But the timeline is tight -- 45 days to identify a new investment and 180 days to complete it. So, when investors are ready to sell a property and looking for a new place to put the money, they often rely on specialists to identify qualifying deals. According to the Indiana lawsuit, a handful of 1031 experts got commissions to direct clients to Rockwell, including some of the plaintiffs.

Concerns Raised

In February, a property manager handling at least nine of the venues raised concerns in a letter to investors, claiming Noah hadn’t been paying property taxes or insurance on the properties as required under its contract, according to a state court filing in Provo, Utah.

“If they are constructing new buildings, getting new investors, where is the money going?” wrote Kathleen Lopez, the chief executive officer of Sentinel Sales and Management in American Fork, Utah. She added that Noah and Rockwell had been harassing her for disclosing the information to investors.

Noah sued for defamation, and the company’s attorney said in a court filing that Lopez was spreading false information about Noah and damaging its reputation. Lopez said she has denied the allegations in court and filed a counter claim, seeking damages.

While fraud related to 1031 tax deferrals is rare, scammers have employed them to cheat investors in the past. Miami businessman Edward Okun got a 100-year prison sentence in 2009 for bilking $126 million from clients. In 2011, California real-estate investor Ezri Namvar got seven years for stealing $21 million.

Rent Checks

At the Indiana property, investors said they were tricked into believing the facility had been built or was almost complete because marketing materials included photographs of a finished structure and rent checks started arriving.

The biggest investor in the Indiana property, Russell Hertrich, who lives in New Hampshire, said in court filings that he paid $1.45 million for a 23% share in June 2018 and received monthly payments of $8,414. The plaintiffs say they haven’t gotten any payments since March, and internal Noah documents show plans for the facility were scrapped.

Rockwell salespeople knew the situation in Carmel was dire, but were being paid commissions as high as 16% to bring in new investors, according to the complaint. Cash for the Carmel project was used to fund rent payments on existing Noah properties or to finance other venues built by Bowser’s construction company, Gabriel Management Corp., the investors said.