LandAmerica 1031 Exchange customers now creditors
Money placed with LandAmerica 1031 Exchange Services Inc. prior to its bankruptcy filing belongs to the estate and not to customers of the company, a judge ruled today.
The ruling essentially turns about 450 customers of the company into creditors who must vie for a portion of the company's remaining assets.
The exchange company and its parent, Henrico County-based LandAmerica Financial Group Inc., filed for Chapter 11 protection in U.S. Bankruptcy Court in Richmond in late November.
The exchange company held proceeds from the sale of investment property as a way for investors to defer capital gains taxes. The investors had 180 days to buy a similar property in which to reinvest.
Customers of the exchange company had argued they had put their money in trust. LandAmerica disagreed.
Bankruptcy Court Judge Kevin R. Huennekens ruled late this morning in favor of the company.
"This was expected," said Ronald A. Page, Jr. with the Richmond firm Cantor Arkema, which represents more than 50 exchange customers.
Cantor Arkema clients "are not going to be pleased but they're not going to be surprised."
At the time of the bankruptcy filing, LandAmerica owed $419.2 million to about 450 customers.
Reader Reactions
Failure to oversee 1031 exchange transactions is squarely on the SEC and the FDIC. 1031 exchange financial transactions are sanctioned by the IRS, but are completely unregulated and uninsured against incompetence or fraud. While I am generally a free market advocate, this is an area where regulation is sorely and immediately needed.The folks who should ultimately answer for LES fraud are US regulators, who, as usual, have been asleep at the wheel.
Mugged first by Land America…
Mugged second by the Bankruptcy Court.
Cash burn in bankruptcy of $100k/daily for a company no longer in business….
what is the Judge doing about that?
Good point for people to remember: don’t deposit money for a 1031 exchange that isn’t held as a trust account separate from general funds. LandAmerica officials should go to jail for this.
With the knowledge that this would be the likely outcome, Ted Chandler and his cohorts had the audacity to ask the court to allow them to receive bonuses! He and his allies deserve criminal prosecution, and if found guilty, incarceration - for a very long time.
Aren’t these private individuals from whom Land America took the entire proceeds of property sales?
For many people this could be the biggest part of their net worth.
How could anyone have accepted this money knowing that Land America was in trouble?
It should have been held in trust not as a general asset of the company.
This is terrible.
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