OKUN SERIES: Victim of scam wants to see the law changed

SILVER SPRING, Md. An important part of Bonnie Schloss' life centers on sailing a modest, 30-foot boat she keeps in Annapolis.

The semiretired video editor enjoys the companionship of other sailors. And, she said, "there's something about sailing. You just go out there and there's a nice breeze, it's quiet and I love the water. There's nothing like the water, any kind of water."

Edward Hugh Okun might agree. The former Miami businessman owned an $8.6 million, 131-foot yacht on which he frequently conducted business, as well as a half-dozen lesser, but very expensive craft.

Schloss was introduced to what is now her passion by her younger sister, Linda Schloss, who died in 1997 and left Schloss a generous inheritance.

Schloss used the money to buy a town house, which she rented out for a while and then sold in 2007 for $335,000. Not long after that, Okun -- a man she had never heard of -- used his Richmond-based company to take the money, Linda's legacy.

The loss was not as devastating as losing Linda to leukemia, but it hit Schloss hard. Schloss was not left broke -- she owns a modest town house in suburban Washington in addition to her sailboat.

However, she feels violated by the theft and its fallout, which have taken over her life.

And, nearing 60, she worries about the future.

"How do you count the number of hours of tears, the hours wasted in anger and frustration? How do I explain about the years of liv ing frugally so that I could live comfortably when I got older.

"I have to live on what principal I have left, and that is scary. When will it run out? How much longer do I have?"

The experience, however, has also given her a mission. "My big thing, from the beginning, was trying to see that it didn't happen to anybody else," she said.

In 2005, Okun entered a largely unregulated industry -- exchange companies that hold the proceeds of real estate sales until new deals are closed, so that the seller can defer capital-gains taxes under section 1031 of the Internal Revenue Service code.

He bought six 1031 exchange companies, including the one used by Schloss, and took money from the client accounts.

Unless Schloss bought a new property with the $335,000, she would have to pay $50,000 in capital-gains taxes -- more money than she had in income the year before.

She could no longer use "income average" as a way to minimize taxes. And the town house she has lived in for 25 years was paid off, so she does not get a mortgage-interest tax break, either.

So when she lined up a deal to buy a $280,000 property in Florida, she turned the $335,000 over to Security 1031 Services to hold. It is no more a tax dodge than mortgage-interest deductions, she says.

"Yeah, it was only $50,000, and I got lucky [with the inheritance], but it was my chance to be lucky," Schloss said.

"I was on the top of the world. With money I had saved, and some I had inherited from my mother and with the sale of this house, I was going to be able to live without worrying from then on -- not extravagantly, but without worry," she said.

"I was set now. I kept saying to myself, 'Something good has finally happened to me. I have finally gotten lucky.'"

Then, in May 2007, she got a letter from a lawyer informing her the money was gone.

"I got hysterical. I was supposed to race that night on my friend's boat," she said. The friend called her, telling her too many people were coming and asking if she would mind not racing. "I burst into tears and said, 'Don't do this. I need to go out tonight. I need to go sailing.'"

Her brother, an accountant, helped her find an attorney for the bankruptcy proceedings in New York for Okun's Richmond-based company.

"At first, I just left it to the lawyer, and then I became involved. They had a creditors meeting in New York, and I went and I met Beth [Callanan] and she said, 'You need to join our group, the Train Wreck Victims.'"

She joined them, and things changed. "I started getting e-mails, and this whole thing has been so complicated that every day there's something new happening and it's all secret. . . . You're trying to read things and understand what is going on."

"It takes over your life. You annoy your friends all the time telling them stories about what's happening."

In addition to the bankruptcy, the FBI, IRS and others were investigating Okun. He was indicted in July, tried and convicted in March and will be sentenced in August.

Schloss and some other victims learned this year that prosecutors asked the judge for permission to show jurors in the then-pending trial a professionally made video of Okun's $171,000 wedding to his third wife, Simone Bolani.

The two married on Dec. 10, 2005, not long after he began raiding the client accounts of his exchange companies to finance, among other things, his divorce from his second wife.

When they married, Okun was 54, Bolani 27. The video shows the bride and groom dancing provocatively, Okun removing a garter from Bolani's leg with his teeth and a formally dressed pug and Pomeranian in attendance.

Schloss and some other victims arranged to watch the video at the federal courthouse here in Richmond.

"The damn dog in the tuxedo!" she said. "You had to laugh. They were so insane. And listening to her talk about why she liked him because he went out and spent money on her . . . how much money he wasted, how much money he threw away."

It came out during the trial that Okun once spent $400,000 to borrow $4 million for just one month.

"He didn't care. It was just waste, and it was so much of my life, $400,000, and here he is throwing it away, using it to bribe people," she said. "And that's just what they proved. Who knows what else he was doing with it?"

The case consumed her. "I went looking for the boat [named the Simone] in Fort Lauderdale. I talked to the dealer. . . . You want to know everything."

A dozen or more of the victims attended the two-week trial in Richmond in March. Schloss said many of them met in person for the first time and got to know one another better.

"These guys have kept me going for two years. . . . Without these people, I wouldn't know what's going on," Schloss said at the time of the trial.

She was disappointed that Okun did not testify. She said she didn't expect to get an apology, but she wanted to hear what he might say.

"Every once in a while, I'd take a look at him," Schloss said of Okun, who wore a blue blazer to trial every day in contrast to the striped jail garb he wore to earlier hearings. "He doesn't look sorry. He doesn't look at us."

Schloss was discouraged when testimony showed that many people knew what Okun was doing but did not stop him. "Nobody cared about us," she said. "We're just ordinary people who had their lives turned around."

A federal report last year found that the number of 1031 exchanges doubled between tax years 2001 and 2005. "Although qualified intermediaries have important fiduciary responsibilities, they are not licensed or regulated and have minimal federal government oversight," the report said.

It was reported that in 2007, there were 23 instances of such companies not meeting their obligations, resulting in estimated losses of $250 million.

The industry's trade organization, the Federation of Exchange Accommodators, asked the Federal Trade Commission in August 2007 to come up with registration and certification standards in the wake of Okun's case and others. But last August, the FTC denied the request for more oversight.

"I want to see the law changed to protect other people," said Schloss, who has contacted lawmakers and the media. But again, she said, "nobody seems to care. It gets depressing."

Otherwise, Schloss is getting on with her life. She hopes to recover some of her lost money in bankruptcy court and misses her younger sister Linda, who died Dec. 12, 1997, at age 42. "It took a long time to get over it," Schloss said.

Linda, who was a successful producer in the advertising business, got Schloss started in her career as a video editor. She was Schloss' best friend and favorite traveling companion.

A month ago, Schloss met some of Linda's old college roommates. "We've stayed in touch. She's just a part of our lives that will never not be there."

Contact Frank Green at (804) 649-6340 or .

Staff writer Emily C. Dooley contributed to this report.