commercial building she owned in Port Angeles. Normally, any gain on that sale would be taxed. But Darlin' had learned how to defer that gain with a 1031 exchange. With a 1031, you sell your property and give the money to a qualified intermediary, or a QI. Within 45 days, you have to find a similar property of equal or greater value to make an exchange. Darlin' did just that. But when she went back to her QI, her money was gone. She was left with two awful questions: "How could this happen? How could this be true?"
The truth was, Edward Okun had taken over the company holding Darlin' Boudreau's money, and ripped her off. He threw lavish parties like a $200,000 wedding and bought mansions and private jets with investors' money instead of holding it for their property exchanges. Okun ended up getting 100 years in prison for taking $126 million from hundreds of people across the country. And while the vast majority of 1031's are not scams, industry insiders say a fraud like Okun's could easily happen again.
Michael Halloran from NES Financial says, "We need to find ways to protect consumers so other people can't steal their money." NES is one of the top providers of 1031's in the country. He's calling for federal regulation of his industry--not a common move in the business world. Halloran says he needs that help to regain investors trust. The 1031 industry has shrunk to a quarter of its former size. And he says right now, Congress is concentrating too much on bigger banks, leaving 1031 investors out in the cold. He says, "On a federal level, most people think this is too small of an issue. The economy has been so battered and there's so much legislative noise, it's tough to get people to pay attention."
Senator Maria Cantwell is on the Senate Finance Committee, but she wasn't immediately aware of the concerns about 10-31's when Q13 FOX News spoke with her last week. Her office did point out that 1031's are mentioned in the financial regulatory bill as the subject of a study. 1031 victims say that's not nearly good enough, but Senator Cantwell says she's not done with economic reform. She says, "I think the american public is on to this. They know that any kind of off-book accounting, any kind of scheme that's trying to evade realAtransparency is going to cause havoc for us in the future."
Darlin' Boudreau says she's seen enough havoc already. Without a law that has some teeth in it, she's worried for all would-be investors in the future. She says, "I fear for the unknowing victims that are yet to be had out there, or are being had as we speak. It's been a nightmare, and it isn't over."
For more information about 1031's, and how they work, take a look at the IRS website. For details on winners and losers when it comes to the regulatory reform bill, check out this breakdown from CNN. For the White House's explanation on financial reform, click here.
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