By Elon Glucklich

The Bulletin

Nearly nine months after a federal judge convicted three co-owners of Bend-based Summit 1031 Exchange on wire fraud and money laundering conspiracy charges, two of the defendants have reported to prison and the other is expected to report in several days.

But 73 Summit investors are still owed more than $3.8 million, and recovering the rest of their losses could take years.

Mark Neuman, of Bend, and Timothy Larkin, of Redmond, reported to the Sheridan federal prison near Salem on March 17, according to a U.S. Bureau of Prisons spokesman.

Lane Lyons, of Bend, hasn’t gone to Sheridan yet. He’s expected to at some point in early April, according to Assistant U.S. Attorney Seth Uram, who co-prosecuted the Summit trial last summer in Portland. But Uram wasn’t sure of the exact details, and Lyons’ attorney didn’t immediately return a phone call Friday.

Summit clients have been fighting to recover their funds since the company’s December 2008 bankruptcy.

Summit 1031 once had a stellar reputation as an exchange accommodation business, with several offices across the Western United States, helping real estate investors offset some capital gain taxes on new home purchases.

But Neuman, Larkin, Lyons and another defendant, Brian Stevens, funneled $75 million from clients into nearly 100 personal real estate investments from 1999 to 2008. The real estate crash forced them into bankruptcy.

Uram said Summit clients lost nearly $28 million with the 2008 bankruptcy. But half was recovered quickly through the sale of some of the Summit co-owners’ properties, and the losses were reduced to $13.7 million among 91 clients.

Today, “The Summit victims have received all but $3.8 million of their financial losses,” Uram said. More than 20 have been repaid in full, but 73 are still owed amounts ranging from $240 to $450,000, according to court records. Many live outside of Oregon.

Neuman, Larkin and Lyons pleaded not guilty following a 2011 indictment, but Stevens pleaded guilty. He was released shortly after testifying against the other three last summer.

In December, a judge sentenced Neuman, who co-founded Summit with Stevens in 1991, to 6½ years in prison. Larkin and Lyons each received 4½ -year sentences.

Even with the restitution amount lowered to $3.8 million, it’s still one of the largest open cases in the state, U.S. Attorney’s Office spokeswoman Gerri Badden told The Bulletin in an email.

For restitution cases, federal law requires victims to be repaid in full, without consideration of the defendants’ economic situation.

But the defendants aren’t likely to repay the $3.8 million while in prison. Uram said they would each probably owe $250 a month after being released.

A combination of factors led to “huge losses” for clients in the Summit case, said Van Pounds, securities enforcement chief with the Oregon Division of Finance and Corporate Securities.

Neuman and Stevens had years of experience as certified public accountants and deep connections with the Central Oregon real estate community.

Combined with an unprecedented real estate bubble — the Bend metro area led the country in home price appreciation in 2006, only to lead in price depreciation four years later — the crash left investors of all kinds with billions of dollars in losses across the High Desert.

Pounds said it’s not surprising that returning money to Summit clients has taken years. Federal law requires full repayment, but how long that takes depends on the defendants’ ability to repay.

“It all comes back to whether you can actually get a restitution amount back to victims,” Pounds said.

— Reporter: 541-617-7820,