A certified public accounting firm helped DBSI, a bankrupt Meridian property management company, defraud investors in a scheme that cost investors hundreds of millions of dollars, according to a lawsuit in federal court in Boise.
The lawsuit alleges that Eide Bailly “turned a blind eye” to misstatements in DBSI financial statements it audited and helped company insiders distort DBSI companies' financial conditions by not disclosing misrepresentations it knew about.
DBSI managed up to 244 commercial properties, including 16 in the Treasure Valley, for 8,500 investors.
Eide Bailly audited several of DBSI’s companies between 2004 and 2007, according to documents submitted with the lawsuit.
DBSI insiders used the accounting firm's audit reports to perpetuate their fraud “by certifying to current and prospective investors the financial health of certain DBSI companies that both the insiders and Eide Bailly knew were in fact insolvent,” the lawsuit says.
The lawsuit was filed by James Zazzali, a New Jersey lawyer working on behalf of two trusts attempting to recover assets in the DBSI case.
By 2004, DBSI had became a Ponzi scheme in which the promised returns for older investors were satisfied by funds from new ones, Zazzali said.
Eide Bailly declined to comment.
Based in North Dakota, Eide Bailly has 19 offices in 10 states, including one in Boise. It serves nearly 40,000 clients, according to the company’s website. The lawsuit was originally in a Delaware federal court in August 2011 and has been transferred to Boise.
Bill Roberts: 377-6408
