Financial Crimes
Billions of dollars of investors’ monies have been lost and more are at risk!
Roughly $185 billion in Internal Revenue Code 1031 Exchange money for real estate was processed in 2008 in the U. S. Although, Federal Law mandates that each exchange must be executed with the services of a Qualified Intermediary, the QI’s are not audited or otherwise monitored by any federal regulatory body.
The risk of loss is great, but unnecessary if our Arizona legislature takes action. Currently only four states have provided the leadership to regulate this process; Nevada, California, Washington State and Colorado. Colorado passed their law January 25, 2010. See http://www.1031.org/ for information from the Federation of Exchange Accommodators.
We should move without delay to establish standards for QI’s. Bank deposits in Arizona as of June 30, 2009 (last figures available) were in excess of $82 billion. I believe this legislation alone, properly marketed across the U. S., can bring $12 billion to $15 billion more to Arizona in deposits by becoming a safe haven.
The defense of the QI that lost their clients $120 million dollars in Nevada by comingling personal and company monies with clients’ funds was, “There was no regulation of what could be done with the funds.”The Nevada legislature did not act to protect its citizens until after this loss.
The added tragedy is that those who have lost their funds are required to pay income tax because of noncompliance with the tax code.
Losses in Arizona have happened and more are inevitable! I personally know of a bank that was approached with an offer to use client money as collateral for personal loans for the owners of a QI. Absolute power over money corrupts. We don’t need to wait until after the fact to regulate.
In December 2008 the QI of LandAmerica filed bankruptcy with over $400 million of consumer funds. The monies are now in limbo and may never be seen again due to commingling and improper investment under LandAmerica’s control.
Arizona consumers, inundated with a flood of downward economic trends, should not have to include real estate entrusted to Qualified Intermediaries that due to a lack of both federal and state legislation are riddled with intentional and unintentional fraud. QI’s are not required to be bonded, insured, or even licensed. This regulatory void has left unscrupulous and incompetent QI’s with doors wide open for malpractice or outright fraud. Your money becomes their money to do with as they wish!
Arizona must move quickly to become the fifth state in the nation to bring regulation to this important business function. Our state could be seen as a safe haven and a home to billions of dollars of 1031 exchanges bringing relocations, assets, tax revenues and jobs to Arizona. Funding will be needed for the Arizona Department of Financial Institutions to oversee this industry.
April 7th, 2008 at 10:16 am
The criminal penalties for financial crimes lately have far exceeded violent criminal penalties. While I do not condone either type of crime, I believe the violent offenders need to spend the time they are sentenced in lieu of 50% off for good behavior. If they had behaved well outside, they would not be in jail in the first place.
I fully believe either type of crime should be appropriately penalized, but for financial crimes to exceed the crime of murder dumbfounds me.
Just a thought.
October 21st, 2008 at 7:36 pm
How dare anyone in government office in the state of Arizona even broach the subject of “Financial Crimes” when the entire State government – Senator McCain right on down to the county supervisors – are guilty of crimes against the citizens of Arizona by the supression of information regarding Arizona’s loss of millions in Medicaid accounts receivable (our elderly poor) and school funding (our future) by our state government’s irresponsible and illegal investing in National Century Financial Enterprises, a company called the “lender of last resort and questionable character” by the National Securities Commisssion. NCFE declared bankruptcy on November 2, 2002, and though millions were lost, We the People did not hear a whisper about it. Our elderly poor have suffered terribly, our schools are on shaky ground, but our “elite government officials” are still drawing their exhorbitant salaries. Tony Rogers, the CEO of AHCCCS (another name for a money-sucking HMO) is still being paid handsomely and looking clean, while our elderly poor and our entire economy is suffering. “The current meltdown” started right here, folks; and now one of the major players is running for President of the United States! Where is our criminal justice system? Where are impeachment procedings for the bipartisan violators who created the “Healthcare Enron” and then covered it up? Justice, along with Constitutional Rights and the Truth, lie murdered and buried somewhere in the Arizona desert.
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