County Investigates 1031 Intermediary

SANTA CLARA, CA-Locally based IRS 1031 Exchange qualified intermediary Vesta Strategies LLC is under investigation by the Santa Clara County District Attorney’s Office for criminal fraud. Acting on complaints that the company embezzled millions of dollars from clients and the fact that the principals have each pointed the finger at the other in federal civil lawsuits, investigators with the DA’s office served search warrants yesterday on four sites, including the company’s offices and the homes of its principals, and hauled away boxes of business records.

The DA’s office says the company’s founders, John Terzakis and Robert Estupinian, have filed federal civil suits against each other alleging the embezzlement of millions of dollars in company assets in recent years. In addition, multiple independent Vesta clients are claiming that over the last eight months they gave millions of dollars to Vesta in 1031 exchanges and that Vesta has failed to provide their money when requested, according to the DA’s office.

Qualified intermediaries holds sale proceeds from investors while they identify and put under contract a like-kind property, which under IRS 1031 Exchange rules allows the investor to defer sales taxes if sale and new acquisition are completed within the 180 days.

The DA’s office says only three alleged victims have been identified so far and that their alleged losses total $4.5 million. Vesta was at one time one of the biggest intermediaries in the business, according to published reports, which means there could be many more victims identified in the days and weeks to come.

Dan Ballesteros, an attorney representing one of the alleged victims who believes the investigation could turn up closer to $20 million in missing money, was not immediately available Friday morning for comment. Deputy District Attorney Mike Fitzsimmons, also not available Friday morning for comment, is asking anyone with information about the case to contact the DA’s Real Estate Fraud Unit.