Feds sue group selling syndicated conservation easements, investors may be on the hook.
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On April 20, 2022 GWG Holdings, Inc. (GWG) filed for bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas (case 22-90032). According to an article in the Wall Street Journal, published on the same day, the bankruptcy was due to “accounting issues...read more
The federal government is suing EcoVest Capital, a real estate investment company, for allegedly creating sham tax shelters by exploiting so-called conservation easements, which are intended to preserve natural land. EcoVest’s scheme hinged on grossly overvalued appraisals, the feds say.
Investors who bought EcoVest’s investments (known as syndicated conservation easements) could be facing serious consequences: their investments could be worthless and they may be facing back taxes, interest, tax penalties, and audits. In addition, investors may not even know that they own an EcoVest investment because most were sold under different names and through brokerage firms. Our firm has identified 54 EcoVest syndicated conservation easements that are listed at the end of this article.
The attorneys at Epperson & Greenidge are investigating these syndicated conservation easements, and we are looking to represent investors seeking to recover their losses by bringing FINRA arbitration cases against the stockbrokers and financial advisors who sold these investments.
In a civil lawsuit filed in the Northern District of Georgia in December, 2018, the United States has accused defendants EcoVest Capital Inc., Nancy Zak, Claud Clark III, Alan N. Solon, Robert M. McCullough, and Ralph R. Teal Jr. of organizing, promoting, and selling allegedly sham syndicated conservation easements to thousands of investors all over the country.
The lawsuit specifies 96 unnamed investments that are alleged sham tax syndicates and that have led to more than $2 billion worth of possibly unlawful tax deductions. The defendants have denied any wrongdoing, and say they intend to vigorously challenge the lawsuit.
According to the government’s lawsuit, the defendants’ allegedly sham tax syndicates aim to exploit a federal tax deduction known as a qualified conservation contribution for property owners who give up their right to develop their land. This deduction centers on what is known as a conservation easement (or sometimes called a perpetual conservation restriction.) A conservation easement is a legal agreement between a landowner and another party, generally a land trust or government agency, that permanently restricts the development or use of land with the purpose of achieving certain conservation or preservation goals.
A property owner may be eligible for a tax deduction when it donates the conservation easement. The value of the tax deduction is based on the fair market value of the conservation easement, as determined by the sales price of comparable conservation easements. However, if no comparable sales are available, then the value of the conservation easement may be determined by calculating the difference between the fair market value of the property before versus after the conservation easement is applied.
It is this second method of determining the fair market value of conservation easements that is central to the government’s case against the defendants.
In its complaint, the government claims that the defendants used this before-and-after formula to grossly overvalue conservation easements, using improper methods to inflate the valuations by 200% or more. These allegedly grossly overvalued conservation easements were applied to properties held by syndicates that defendants sold to individual investors as limited partnership shares. Then, once the conservation easements were donated, the syndicates holding the properties passed on the massive federal tax deduction to its investors. The investors, in turn, would claim their pro rata portion of the deduction received from the syndicate as a qualified conservation contribution on their individual tax returns.
EcoVest’s approach to syndicated conservation easements is not an aberration. Recent news reports, including a 2017 ProPublica investigation, have highlighted increasing conservation easement donations by investors seeking to reap tax benefits — frequently with appraisals that appear inflated.
According to the fed’s lawsuit, potential investors in EcoVest’s syndicated conservation easements were often told that for every $1 they invested, they would reap $4 or more in federal tax deductions and state tax credits. For an investor who would otherwise be in the highest tax income bracket, that could mean an immediate return of over 40% on their investment. By comparison, high-yield savings accounts and money markets in the current climate rarely offer more than a 2.20% return.
Not surprisingly, these syndicated conservation easement products have proved appealing to investors. Our law firm has discovered that just in 2018, investors have purchased over $150 million worth of EcoVest’s syndicated conservation easements. Further, by reviewing SEC filings, our law firm discovered that investors have purchased over $637 million worth of EcoVest’s syndicated conservation easements, in at least 54 separate programs, since 2014. A list of these 54 syndicates can be found at the end of this article.
All of these EcoVest syndicates may turn out to be grossly overvalued or even worthless. Further, investors who purchased interests in the syndicates and claimed the corresponding qualified conservation contribution deduction on their tax returns, may end up facing large bills for unpaid back taxes, accrued interest, tax penalties, and potential audits.
Our law firm has also discovered that brokers and financial advisors have made hefty profits selling these syndicated conservation easements to investors. From SEC filings, it appears that brokers and advisors may have made over $68 million in sales commissions on the 54 tax syndicates that we believe we have identified — an eye-opening 10.7% average fee.
The fact that EcoVest used brokers and advisors to sell these syndicated conservation easements to investors may open up an avenue of relief for customers to recoup some or all of their losses. Through a process called FINRA arbitration, investors who purchased these investments may be able to file a claim against the brokers/advisors and their firms to receive an award for damages.
The attorneys at Epperson & Greenidge have extensive experience within FINRA and we specialize in bringing these claims on behalf of investors. We also have specific experience representing clients who have invested in private placements and tax havens. We accept all cases on a contingency basis: we only get paid if and when you collect money. Time to file your claim may be limited, so call 877-445-9261 now to speak to an attorney for a free consultation.
The 54 EcoVest syndicated conservation easements that our firm believes we have located are:
- arcadian quay holdings, llc
- azalea bay resort holdings, llc
- azul bay resort holdings, llc
- beech springs resort holdings, llc
- bellavista grove holdings, llc
- belle harbour resort holdings, llc
- birkdale landings holdings, llc (fka ecovest catalina key, llc)
- camellia station holdings, llc
- cape fear pointe holdings, llc
- carolina bays resort holdings, llc
- cayo dorado holdings, llc
- cayo marsopa holdings, llc
- coastavista palms holding, llc
- copano cove holdings, llc
- cottonwood cove holdings, llc (fka catalina key management, llc)
- cristobal key holdings, llc
- cypress cove marina holdings, llc
- del mar vista dunes holdings, llc
- diamond grande resort holdings, llc
- ecovest total return fund, llc
- espiritu shores holdings, llc
- garden lakes estates holdings, llc
- hammersmith landing holdings, llc
- harbor gate at seadrift holdings, llc
- hickory preserve holdings, llc
- indigo sounds holdings, llc
- lakeshore resort holdings, llc
- long bay marina holdings, llc
- magnolia bay resort holdings, llc
- matagorda cove holdings, llc
- miramar pointe holdings, llc
- montego pointe holdings, llc
- monterrey cove holdings, llc
- myrtle cove resort holdings, llc
- myrtle west resort holdings, llc
- neuse harbor holdings, llc
- new river preserve holdings, llc
- north bay cove holdings, llc
- ocean grove resort holdings, llc
- port quay resort holdings, llc
- punta vista grande holdings, llc (fka buena vista glenn, llc)
- queen’s cove holdings, llc
- river trace resort holdings, llc
- riverside preserve holdings, llc
- rocky creek plantation acquisitions, llc
- sanibel resort holdings, llc
- santo bay resort holdings, llc
- seavista resort holdings, llc
- south bay cove holdings, llc
- tortuga trace holdings, llc
- tupelo grove holdings, llc
- turkey creek resort holdings, llc
- waterway grove holdings, llc
- white sands village holdings, llc
(updated February 27, 2019)