Two Virginia Residents Sentenced for Their Role in Scheme to Defraud Clients of Funds Allegedly Held in Trust
August 14th, 2009
August 14th, 2009
US Department of Justice
Two former employees of Edward H. Okun, who was sentenced to 100 years in prison on Aug. 4, 2009, after a three-week jury trial, were sentenced today before U.S. District Judge Robert E. Payne for their roles in a scheme to defraud and obtain approximately $126 million in client funds held by The 1031 Tax Group LLP (1031TG).
Lara Coleman, the former chief operating officer of Investment Properties of America (IPofA), was sentenced to 10 years in prison and ordered to pay full restitution. Coleman pleaded guilty on Jan. 6, 2009, to conspiring to commit mail and wire fraud and to making a material false statement to federal investigators.
According to the plea agreement and statement of facts, Coleman and others used 1031TG and its subsidiaries in a scheme to obtain millions of dollars of client funds by 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 such exchanges, investment property owners deposit the proceeds from the sale of their property with qualified intermediaries and sign exchange agreements, which include various promises by the qualified intermediaries to clients regarding the safekeeping of exchange funds in trust.
In the plea agreement and statement of facts, Coleman admitted that 1031TG falsely represented that it would hold client funds solely to complete the clients’ 1031 exchanges. Coleman admitted that after obtaining clients’ exchange proceeds with that false promise, she and others misappropriated approximately $132 million in client funds to support the lavish lifestyle of the owner of 1031TG, pay operating expenses for the owner’s various companies, invest in commercial real estate and purchase additional qualified intermediary companies to obtain access to additional client funds. In addition, Coleman admitted that she lied to federal investigators about statements she made in 2006 to internal attorneys for Investment Properties of America about the amount of money she and others had misappropriated.
Robert D. Field II was sentenced today to five years in prison and was ordered to pay full restitution for his participation in the conspiracy to defraud 1031TG customers. Field was the chief financial officer of a holding company that was set up, in part, to oversee both IPofA and 1031TG, although neither company was ever officially made a subsidiary of the holding company. The sentencing of Richard Simring, the chief legal officer, has been continued. Field pleaded guilty on July 3, 2008, and Simring pleaded guilty on July 24, 2008.
The case is being prosecuted by Assistant U.S. Attorneys Michael S. Dry and Jessica A. Brumberg for the Eastern District of Virginia and Trial Attorney Brigham Q. Cannon of the Criminal Division’s Fraud Section. This continuing investigation is being conducted by the U.S. Postal Inspection Service, the Internal Revenue Service and the FBI.
Read release at USDOJ.gov…