www.trustee1031taxgroup.com - Plan and Disclosure Statement

FAQS REGARDING THE PLAN AND DISCLOSURE STATEMENT - Updated Aug 25, 2009
The FAQS set forth below are for convenience only. The Court-approved Second Amended Disclosure Statement is the only document that may be relied upon in deciding whether to vote to accept or reject the Plan, and all creditors are urged to read it carefully.

WHY AM I RECEIVING THIS PACKAGE OF MATERIALS FROM THE CHAPTER 11 TRUSTEE?
During the last week of August, you will be receiving a packet of materials containing, among other things, the ballot to vote on the Chapter 11 Trustee’s plan, and the court-approved disclosure statement. You are receiving this because the Chapter 11 Trustee's records show that you are owed money by one of Okun’s qualified intermediary companies which operated as part of The 1031 Tax Group. The names of these debtor companies are listed on the first page of the disclosure statement (the “1031 Debtors"). You should read these materials carefully and consult with your personal legal, financial and tax advisors to assist you in understanding these documents.   These documents describe, among other things, the anticipated distribution you will receive on account of your claim if the plan is approved. As a creditor you are entitled to vote on whether the enclosed second amended plan (the "Plan") should be approved by the Bankruptcy Court. A ballot is enclosed for your convenience. Ballots must be delivered so as to be received by the Voting Agent by 4:00 p.m. on September 25, 2009, and sent to Golenbock Eiseman Assor Bell & Peskoe LLP, 437 Madison Avenue, New York, NY, Attn: Michael S. Weinstein, Esq. Ballots must be fully completed, dated and signed and returned to the ballot agent (counsel for the Chapter 11 Trustee) so that they are received by the voting deadline.

WHAT IS THE PLAN ?
In sum, the Plan is a document that sets forth the manner in which The 1031 Debtors' assets will be liquidated and the proceeds distributed to creditors.   If it is approved by the Court at the hearing currently set for October 7, 2009, the Plan will be a legally binding document governing, among other things, the treatment of your claim against The 1031 Debtors. Once approved by the Court, the Plan becomes a contract between The 1031 Debtors' estates and their creditors with respect to the payment of creditors' claims from the assets of The 1031 Debtors.

WHAT HAPPENS IF I DO NOT VOTE ON THE PLAN ?
While the Chapter 11 Trustee and the Creditors' Committee encourage you to vote to ACCEPT the Plan, you are not required to vote on the Plan. If you do not vote on the Plan, and the Court approves the Plan, you will nonetheless receive the same treatment as other creditors in the class in which your claim falls under the Plan.

WHAT CLASS AM I IN ?
Under the Plan, The victims of the Okun fraud and other general creditors are in Class 3.

I AM AWARE OF THE CLASS ACTION LITIGATION AND THE RESTITUTION PROCEEDINGS PENDING IN OTHER COURTS. IF I PARTICIPATE IN THESE BANKRUPTCY CASES, DO I STILL NEED TO PARTICIPATE IN THESE OTHER PROCEEDINGS ?
YES, if you are an exchanger-victim of Okun's crimes. The bankruptcy proceedings provide a recovery to creditors of The 1031 Debtors from the liquidation of assets and claims owned by the 1031 Debtors. The class action will provide a recovery to exchanger-creditors that are members of the class based upon the claims owned by the class. Lastly, the restitution proceedings may provide a recovery for exchanger-creditors based upon assets of Okun that the Federal Government may discover and seize.   If you have any questions or uncertainty about whether you are a member of the class action or have a claim in the restitution proceedings, you should contact the counsel for the class action (Hollister & Brace) and/or the United States Attorneys’ office for the Eastern District of Virginia.

IF I VOTE TO ACCEPT THE PLAN, AM I ALSO VOTING TO APPROVE ALL OF THE PROFESSIONAL FEES CHARGED IN THE BANKRUPTCY PROCEEDINGS ?
NO.   Lawyers, accountants, and other professionals for the Trustee and the Committee are required to file final fee applications, which will be considered at a hearing after the plan confirmation hearing that will be separately noticed to creditors. You have the right to file an objection with the Bankruptcy Court with respect to those applications for fees and expenses, and may appear at the hearing as well. This will have no effect on your right to receive your distribution under the Plan.

WHEN CAN I EXPECT TO RECEIVE A PAYMENT ON MY CLAIM ?
If the Plan is approved by the Court on October 7, 2009, then the Chapter 11 Trustee expects that an initial payment (estimated in the disclosure statement to be approximately 35% of your claim) will be made before the end of the year.   A separate distribution (of approximately 9% of your claim) will be made at or around the same time by the Class Action to the class members.    We also expect that there will be additional distributions before the bankruptcy cases are closed.   Unfortunately, we can not at this time predict when these additional payments will be made or how much will be paid in these future distributions.

WHY IS THE BANKRUPTCY CASE STILL NECESSARY IF THE GOVERNMENT CAN SEIZE ALL OF OKUN’S ASSETS AND DISTRIBUTE THEM THROUGH THE RESTITUTION PROCESS?
The forfeiture power places the Government in Okun’s shoes so that the Government can seize Okun’s assets. Unfortunately, most of Okun’s assets (many of which were owned through IPofA) turned out to have no value above mortgages. The forfeiture power does not eliminate mortgages and, as a result, the Government would get Okun’s assets subject to those mortgages. More importantly, most of the money to be distributed in the bankruptcy case results from settlements of claims asserted by the Chapter 11 Trustee against third parties. These claims do not belong to Okun and would not be covered by forfeiture.

HOW DOES THE CHAPTER 11 TRUSTEE GET COMPENSATED FOR HIS SERVICES?
The Bankruptcy Code in Section 326(a), provides a cap on a trustee’s compensation. The maximum allowed under that section is just slightly in excess of 3% of the monies disbursed by the trustee.
In connection with final applications for compensation, the Chapter 11 Trustee will request an amount of compensation based, among other things, upon the time spent, the difficulty encountered, the results achieved, the risks taken, the Chapter 11 Trustee’s experience and reputation, awards in similar cases, and other relevant factors. In arriving at the requested compensation amount, the Chapter 11 Trustee will consult with the Office of the United States Trustee.
The Chapter 11 Trustee’s request for compensation will be made upon notice to the service list, who may file objections and appear at the bankruptcy court hearing which will be held to consider all requests for compensation and reimbursement of expenses.

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