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(Michelle Napoli, editor of TIC Monthly, contributed to this report.)

HENDERSON, NV-The owners of at least three IRS 1031 Exchange accommodation companies entrusted with tens of millions of dollars of investors’ money abruptly closed their offices here last week without returning funds to investors. The FBI tells GlobeSt.com it entered the owners’ Vegas headquarters last week and is currently evaluating complaints to determine if any federal laws were violated, but wouldn’t provide any more detail. One of the owners has reportedly met with the FBI, and a Clark County district judge this week put the main company, Southwest Exchange Inc., into receivership.

The owners of Southwest Exchange (dba Southwest 1031 Exchange) also own Qualified Exchange Services of Santa Barbara, CA, and Arrow 1031 Exchange of Boise, ID, which are listed on Southwest Exchange’s website as affiliates. Kyleen Dawson, one of the former owners of QES, tells GlobeSt.com that she and the owners of Arrow sold their companies to Capital Reef Management in October, at which time Betty Kincaid, the founder of Southwest Exchange, tells GlobeSt.com she severed all ties with her former company, in which she sold a controlling interest in 2004.

Dawson says that based on her experience negotiating the sale of QES, she understands the owners of Capital Reef Management to be Don McGhan, Jim McGhan and Nikki Pomeroy. Don McGhan and Pomeroy are also registered with the Nevada Real Estate Division as chairman and executive vice president, respectively, of Southwest Exchange. David Keys is listed as the CEO of Southwest Exchange. The Nevada Real Estate Division this week filed notices suspending the registration all three Southwest Exchange officers filed in order to be 1031 exchange accommodators (aka Qualified Intermediaries) in the state. On Tuesday, Keys resigned as a director of Silver State Bancorp of Henderson, citing personal reasons.

The back-office operations of all three companies were reportedly handled out of Southwest Exchange’s headquarters at 2370 Corporate Circle, Suite 160. None of the owners have responded to requests for comment left on the company’s voice mail. Dean Koch, who in state documents also is listed as an officer of Southwest Exchange Inc, also did not return phone calls seeking comment. Koch and Don McGhan also are partners in Nevada Safe Harbor Inc., according to the Nevada Secretary of State’s office.

One or more of the owners closed the offices of Southwest Exchange on Jan. 30, 2007, posting a notice saying that staff was out for a training session, according to local sources familiar with the situation. The next day, the FBI entered the premises in response to a complaint from Dawson and possibly others. Dawson says she called the FBI after growing concerned about the company’s operation about 12 days ago, after a client’s funds were not were not wired as arranged.

“The bottom line is the wire transfers did not occur as scheduled,” she says. “The next day I waited for confirmation and instead I got a song and dance, which immediately raised red flags for me because that almost never happens in our industry. Prior to the sale, [my partner and I] had never missed a wire transfer and we’d been in business together for seven years. I called the FBI because I felt that the only reason the money wouldn’t be transferred is if it wasn’t there to be transferred, and that is our clients’ life savings.”

Dawson says she was told by the FBI that Don McGhan “presented himself” to the agency last week with regard to this matter. David Staretz, chief legal counsel for the Las Vegas field office of the FBI, could not be reached Tuesday afternoon for comment.

Terrence Wright, owner and board chairman of Nevada Title Co., which has transactions in escrow waiting for money to be distributed by Southwest Exchange, tells GlobeSt.com that the first course of action should be an audit of the company. “Until an audit is done, none of the deals [left in limbo] can close and, more importantly, investors are left in limbo,” Wright says. “There’s nothing in IRS law that says if your accommodator shuts down, you get a reprieve; as a result, its possible investors could not only lose their earnest money, they could lose their equity and then still have to pay the taxes on the gain they made from the sale that prompted the exchange.”

Looking beyond the immediate, Wright says the longer-term issue is what action government will take to minimize this type of thing from happening. Nevada is the only state that has any kind of registration requirement for exchange accommodators, and it requires only a $50,000 surety bond, which does nothing to protect investors.

“To let a company go into business with [with little or no bonding] while they hold potentially hundreds of millions in deposits, that just doesn’t seem right,” he says. “To have so little oversight, whether because of a loophole or not, certainly that has to be looked into as quickly as possible.”

Hugh Pollard, speaking as president of the Federation of Exchange Accommodators, tells GlobeSt.com that Southwest Exchange’s membership in that organization has been suspended. There is little more the organization can do, he says, because it is merely a trade association, not a regulator.

“We want people to realize this is an incredibly isolated incident within the industry,” says Pollard, who also is regional manager of First American Exchange Co. “It’s not representative of the FEA or the industry itself.”

Dawson, whose clients had upward of $11 million placed with QES, says she believes the new owners of her company had a Fidelity Bond–a business insurance policy that protects the employer in case of any loss of money or property due to employee dishonesty–valued at $50 million.

Dawson says she has provided the names of her clients who had placed money with QES to Brown & Brown Insurance of Santa Barbara, CA, the brokerage firm that sold the insurance. A Brown & Brown official could not be reached Tuesday for comment. Pollard says the claims adjuster for the insurance is Crumb & Forster, which did not return phone calls seeking comment. Dawson says she also has asked the IRS for an emergency Private Letter Ruling to extend her clients’ exchange deadline.

“Our No. 1 focus right now is to try and help them eke back any money they can get,” Dawson says. “We did everything correctly but it doesn’t make it any better for our clients; we’ve had grown men crying in our offices. My poor clients. I would never dream this. It’s like a movie.”

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