Real estate investors are suing a deceased Clearwater attorney with blistering allegations of missing money, fraud and malpractice
By Ashley Gurbal Kritzer
Tampa Bay Business Journal
Published: May 11, 2020

Multiple real estate investors are suing a deceased Clearwater attorney, alleging that they are each owed hundreds of thousands of dollars after he failed to complete their 1031 tax exchange transactions.

Three lawsuits filed in Pinellas County between February and early May accuse attorney John P. Martin of botching the investors' individual 1031 exchange transactions. A real estate transaction that falls under section 1031 of the IRS code allows investors to reinvest profits from one sale into another property to defer capital gains taxes.

In each lawsuit, the investors allege that 1031 Exchange Services LLC — the corporate entity Martin used to complete exchange transactions — was the fiduciary for the proceeds from sales that they were planning to reinvest into other properties. Each investor is demanding their proceeds as well as damages incurred by the failed transactions.

Martin died Feb. 4 by suicide, according to the medical examiner that serves Pinellas and Pasco counties. Clearwater police did not immediately respond to a records request Monday. The lawsuits allege fraud, professional malpractice, breach of fiduciary duty and conversion of the sale proceeds for the defendants' use and benefit. They also seek to put an equitable lien on the defendants' assets.

As of Monday, there were no attorneys listed for the defendants in court records.

One of the lawsuits, brought by longtime West Central Florida investor Ralph Jason Charette on May 6, alleges that $2.4 million is missing from both Martin's defunct law firm and exchange entity and that there are approximately 20 other victims. Charette's lawsuit names Martin, his defunct law firm, the John P. Martin Revocable Trust and the exchange entity as defendants.

"Mr. Charette is a hard worker, and has been a very prudent investor," John Anthony, Charette's attorney and a partner in Anthony & Partners LLC, said in a statement. "After 35 years of practicing law, it is particularly heartbreaking for me to see an honest and trusting man like Mr. Charette lose a life’s fortune due to some form of lawyer misconduct. But the story will not end there. We are determined to find his money, wherever it went, and get it back for him."

Charette's lawsuit also alleges that Martin transferred money that was entrusted to him, his defunct law firm and exchange fund to his own intended beneficiaries — including his own trust.

Charette had used Martin as a transactional attorney for years, according to his lawsuit, frequently recommending his services to others in the business. But he began to have problems with Martin when he was pursuing a waterfront property in Stuart after selling off three other properties: two in Clearwater and one in Englewood.

The sale of those three properties netted Charette $540,203, which Martin's exchange entity held as a fiduciary, maintained in an attorney trust account at Valley National Bank.

The $850,000 property in Stuart was "a unique waterfront property that dovetailed with the plaintiff’s occupation in the manufacture and refurbishing of recreational vessels," according to the lawsuit. But the deal kept experiencing delays, the lawsuit alleges, and Martin "found excuses" not to meet with Charette.

On the day before Martin died, he agreed to meet with Charette at his office at 4 p.m. the next day. The next day — Feb. 4 — Charette learned that Martin took his own life before 4 p.m., according to the lawsuit.

The other two lawsuits make similar allegations.

Jason B. Kuehn, a Pinellas County-based real estate investor, sued Martin and his exchange entity in March, also alleging that Martin botched his 1031 exchange transaction. In that case, Kuehn sold off a single family home near the Clearwater waterfront and needed to reinvest profits of $585,270.

Kuehn's sale closed on Jan. 17. When he learned of Martin's death, his lawsuit says, he looked into where that money was, as Martin was holding it as a fiduciary.

His lawsuit alleges that his money was wrongly transferred from the fiduciary, and that the location of his money is currently unknown. His attorney, Jon Coats of Coats Schmidt PA, did not immediately respond to a request for comment Monday.

The first lawsuit was filed Feb. 20 by two Idaho investors, Jonathan A. Galane and Lisa Galane, as Trustees of the JLMG Living Trust. On Jan. 10, the Galanes sold off a Clearwater property, netting proceeds of $345,959 that they were looking to reinvest for tax benefits.

The Galanes were scheduled to close on a Boise property on Jan. 31, according to their lawsuit, but they allege that Martin and his entity never made their money available for the closing. They secured an extension of the closing date until Feb. 4 and were forced to take out a loan to cover the closing costs, according to their lawsuit, and anticipate that they won't be able to secure the tax benefits of a 1031 exchange.

Bret Feldman of Phelps Dunbar LLP, an attorney representing the Galanes in their lawsuit, declined comment Monday.