A founder of a Bend-based real estate services company has pleaded guilty to federal conspiracy charges and admitted to misusing more than $44 million and losing $13.7 million for his customers.

Brian D. Stevens, 55, of Bend, pleaded guilty in U.S. District Court on Thursday to conspiracy to commit wire fraud and conspiracy to commit money laundering stemming from the operations of Summit 1031 Exchange, according to a news release issued Friday by the U.S. Attorney’s Office.

He and Summit co-founder Mark A. Neuman, 56, were both named in a federal criminal document, called an information, March 18 on the same charges.

Stevens was arraigned and agreed to plead guilty. In exchange, he agreed to a sentence of between four and eight years in prison, according to the news release and court records. He was released pending sentencing, which is scheduled for Sept. 13. Neither he nor his attorneys could be reached for comment Friday.

Neuman arraigned Wednesday

Neuman was arraigned Wednesday, pleaded not guilty and was released. A trial has been scheduled for June 14, according to court records.

“Mr. Neuman is not guilty of these charges,” his attorney, Emily Simon, said Friday. “That’s why he entered a plea of not guilty.

“(He looks forward to) the opportunity for all of the facts to be fully aired at trial. Mr. Neuman never had the intention of defrauding or cheating anybody.”

Neuman and Stevens are the only ones charged in the case.

However, in court Wednesday, Assistant U.S. Attorney Seth Uram said the government intends to seek an indictment charging Neuman and two other co-conspirators in the next two months, according to court records. The alleged co-conspirators were not named. Federal law generally requires those charged with felonies to be indicted by a grand jury unless they waive the right and agree to plead guilty to charges in the information.

Court records refer to Stevens and Neuman, both licensed certified public accountants, as original shareholders in Summit Accommodators, which they incorporated in 1991. It later became known as Summit 1031 Exchange, in reference to section 1031 of the federal tax code, which involves the deferral of capital gains taxes.

The tax code allows owners of income-producing, or investment, property to defer the tax due when they sell the property, according to court records.

For example, someone selling a business or investment property, known as the exchanger, has 45 days to identify another property of similar value and 180 days to purchase it. However, he or she has to deposit money from the sale with a “qualified intermediary,” such as Summit, to maintain the tax deferral.

Summit established branch offices in six other states, according to court records. Those offices wired all exchange funds to Summit, which controlled them until the exchanger closed on the new property.

In the four years from 2004 to 2008, Summit and its branches maintained average monthly exchange-fund balances between $49 million and $109 million, according to court records. For the same years, its gross revenues ran between $1.89 million and $7.1 million.

Co-conspirators

From 1993 to 2005, Neuman and Stevens owned and operated Summit and another company called Inland Capital Corp., although a third person also had ownership the first five years.

In January 2006, two others, called co-conspirators in court records, also became owners. The four each had 25 percent of both companies.

In exchange for holding customers’ money, Summit agreed to pay an interest rate equivalent to a passbook savings account, according to court records.

Summit made money charging fees for exchange transactions and any interest earned above the basic savings account rate.

Contrary to what they told customers, the government states in court records, Neuman, Stevens and the others transferred exchange money from Summit to Inland and invested in real estate and loaned money to businesses, individuals and themselves.

In the charging document, prosecutors listed 28 transactions, detailing transfers of exchange money and other funds from Summit to Inland. Then checks would be written on the Inland account, sometimes the same day or the next day, to buy property.

In total, prosecutors outline 14 real estate purchases made over 20 months from March 2005 to November 2006 for a combined $12.9 million.

Five transactions involved land in Bend totaling $3.6 million; two involved property in La Pine totaling more than $1 million; and one transaction for land in Powell Butte totaled $2 million. The rest involved land in Hawaii; several locations in Idaho; Kalispell, Mont.; and Klamath Falls.

Neuman, Stevens and the two others saw problems coming in the banking and real estate investment markets, according to the court document. They attempted to sell Summit to a financial institution but filed for bankruptcy Dec. 18, 2008, with 91 customers in the middle of exchanges.

The customers lost, collectively, $13.7 million, court records said.