Convicted felon Edward Okun burned through millions of dollars of other people’s money on high-end homes, a 131-foot yacht, a helicopter and $1,000 shots of cognac.
Included in the swindled loot was $42,500 belonging to Celeste Lucero, a hairdresser who lives in Wheat Ridge and who wanted to use the proceeds from the 2007 sale of a townhome as a down payment on her own salon.
“It was lost on a home that I had owned for 16 years,” said Lucero, 54. “It was devastating.”
Dozens of Colorado residents were hit by Okun’s fraud.
The Miami businessman acquired companies that held money for clients in the midst of 1031 exchanges. Under such transactions, proceeds from the sale of an investment property are used to buy another within 180 days. In doing so, capital-gains taxes can be deferred, but the money must be held by a third party in the interim.
But as soon as Okun bought the cash-holding companies, he used their funds as his “personal piggy bank,” prosecutors alleged.
Convicted in March of conspiracy, wire fraud, money laundering and other charges, Okun joined disgraced money manager Bernard Madoff in receiving a triple-digit prison term when a judge handed him a 100-year sentence this week.
That, however, is of little solace to victims like Lucero, who may recover just a third of their losses.
“To me, they’re worse than a crack addict that goes and robs a 7-Eleven,” Lucero said of Okun and Madoff. “A crack addict doesn’t have anything. They already have everything. They have multimillion-dollar homes.”
More than 300 claims totaling $167 million have been filed in the bankruptcy case of Okun’s company, the 1031 Tax Group.
Sixty-five claims are from Colorado victims, many who were clients of Denver-based Investment Exchange Group, one of the firms acquired by Okun. Some in Colorado say they’re owed more than $1 million. The disbursement of funds to victims is expected to be completed by the end of the year.
“Victims in this case weren’t looking for abnormally high returns on an investment but were simply trying to follow the popular 1031 tax-code provision that mandates that a third party hold their property sale proceeds until the funds can be reinvested in a replacement property,” said Denver attorney Bradford Dempsey, of Faegre & Benson, who represents a victim in the case.
In addition to losing much of the proceeds from the sales of their investment properties, victims will likely have to pay capital-gains taxes because they were unable to complete the purchase of a replacement property, Dempsey said.
Lucero already planned to pay taxes on her gains because she couldn’t find another investment property and was going to use the money on her salon business.
But that wasn’t the case for Trinidad mortgage broker Gary Clapp, who lost $20,000. In 2007, Clapp and his wife were in the midst of selling most of their investment properties as part of a retirement plan. But they’ve put that off now after getting hit by the economy and Okun’s fraud.
“If this hadn’t happened, plus the economy going to hell, we’d be retired now,” said Clapp, 63.
“It looks like that’s going to be a long way off.”
Andy Vuong: 303-954-1209 or avuong@denverpost.com
This article has been corrected in this online archive. Originally, it had an incorrect name for attorney Bradford Dempsey.
