Defense lawyers grill potential jurors in trial of Meridian's DBSI execs

jsowell@idahostatesman.comFebruary 4, 2014 

Defense attorneys asked 40 potential jurors Tuesday whether they could fairly judge whether four top DBSI executives cheated investors in the Meridian company.

Chief U.S. District Judge B. Lynn Winmill told the jurors that the defendants are considered innocent until jurors, as judges of fact, determine whether they are guilty of some or all of the crimes they’re charged with. He told them the burden is on the prosecution to prove guilt.

Even so, only four jurors raised their hands when defense attorney Jeffery Robinson asked whether they thought defendants Douglas Swenson, Mark Ellison, David Swenson and Jeremy Swenson were innocent. “I sat down, and they just looked like regular men,” one woman juror said. “I didn’t have an opinion (on whether they were guilty or innocent).”

The men face a combined 89 counts of fraud, conspiracy and money laundering.

Prosecutors accuse them of using money invested by new investors to pay guaranteed returns to existing investors. At the time, prosecutors claim, the company was losing $3 million a month. In the indictment against the four men, prosecutors twice asserted that DBSI “essentially operated like a Ponzi scheme.”

Douglas Swenson, DBSI’s president; Ellison, a DBSI co-founder and later the company attorney; and Swenson’s sons, David Swenson and Jeremy Swenson, have each pleaded not guilty to the charges. All four are out of custody.

With his questions, Robinson explored whether jurors had already made up their minds about the defendants’ possible guilt.

He also asked about their attitudes toward the defendants testifying on their own behalf. A large number said they would take the witness stand to try to prove their innocence if they were accused of a crime they didn’t commit.

Likewise, a large number of jurors who said they had given a public speech said they were nervous before getting up to talk.

“And did your freedom depend upon giving that speech?” Robinson asked.

Robinson said some people might harshly judge a defendant who doesn’t testify but might decide one who does would say anything to avoid a conviction.

Founded in 1979, DBSI started attracting large numbers of new investors in 2003 through the sales of commercial properties and undeveloped land. Ownership was spread among a large group of investors. DBSI offered groups of investors a guaranteed yearly return of 6.5 percent on business properties, paid monthly, and 7 percent on unimproved land, paid quarterly. The investors became the owners of the properties, which were then leased back to DBSI for 10 to 20 years. The company was to manage the properties, collect lease payments from tenants and service debt.

In 2007 and 2008, DBSI claimed it had a net worth of more than $105 million, including $15.4 million in cash and funds available for immediate access. The company, which had office and retail developments in 34 states — including several in the Treasure Valley — claimed it could meet its obligations to investors for two years even if it received no rent payments from tenants.

Prosecutors say the true net worth was nowhere near that. They allege that the properties with guaranteed payments quickly became unprofitable and that DBSI was dependent upon funds from new investors to make payments to older investors. The government claims the only real profit gained by the company was through buying properties and charging investors a premium of 20 percent to 30 percent more for the same properties.

The government contends that by 2007 DBSI was losing $3 million a month on its fractional investment portfolio. New investments were needed to meet existing obligations, prosecutors claim. The company, which included Idaho-based Kastera Homes and Western Electronics, declared bankruptcy in late 2008.

The fraud and conspiracy charges are linked to buildings and properties in Virginia, Illinois, Georgia, Missouri, North Dakota, Texas, Illinois and Georgia. None of the Idaho properties is a part of the criminal case.

Gary Bringhurst, DBSI’s chief operating officer, pleaded guilty last year to conspiracy to commit securities fraud. He is scheduled to be sentenced April 29.

Angelo Calfo, who represents Douglas Swenson, did not mention Bringhurst by name. However, he hinted that Bringhurst would be called to testify by the prosecution. He warned jurors against concluding that the defendants in this case must be guilty because Bringhurst pleaded guilty.

Twelve jurors and four alternates were seated Tuesday afternoon. The trial opened Wednesday with opening statements.

John Sowell: 377-6423, Twitter: @IDS_Sowell

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