Crazy Judge Makes Richmond VA Bankruptcy Utopia

By Fred

First he gave executives who killed Circuit City his blessing to blow the company’s last dime on bonuses for themselves. Now U.S. Bankruptcy Judge Kevin Huennekens is telling the defrauded customers of defunct LandAmerica 1031 Exchange Services the money they entrusted to LandAm is no longer theirs.

These poor suckers made the mistake of letting LandAm hold the proceeds from sales of investment properties so they could avoid paying capital gains tax while they found other properties to invest in. LandAm collected these deposits with a smile almost right up to the moment it went under.

Huenneken’s ruling that the money now belongs to LandAm is based on the loophole that customers’ agreements with the company didn’t contain the words “trust” or “escrow.”

Silly people just believed what the company stated was its whole reason for existing.

Huenneken’s anti-consumer interpretation may ultimately kill the 1031 exchange business altogether. Only an idiot would give a penny to such a company, knowing the company could disappear tomorrow and keep everything, no strings attached.

To top it off, these ripped-off customers now owe those capital gains taxes on the money Huenneken is letting LandAm steal, unless President Obama himself declares the situation a disaster and lets them off the hook with the IRS.

The customers’ only recourse is to line up with all LandAm’s other creditors and hope someone throws them a scrap.

Justice may be blind, but this ruling is so morally and ethically repugnant and utterly devoid of common sense, Huennekens needs to be de-benched and psychologically evaluated before other bankrupt companies launch the biggest siege Richmond has seen since the Civil War, seeking more sweet deals.

Home Depot will probably see a big spike in shovel sales, now that investors know a hole in the backyard is the only safe place to keep their fortunes.

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5 Responses to Crazy Judge Makes Richmond VA Bankruptcy Utopia

  1. Tim says:

    Fred,

    Do you have a copy of the decision, or a cite? Thanks.

    Take a look at the trade group, federation of exchange accommodators web site. Not a peep, they’ve got to be shaking in their boots.

    Unfortunately its just going to be the “working stiff” who built up RE, but are uninformed who get burned in the future by this ruling.

  2. catsworking says:

    Tim, I poked around a bit and found this site where it looks like the matter is listed on the court docket, but it’s restricted. If you have access, it looks like you may find the ruling there.

    http://www.vaeb.uscourts.gov/megadkt/477984.html

    Otherwise, all I know is what I’ve been reading in the paper. In today’s article, the past president of the Federation of Exchange Accommodators was quoted as saying, “It’s bad for our industry, and it’s a bad decision,” because the assumption has always been that these companies hold the money as agents for taxpayers but have no rights to the funds.

  3. Bob says:

    What was it that Shakespear said…. First Kill all the Lawyers…

    It’s no wonder why the States is in such a terrible mess, people losing their homes, Robber barons running free and looney judges on the bench.

    I just shake my head and Thank God I live in Canada.
    The Cold and the Polar Bears keep MOST of the Looneys out!!!

    Happy Friday
    Che….Viva La Revolution

  4. Tax Guru says:

    I’ve been active in taxes for lengthier then I care to admit, both on the individual side (all my employed life story!!) and from a legal viewpoint since passing the bar and following tax law. I’ve rendered a lot of advice and righted a lot of wrongs, and I must say that what you’ve posted makes utter sense. Please persist in the good work – the more people know the better they’ll be armed to comprehend with the tax man, and that’s what it’s all about.

  5. catsworking says:

    Welcome, Tax Guru! On behalf of Fred (who passed away last May) we thank you for validating his understanding of the LandAm bankruptcy.

    Just read in the paper that the only ones prospering from this debacle are the attorneys, some of whom are billing almost $1,000 AN HOUR for their services and sucking dry whatever funds would otherwise be left to repay the people who were defrauded.

    I’m sorry, but I don’t care how much they’ve studied bankruptcy law, NOBODY’s knowledge is worth that much. They turn the legal system into organized crime.

    -Yul

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