Ventura County, CA: (Dec-10-07) A class action lawsuit was brought against 1031 Exchange intermediaries Santa Barbara-based Qualified Exchange Services, or QES, and its parent company, alleging that they violated the Racketeer Influenced and Corrupt Organization Law (RICO). The suit alleged that the defendants gained access to and stole funds that were being held for 1031 Exchange by qualified intermediaries, causing an estimated $95 million in damages to more than 100 investors. The suit named multiple defendants including Southwest Exchange, QES, Southwest Chairman Donald McGhan, his former breast-implant company MediCor and several financial services companies including UBS Financial. Sources claimed that RICO, or corrupt practices allegations, are part of a broader civil suit alleging fraud and other misrepresentations on the part of the plaintiffs. As part of a settlement reached, company officials announced that UBS Financial Services will pay $23 million so as to be released from claims made in the class action lawsuit.
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