An irreverent Wall Street Blog
by Bill Singer
 
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

Tax Exchange Ponzi Ends With $25 Million Hole And Criminal Pleas
Written: November 19, 2012

Logo of the Internal Revenue Service

Logo of the Internal Revenue Service (Photo credit: Wikipedia)

If you are lucky enough to have sold a business or property and realized a gain, the damn Internal Revenue Code (“IRC”) requires you to pay tax at the time of the sale. You know what they say about death and taxes, right?

Well, hold on a sec because there’s good news: Under an exception set forth in IRC Section 1031, you may be able to postpone paying the capital gain tax if you reinvest the proceeds in similar property as part of what’s known as a qualifying like-kind exchange. No, you don’t avoid paying the tax altogether but you can put off that painful event.

What’s a “like-kind exchange” you ask?  Ahhh . . . the line forms to the left for that bedeviling query and there are lots of different answers.  As noted in the IRS publication: “Like Kind Exchanges Under IRC Code Section 1031″:

[T]he disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property.  Taxpayers engaging in deferred exchanges generally use exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations. .

Of course, if you don’t get the whole like-kind thing just right, you could find yourself in hot water with the Internal Revenue Service.

If you are contemplating a like-kind exchange, it’s best to talk to a tax professional. This isn’t the kind of thing that you necessarily want to undertake a la amateur hour — I don’t suggest that you try find the answers online or looking something up on TurboTax. Call a CPA or lawyer, or at least callH&R Block. Whatever you do, do not rely upon this article for any tax advice.

1031 Qualified Intermediary

All of which brings us to Vesta Strategis, based inSan JoseCA.  Seems that Vesta held itself out as a qualified intermediary for the purpose of conducting tax-deferred IRC §1031 exchanges. Vesta promoted a transaction requiring the deposit of proceeds from an investment real estate sale with the supposedly qualified intermediary, and those proceeds would be rolled over into a new qualifying investments during a 180-day statutory period without capital gains taxation.

SIDE BAR: Cast of Characters

  • John D. Terzakis was the majority owner and controlling person of Vesta, which he owned through Single Site Solutions Corp., Willowbrook, IL (a company that had managed land-development and commercial real estate projects in the Chicagoarea).
  • Robert E. Estupinian was the former Chief Executive Officer and minority owner of Vesta until approximately December 2007.
  • Peter Ye, was the former vice president of operations and subsequently president.

Terzakis and Estupinian fraudulently solicited and caused others to solicit prospective clients to deposit funds with Vesta. Among the misrepresentations made was that that Vesta would hold those deposits and return them as promised. Instead, the defendants stole client funds for their own use, and utilized the old Ponzi scheme by which new client deposits were diverted to pay redemptions owed to earlier clients.

Terzakis, Estupinian, and Ye purportedly fraudulently asserted that Vesta:

  • was a safe and financially secure Section 1031 exchange company,
  • client deposits would be held by Vesta, and
  • client deposits would be returned at the time of redemption.

Timber!!!

Terzakis and Estupinian sued each other in federal court in San Jose, blaming one another for misappropriating Vesta client deposits. In July of 2008 with approximately $25 million owed to its depositors, Vesta collapsed because it lacked the ability to meet its redemption obligations.  In August, 2009, a federal civil class action was filed in San Jose federal court against Terzakis, Estupinian and others by Vesta clients alleging misappropriation of their funds.

Indictment

On December 30, 2009, a San Jose federal grand jury indicted Terzakis, 52, of Hinsdale, IL, and Estupinian, 47, of San Jose, CA, on 12 felony counts of wire fraud, money laundering, and conspiracy to commit wire fraud and money laundering.  Terzakis and Estupinian were arrested on January 6, 2010.

The maximum statutory penalty for each count of

  • wire fraud and conspiracy to commit wire fraud: 20 years imprisonment, a fine of $250,000 or twice the gross gain or twice the gross loss to any victim, and restitution;
  • money laundering, and conspiracy to launder monetary instruments: 10 years imprisonment, and a fine of $250,000 or twice the amount of the criminally derived property involved in the transaction.

Additionally, Terzakis and Estupinian faced a $24,633,341.34 forfeiture .

On June 21, 2010, Ye; on February 2, 2011, Estupian; and On February 23, 2012, Terzakis, respectively each pled guilty to three felony counts: conspiracy to commit wire fraud, wire fraud, and money laundering.

On September 27, 2012, Terzakis was sentenced to 84 months in prison and ordered to pay full restitution, in an amount to be determined by the court.

On November 15, 2012, Estupinian was sentenced to 66 months in prison and ordered to pay full restitution, in an amount to be determined by the court.


 
[^top^]

Previous Entries
August 20, 2014
And now for the seamy side of government and politics. Enter one Fraser Verrusio, the former policy director for the House Committee on Transport... Read On
August 19, 2014
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS... Read On
August 18, 2014
Registered persons who are looking to get involved with a venture frequently contact me but then, inexplicably, have trouble describing just what it i... Read On
August 16, 2014
Anticipating Stockbroker Fined For Taking Client Files HomeAugust 15, 2014Ah yes, that sweet anticipation with which you ponder leaving the scorched e... Read On
August 15, 2014
Ah yes, that sweet anticipation with which you ponder leaving the scorched earth of the branch office of your current brokerage firm for the greener p... Read On
August 14, 2014
In comedy duo Laurel & Hardy's 1933 film "Sons of the Desert," the song "Honolulu Baby" made its debut.  Some 81 years, lyrics to that tune w... Read On
August 13, 2014
At first glance, it probably seemed like a good idea. Start up a little business on the side. As the business progressed, pull down some salary. As th... Read On
BrokeAndBroker.com Job Search
Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Chepucavage Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Brokeandbroker.com Morgan Keegan Arbitration Counterclaim BrokeAndBroker.com Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC RRBDLAW.com Ponzi Affinity Fraud Wachovia Raymond James BrokeandBroker.com Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX BrokerAndBroker.com FBI Banc of America Pro Se Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax RRBDlaw.com Email Netschi Moore Whistleblower Street Sweeper Tran Bharara Facebook Online Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 RRBDlaw Appeal Fowler LPL Johnson US Airways Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Away Account Credit Repair PN Advisor Placement Group Forex Mortgage Private Placement Moon Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker RIA Prison Disclosure NASAA Aguilar FCPA Subway Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank God HSBC Private Placements Eric Stein Wire Fraud CCO Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Outside Account Options Telephone Wine Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA MetLife Continuing Education OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Judgment Bank Fraud Deceased TSSB Mary Jo White Trustee Frumento Conspiracy 6th Circuit Proctor Rule 3040 Class Action Beneficiary NYAG Schneiderman Gallagher White Short Sale Compromise Website TRO Supervision Vacatur SDNY BrokeAndBroker Bill Singer Piwowar Rule 1122 Article V signature VA Regulation SP Rule 3270 OWB Stockbrokers
 
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+