Philanthropists lost $1.9 million to Okun scam

ATLANTA Every Tuesday and Thursday, a rough but orderly line forms in a parking lot on Auburn Avenue, three doors from the birthplace of the Rev. Dr. Martin Luther King Jr.

At 11:30 a.m., several hundred people start shuffling off the asphalt into a former school cafeteria. Most are chipper at the prospect of a good meal, some are wary and a few appear hungry for more than food.

For 17 years, the homeless and down and out have been welcome at Our Lady of Lourdes Catholic Church, where a growing hot-lunch program faces an uncertain future thanks to a crook who once spent $26,000 on a dinner in the Bahamas.

Edward Hugh Okun used his now-bankrupt Richmond company in a $126 million fraud that victimized more than 300 people, including Hampton Ward of Atlanta, who lost $1.9 million that he and his wife, JoAnn, had earmarked for the Lourdes Lunch Group.

"We were interested in setting up an endowment . . . where once we leave the Earth, the feeding program would go on in perpetuity," said Ward, 67. Now, he says, "we'll have to find someone to take our place."

Ward funds the program with $40,000 a year out of his own pocket.

"That's an embarrassing thing for me to tell, because I don't believe in publicity." But, he said, "I want to show the impact that this bankruptcy had on all kinds of folks. There are folks out there who lost their home. They lost their entire life savings."

. . .

The Wards are among thousands of people and institutions across the U.S. caught up in Ponzi schemes and other frauds undone when the bottom dropped out of the economy.

The repercussions rippled across the country in tragic and sometimes surprising ways.

FBI Director Robert S. Mueller III told Congress this year that economic crime remains a top concern and that the bureau had more than 565 open investigations of corporate fraud.

Cases such as Bernard Madoff's, in which billions were lost, have been highly publicized, while others, such as Okun's, less so. Okun's victims, unlike Madoff's, were not investors -- they thought the money had been placed in safe accounts.

Okun's victims included a Stetson-wearing Texan who lost $700,000 from the sale of ranch land his family owned for 100 years, a hardware-store owner in Connecticut and a psychotherapist in Florida. They included people who had worked hard all their lives, who had done everything right.

Ward, long retired, owned a janitorial and cleaning business, United Cleaning Specialists, based in Atlanta. He also owned a real estate business based in Denver.

In October 2006, Ward sold a shopping center in Parker, Colo., for $8.2 million. It was a good price, he said. "My wife and I were kind of excited . . . it was kind of a home run." The bank was paid more than $4.8 million still owed on the property, leaving $3.4 million.

"We set down and we said, 'You know, it's going to be great because we'll be able to travel and still do our charity.' But it didn't quite work out that way."

Ward placed the $3.4 million left over from the shopping center's sale with a company called The 1031 Exchange Group. Under section 1031 of the Internal Revenue Service tax code, one can defer capital-gains taxes on the sale of real estate if the proceeds are placed with a 1031 exchange company to hold until a new property is purchased.

Ward decided to leave the money with the 1031 company for the maximum of 180 days and take it out, pay taxes and use part of the balance for the lunch program's endowment. But when Ward tried to get his money in April 2007, he discovered it was missing.

The 1031 firm had been purchased by Okun's Richmond-based The 1031 Tax Group. Okun, a Miami real estate developer in need of cash to fund, among other things, a $6 million divorce, started buying 1031 companies and draining the accounts of clients such as Ward.

For a time, Okun was able to fund the client exchanges as they came due, with money taken from client accounts that were in 1031 companies he had subsequently bought.

It was a Ponzi scheme, and it worked until not enough money came in to keep it going. The bottom fell out for Okun in May 2007, and he declared bankruptcy amid a criminal investigation that was already under way in Richmond.

Okun was tried in Richmond in March, found guilty and is facing up to 400 years in prison when sentenced in August.

Of the $3.4 million placed in the 1031 company, Ward was able to recover $1.5 million with which he paid taxes and acquired another property, leaving a net loss of more than $1.9 million.

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Okun's bankruptcy came at a time when the lunch program was feeding more people than ever. Ward got behind in paying the program's bills but was able to catch up.

Ward is reluctant to talk about the personal impact of the scam. Beth Callanan, a fellow victim who has gotten to know Ward, said the only times she has seen him upset about the Okun mess was when he speaks about the feeding program.

Ward said he and his wife first feared that the loss would cripple travel plans, but no longer. "We plan to start again soon. However, with the present economic downturn coupled with our Okun losses, we are much more cautious how we spend our money."

