Fourth Circuit Upholds 100-Year Sentence in Okun Case
RICHMOND, Va. – Neil H. MacBride, United States Attorney for the Eastern District of Virginia, announced that the United States Court of Appeals for the Fourth Circuit upholding the conviction and 100-year sentence of Edward H. Okun, the former owner of The 1031 Tax Group LLP (1031TG), whose fraud led to the loss of more than $126 million in client funds.
“Financial fraudsters make calculated, rational decisions, and the threat of spending as much as 100 years in prison can begin to change corporate culture and behavior,” said U.S. Attorney MacBride. “Today’s opinion confirms that it is just for fraudsters who rob the life savings of their victims to spend the rest of their lives – or at least a big chunk of it – behind bars.”
Okun was convicted by a federal jury in Richmond, Va., on March 19, 2009, of conspiracy to commit mail and wire fraud, wire fraud, conspiracy to commit money laundering, money laundering, bulk cash smuggling and perjury. He was sentenced by U.S. District Judge Robert E. Payne on Aug. 4, 2009, to 100 years in prison.
According to the evidence presented at trial, from August 2005 through April 2007, Okun and others used 1031TG and its subsidiaries, all owned by Okun, in a scheme to defraud clients of millions of dollars through false pretenses. Section 1031 of the Internal Revenue Code allows investment property owners to defer the capital gains tax that would otherwise be due on properties sold, if the proceeds are used to purchase new property in a specified time frame. To facilitate this exchange, investment property owners deposit the proceeds of property sales with qualified intermediaries and sign exchange agreements that include various promises by the qualified intermediaries to clients regarding the safekeeping and use of exchange funds.
Specifically, the evidence presented at trial established that 1031TG obtained funds by promising clients that their money would be used solely to effect 1031 exchanges as outlined in the exchange agreements. After making such promises, evidence showed that Okun and others misappropriated approximately $126 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. In the negotiations to purchase additional qualified intermediary companies, evidence showed that Okun and others misled owners of those companies to induce them to sell their companies to Okun, who then took control of and misappropriated the client funds.
The evidence also showed that Okun instructed his employees in Richmond 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.
The investigation was conducted by the U.S. Postal Inspection Service, the Internal Revenue Service and the FBI. The case was prosecuted by Assistant U.S. Attorneys Michael S. Dry and Jessica A. Brumberg for the Eastern District of Virginia and Brigham Q. Cannon, a former Trial Attorney for the Criminal Division’s Fraud Section.A copy of this press release may be found on the website of the United States Attorney's Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on https://pcl.uscourts.gov.