1031 Trustee Places More
Businesses In Bankruptcy
By Kristina Doss

DAILY BANKRUPTCY REVIEW -- Miami developer Edward Okun’s business empire continued to crumble this week, as the trustee appointed by the court last month to oversee his businesses placed a batch of them into bankruptcy and warned he may take the same step for other Okun entities.

Chapter 11 Trustee Gerard A. McHale Jr. on Thursday filed Chapter 11 petitions with the U.S. Bankruptcy Court in Manhattan for Investment Properties of America LLC and other entities that are engaged in real-estate ventures, such as owning and operating residential properties, malls and warehouse facilities.

McHale said he decided to seek bankruptcy protection for the businesses to “stabilize, preserve, and monetize, to the extent possible, their respective assets.”

According to McHale, the value of their respective assets have been “diminished - and in some cases, possibly destroyed” by Okun’s alleged mismanagement and by parties trying to enforce alleged liens and other rights and remedies.

The bankruptcy court tapped McHale last month to oversee Okun’s 1031 Tax Group Inc., a real estate tax shelter, and Okun’s other businesses in response to alleged fraud and mismanagement.

The 1031 Tax Group collapsed into bankruptcy five months ago after Okun allegedly “borrowed” $150 million from investors to fund real estate investments made by another of his companies, Investment Properties Of America.

In October, Okun and his wife agreed to sign over most of their assets - including the Houston mall plus a yacht, two Lamborghinis and two Gulfstream airplanes - to McHale in order to pay back creditors of 1031 Tax Group.

1031 Tax Group was a “qualified intermediary” that lets investors who sell investment properties defer capital-gains taxes if they invest the proceeds in similar-type properties within 180 days. To qualify for the benefit, the seller can’t touch the money from the
sale. Instead, the money must go into an account until it’s used for the purchase of a new property.

Okun got into the tax exchange business two years ago, according to court papers, paying about $27 million in cash for six regional qualified intermediaries. He rolled up the exchanges to create 1031 Tax Group.

New York-based 1031 Tax Group filed for Chapter 11 protection on May 14, along with more than a dozen affiliates. The companies listed combined assets of $154.6 million and debts of $152.1 million. Besides Investment Properties of America, McHale filed Chapter 11 petitions on Thursday for 100 Corporate Drive LLC; Crossroads Miami Logistics Center LeaseCo LLC; Crossroads Miami Logistics Center LLC; CW Acquisition LLC; IPofA 5201 Lender LLC; IPofA Columbus Works LeaseCo LLC; IPofA Shreveport Industrial Park LLC; IPofAWest 86th Street Lease Co LLC; Simone Condo I LLC and Simone Condo II LLC. According to McHale, the businesses’ books and records are both incomplete and in a state of disarray.

With the information he does have, McHale said it appears that Cordell Funding is an alleged secured creditor of IPofA Shreveport Industrial Park LLC with a $13.4 million claim.

Cordell Consultants Inc. is an alleged secured creditor under two $3 million loan agreements with Okun. The loans are guaranteed by Simone Condo I LLC and Simone Condo II LLC.

Further, Cordell Consultants is an alleged secured lender of IPofA 5201 Lender LLC with a $2.5 million claim.

McHale said that he may have to amend the bankruptcy petitions as additional information is discovered. DBR

Daily Bankruptcy Review - November 19, 2007 (PDF)