Charges against Douglas L. Swenson, whose Meridian property management company filed for bankruptcy in November 2008, would be "misguided," said his Seattle law firm, Calfo Harrigan Leyh & Eakes.
Federal prosecutors could seek the indictment against DBSI's founder as soon as today, the law firm said Tuesday.
Lawyers in other civil cases and a court-ordered investigation of DBSI have said that company insiders used money from new investors to pay earlier investors beginning as early as 2004. The company collapsed when real estate prices fell as the Great Recession began.
DBSI managed 244 commercial properties for more than 8,500 investors in the U.S. before it filed for bankruptcy. Among them were 16 commercial properties in the Boise area, including the Plantation Shopping Center, 9000 W. State St.; the Northgate Shopping Center, near State and Glenwood streets; and Broadway Plaza, 1217 Broadway Ave.
The 4-year-old federal criminal investigation of DBSI led to a guilty plea by a senior manager on a charge of conspiracy to commit securities fraud, a felony, according to court documents made public Tuesday.
Gary Bringhurst, a Utah resident who formerly lived in Boise, faces up to five years in prison and a $250,000 fine. His plea agreement was unsealed Tuesday.
Bringhurst declined to comment. U.S. Attorney Wendy Olson said no one else has been charged, but the investigation continues.
In a statement, Swenson's attorneys said DBSI was a "successful and highly profitable" real estate enterprise. "For more than two decades, its investors made money and were happy," they said.
"It wasn't until the downturn in the economy, the Lehman Brothers failure and the Great Recession that DBSI could no longer profitably buy and sell real estate," the lawyers said. "There was no fraud at DBSI. ... The government's effort to pin the failure of the real estate industry and market on Doug Swenson is shameful and unjust."
The law firm said last year that Swenson could face charges of tax evasion, money laundering, racketeering and securities fraud.
Meanwhile, other civil lawsuits involving DBSI are proceeding.
A New Jersey lawyer representing two trusts seeking to recoup assets from DBSI for investors and creditors in the bankruptcy has described the companies that made up DBSI as presenting "the illusion of a monolith of wealth, competence and power."
The company was "rotten to the core," James Zazzali wrote in 2010. "Obligations to investors had outstripped receipts for years. The edifice was supported by hundreds of empty or half-formed entities that passed assets back and forth to create the impression that it could keep its promise to investors."
The case against Bringhurst echoed Zazzali's accusations.
Bringhurst was part of a conspiracy to mislead investors through false and fraudulent representations that DBSI was financially strong, according to documents filed in U.S. District Court in Boise by Olson and the U.S. Department of Justice's Tax Division.
Prosecutors said Bringhurst and others attended weekly cash meetings, at which they knew that DBSI's business model was not sustainable and that the company could pay existing obligations only by raising funds from new investors.
Bringhurst and others agreed to sell tenant-in-common investments - in which several people were fractional owners of a building - to people knowing that the business model was not sustainable, prosecutors said.
They said the conspiracy included misrepresenting the use of accountable reserves for purposes other than building and other improvements for which they were intended.
Bringhurst's sentencing is scheduled for July 26.
Bill Roberts: 377-6408, Twitter: @IDS_BillRoberts