Legal News

Okun Joins Madoff in Century Club

By Ashby Jones

After L’Affaire Madoff, part of us thought we’d see our grave before we saw another 100-year sentence (Madoff got 150 years).

But lo-and-behold, mere moments ago, we got word of another: Edward Okun (pictured), the former owner of The 1031 Tax Group LLP, was sentenced Tuesday to a cool century — 100 years exactly — for his role in a scheme to defraud 1031 Tax Group investors of $126 million.

In March, Okun was convicted by a jury in Richmond, Va., of a handful of crimes, including money laundering, perjury, and our personal favorite: bulk cash smuggling.

At trial, assistant U.S. Attorney Michael Dry argued Okun's fraud was worse than others, because his victims didn’t think they were investing, necessarily, simply using Okun’s service to hold funds after they sold property but before they rolled the money into new real-estate investments. Section 1031 of the tax code allows customers to defer taxes when like property purchases are made within several moths of a sale.

However, instead of holding the money, prosecutors say Okun used it as a "personal piggy bank" for lavish personal expenses.

Okun’s lawyer, Barry Pollack at Miller & Chevalier, did not immediately return a call seeking comment.

And what about the 100-year sentence? Okun pulled out all the stops in his sentencing memorandum, arguing that he was neither Madoff nor another fraudster from recent memory, Marc Dreier. “Not only is Okun no Madoff, he is no Dreier,” read the memorandum. “The losses alleged from Okun’s offense conduct are one-sixth that of the fraud perpetrated by Dreier and one-thousandth of the losses created by Mr. Madoff.”

It was actually a mere fraction of what the government had requested. In its sentencing memorandum, the government stated:

The United States respectfully asks this Court to sentence the defendant to the Guideline sentence of 400-years imprisonment or, alternatively, a term of years that both would assure that the defendant will remain in prison for life and forcefully would promote general deterrence. . . . Unlike other recent high-profile fraud prosecutions, Okun's victims never asked the defendant to invest and risk their money. Instead, the victims entrusted their money with the defendant relying on the defendant's promises that he would hold their money safely in bank and escrow accounts for a short, defined period of time. Okun's criminal acts drove many individuals to economic collapse or near collapse, and caused especially significant non-economic, emotional damage on many of his victims. Despite his promises to these victims, Okun used almost $40 million of client exchange funds as his "personal piggy bank" to, among other things, fund: his divorce settlement with his former wife, a jet, a helicopter, a 131-foot yacht, multimillion dollar homes, and jewelry for his new wife.

Full post as published by Law Blog - WSJ.com on August 04, 2009 (boomark / email).