Arizona 1031 Fraud Conviction

Late Friday, a Phoenix television station reported news that a Litchfield Park married couple that had claimed to be a Qualified Intermediary was convicted of fraud. The couple did business under the name 1031 Exchange Consultants, LLC (as well as Etna Land Trust; Executive Realty Group; and Tax Management Consultants, LLC).

Owner of 1031 Exchange Consultants, Gordon Deibler, acted as a Qualified Intermediary (QI) through the companies and accepted the proceeds from property sales for clients. Instead of securely holding the funds and then using the proceeds to purchase replacement property for his clients, he diverted the money for personal use.

The couple was also involved in a mortgage loan scheme with their handyman where they inflated the property value and falsified credit and income information for a loan application.

According to news reports, Mr. Deibler pleaded guilty to one count of directing a criminal syndicate and one count of fraudulent schemes and artifices. He faces a prison term of somewhere between three and twelve years and was ordered to pay restitution to the victims in the amount of $1.6 million.

Once again we have a story hitting the news of another fraudulent individual acting as a Qualified Intermediary. While regulation may slow some of these schemers down, criminals will still find ways to break any laws written. This couple is a perfect example of that. I don't think it would have mattered what laws were written. They clearly had no conscience about stealing money from individuals that placed their trust in them.

We've written of the need to fully investigate the Qualified Intermediary you use. Much like you would want to know the bank you place your money, the investment advisor you use, the accountant or attorney you retain, you should review the qualifications, experience and safety of your Qualified Intermediary. 1031 Corporation is a subsidiary of FirstBank. While a bank-owned QI is not the only choice, investment requirements of banks are highly regulated. Further, a typical bank-owned Qualified Intermediary will segregate funds, have a high amount of bonding and financial backing as well as have dual control procedures in place to ensure checks and balances are maintained.

You have a choice when selecting a Qualified Intermediary. You should use that choice to make sure you are comfortable knowing who is assisting you in your 1031 exchange needs. Give us a call at 888-367-1031 if we can assist you with questions or setting up your 1031 exchange today.