"My wife and I are going to survive -- on a different level than before -- but we're going to be able to survive, and we're going to be able to keep our program open," Ward said.

That's good news to Walter Mullins, who got in line for lunch one chilly Tuesday morning last month. A slight man with a gray beard, he showed up before 9 a.m., his possessions tied to a hand truck that stood in front of him.

Mullins was the first of 407 people served that day -- twice as many as a year ago -- and among the 35,000 meals the program may serve this year. Other programs in the city handle the other days of the week.

More diners arrived soon after Mullins. Some held their spots in line with backpacks, plastic bags or folded pieces of cardboard while they gathered in small groups to talk and laugh. A few had conversations with themselves.

By 10:15 a.m., across the street at the Martin Luther King Center, a grandmother, mother and 3-year-old sat waiting, sitting on a wall along the sidewalk.

"We're seeing more and more children," Ward said. "Lately, it's just been terrible. I just go home brokenhearted."

Cooking inside the former school cafeteria started earlier that morning. The day's menu included chicken, mashed potatoes, gravy, carrots, green beans, rolls, dessert and pink lemonade.

Much of the food is purchased at 16 cents a pound from the Atlanta Community Food Bank. They also buy from an area food wholesaler, and a local supermarket, baker and others donate some of the food. The church supplies the facilities and utilities.

There are 35 volunteers who pick up the food, cook and serve the meals, organize and manage the line outside and clean up afterward. Most have been volunteering for years and members of the church for decades.

The volunteer in charge of the volunteers is Thayes Sturgis, 67, a retired phone-company employee. An 11-year breast-cancer survivor, Sturgis says the work is a way of thanking God for saving her life.

Sturgis is a longtime parishioner at Our Lady of Lourdes. "This is holy ground," she said. The 97-year-old church and its former school are located across the street from King's tomb and in the heart of the Martin Luther King Jr. National Historic Site.

And, she said, the original church/school building was constructed in 1912 by Mother Katherine Drexel, now a Catholic saint. Drexel founded the Sisters of the Blessed Sacrament for Indians and Colored People in 1891.

The Ebenezer Baptist Church, where King's father was pastor and King later the co-pastor, is just a block down Auburn Avenue.

King walked by Our Lady of Lourdes from his home -- almost next door -- to Ebenezer. And as a child, King played in the Lourdes school playground, which is now the parking lot where the homeless gather.

Ward, the son of a Baptist preacher, converted to Catholicism when he married. "They call me a 'Baplic,'" he said before adding: "I'm certainly not a saint."

The Rev. John Adamski, Our Lady of Lourdes' pastor, might disagree. He said Ward has been the program's sole financial supporter and that the church "is very blessed to have his unstinting support for this program."

"Mr. Ward has been generously, selflessly maintaining the Lourdes lunch program for well over 10 years," Adamski said. "He does this without drawing attention to himself but, rather, seeks to make sure that hungry people are fed."

A self-described country boy from Athens, Ga., Ward said that as "an enlightened capitalist," he wanted to return something to the community after employing many minority workers in his business.

"This program is really dedicated to a lot of my employees that worked so hard for me over the years," Ward said.

Also, he said, "I think I was influenced by the civil-rights movement and the attitude of the folks. It's contagious."

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As people gather in the parking lot, volunteers, one with a loudspeaker, form the line that must zigzag to keep inside the property.

Shortly before 11:30 a.m., Sturgis asks those wearing hats to take them off and then leads the crowd in a brief prayer that ends in a rousing "Amen!" After filing into the cafeteria, they line up along the walls on the worn linoleum floor.

Jean Marek, the oldest volunteer, collects the numbered tickets before each diner is handed a paper plate of food, eating utensils and a drink. "I'm 93. I'm glad I got a job," she said with a laugh. "I love coming. I don't miss a Tuesday or a Thursday."

Ward minimizes his role. "All I do is write a check every once in a while." The volunteers, he said, "they're the real people behind the program. They get up early, they work hard, they cook over a hot stove all day . . . and they're the most wonderful people in the world.

"I'm worried more about them losing their program that they have built over the years. Our dream always was that it would last forever."

Ward said an endowment would need to be in the $2 million range to allow for the growth of the fund and an increase in the cost of goods over the years. A $1 million endowment might be able to keep it going at the current level.

"It's a very frustrating situation. I guess I'm very angry at Mr. Okun, at what he did. He hurt a lot of people," Ward said. But, he promises, "we're going to endure in spite of Okun."

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