1031 Tax Group customers seeking<br> liquidation of company assets

Customers of 1031 Tax Group LLC, a bankrupt real estate trust that is reorganizing under court protection, have asked a judge to liquidate its assets instead and force its founder to surrender his passport.
1031 Tax Group’s founder, Robert Okun, is a flight risk with ties to foreign countries and access to private transportation, the customers said in a court filing. Reorganizing under Chapter 11 of the federal bankruptcy code can take as many as two years and cost tens of millions of dollars and might squander the remaining assets of 1031 Tax Group, the customers claimed.
“There is no business at 1031,” said lawyer Jay Teitelbaum, who filed the request for the customers May 25 in U.S. Bankruptcy Court in Manhattan. “There’s nothing to reorganize. We just need to find the assets and return them to the people who have had their lives turned upside down.”
Richmond, Va.-based 1031 Tax Group, which helped investors avoid capital gains taxes, filed for bankruptcy protection this month when it was unable to follow through on more than 300 so-called open exchange contracts worth around $151 million. Federal prosecutors in Richmond have started a preliminary criminal investigation of the matter, according to court documents.
1031 Tax Group, a so-called qualified intermediary, held the proceeds of real estate and business sales until a seller could find another asset to invest in. That technique defers capital gains taxes.
The motion was filed on behalf of six investors holding more than $5.2 million in claims. The request will be considered at a hearing on June 11 and has drawn interest from 1031 Tax Group’s other customers, Teitelbaum said.
But Lukenda, an executive at Huron Consulting Group Inc. hired to reorganize the company, said converting the case to a liquidation under Chapter 7 of the bankruptcy code would make it more difficult for creditors to maximize recovery and might involve years of costly litigation.
1031 Tax Group filed with 14 affiliates, including Atlantic Exchange Co., National Exchange Accomodators LLC and Shamrock Holdings Group LLC.