A notice from a law firm greets visitors to the Southwest Exchange Inc. office at 2370 Corporate Circle Drive on Wednesday. The Henderson-based business closed earlier this week. Review-Journal

Henderson police, the FBI and state officials are looking into complaints about the unexpected closing of a small Henderson company that has at least $22 million in unaccounted-for money and possibly hundreds of millions of dollars belonging to real estate investors.

It's not clear whether Southwest Exchange, which also does business as Southwest 1031 Exchange and Southwest Exchange Corp., still has money that real estate investors trusted the company to hold to get tax breaks.

Title companies in Las Vegas were waiting for Southwest Exchange to release money for numerous real estate transactions when the company shut down this week, said Terrence Wright, owner and board chairman of Nevada Title Co.

"Certainly, it's tens of millions and possibly hundreds of millions of dollars" that could be missing, Wright said.

At least $22 million is unaccounted for, said a state official who spoke on the condition of anonymity.

State regulators "need to get in there as quickly as possible," Wright said. "No one knows what's going on until an audit is done."

Dave Bax of Bax Investment Group said the complaints about Southwest Exchange could be huge.

"If they end up in bankruptcy and the money isn't there, the investors become unsecured creditors," Bax said. "That's way down on the list in bankruptcy court. I mean, think about it, these folks sell a property for half a million bucks and if the money is gone, your exchange is gone and now you've got to pay taxes on profits you were going to avoid and you lose your money."

A lawyer who spoke on condition of anonymity said his client waited two weeks for release of money for a real estate purchase. The lawyer said he wrote a demand letter for the money and had it delivered by hand to Southwest Exchange on Jan. 25. The lawyer's calls were not returned, and he went to Southwest Exchange's offices on Tuesday and found the door locked.

A note on the door said that the office was closed temporarily for training, but a woman pulled it down and started taking notes on the notice, the lawyer said.

"We are planning on filing (a lawsuit) against Southwest and its insurance company," the lawyer said.

Calls to Southwest Exchange on Wednesday were not returned. The office, at 2370 Corporate Circle, Suite 160, was still locked Wednesday, and a notice on the door advised customers to contact Southwest Exchange's attorneys.

The division Web site shows three individuals who are registered as qualified intermediaries at the Henderson address. They are David Keys, Donald McGhan and Nikki Pomeroy.

The Henderson Police Department has received complaints about the company and is looking into it, spokesman Keith Paul said. Also, there were reports that the FBI is investigating Southwest Exchange.

"(Qualified intermediaries) have millions of dollars of investors' money, and no one is auditing them?" Wright asked. "How stupid is that? You know sooner or later someone is going to get in there, take the money and run."

Gail Anderson, administrator of the Nevada Real Estate Division, said: "Nevada to my best knowledge and understanding is the only state that does anything to regulate intermediaries at all."

Nevada requires these intermediaries to register and post a $50,000 surety bond. Anderson said she can void the registration of a qualified intermediary that violates rules. The intermediary could demand a hearing on the issue.

Title companies pay 3.5 percent of their revenues to the state so title companies can be regulated and audited, primarily because of the investor funds title companies hold in escrow accounts, Wright said.

Southwest Exchange and companies like it hold money for real estate investors who want to delay paying capital gains taxes from the sale of real estate, as allowed under section 1031 of the Internal Revenue Service Code.

Section 1031 allows investors to sell real estate and use the money to buy the same kind of real estate without paying a capital gains tax. An apartment complex owner, for example, could sell an apartment building in Las Vegas.

To avoid income tax on profit from the sale, however, the investor must rely on a company like Southwest Exchange to hold his money while he looks for another apartment building to buy.

In 2004, Anderson proposed increasing the amount of the surety bond to $1 million from $25,000 in 2004, but intermediaries objected. Some intermediaries said they could not afford a $1 million bond.

Review-Journal writers Hubble Smith and Francis McCabe contributed to this report.