The federal jury that will decide the DBSI case heard vastly different stories in court Wednesday.
Federal prosecutors painted DBSI president Douglas Swenson, general counsel Mark Ellison, and executive secretaries David Swenson and Jeremy Swenson as lawbreakers who raked in millions of dollars, inflated DBSI's value to attract new investors, and failed to inform investors as troubles mounted and their financial empire crumbled.
"The investors were completely in the dark" when the Meridian property management company declared bankruptcy in late 2008, Assistant U.S. Attorney Raymond Patricco said.
Defense attorneys described the four men as conscientious businessmen who were victims of the economy their company tumbled when vacancies soared in shopping centers and office buildings owned by DBSI investors and managed by the company.
Investors were warned constantly in company documents that their financial futures should not be dependent on DBSI investments that could be considered risky, and independent analysts looked at company offerings before recommending them to brokers, said attorney Patricia Eakes, who represents Douglas Swenson.
"There isn't going to be any evidence that anyone at DBSI committed a fraud," Eakes said.
Opening statements from Patricco and Eakes took up the entire day Wednesday in front of a packed courtroom and Chief U.S. District Judge B. Lynn Winmill. Twelve of the jurors will decide the case, with four to be designated as alternates after the eight to 10 weeks of testimony concludes.
Opening statements are scheduled Thursday from attorneys representing Ellison, David Swenson and Jeremy Swenson. The first prosecution witnesses are expected to take the stand.
The four men are charged with a combined 89 counts of conspiracy, fraud and money laundering.
The defendants, Patricco said, regularly held secret meetings at which the company's true financial picture was discussed among a small group. That information was hidden from other DBSI employees, brokers who sold investments on the company's behalf and investors.
Less than a year before DBSI which stands for Diversified Business Services and Investments declared bankruptcy, the company said it had a net worth of $105 million, Patricco said. It led investors to believe that the company was strong and had the money to back a guaranteed 6.5 percent return to investors.
One investor came to Idaho from out of state to talk with Douglas Swenson personally in March 2008 before deciding whether to invest. Based on Swenson's assurances, the man invested $1.4 million in the company, money DBSI lost, Patricco said.
"We'll prove that the defendants knew DBSI's true financial condition but didn't tell investors," he said.
Gary Bringhurst, DBSI's former chief operating officer, is expected to testify that he knew the financial information the company released was misleading, Patricco said. Bringhurst is also expected to say he knew the company was on the brink of bankruptcy at the same time it was losing large sums of money in 2008, the prosecutor said.
Eakes countered that Bringhurst repeatedly said he expected company income to rise in the third and fourth quarters of 2008. If he tells a different story in court, Eakes said, other witnesses and documents will contradict his assertions.
'BELIEVED IN' DBSI
Douglas Swenson, 64, started DBSI with Ellison and another partner in 1979, according to Eakes. Its fortunes rose in 2003 when it began selling buildings to groups of investors that held fractional interests.
At its peak, the company had 500 employees, including 50 accountants. It managed properties in 30 states.
Although Swenson sometimes made $1 million a year, almost all of that was reinvested in the company, Eakes said. He lived in the same house for 25 years and didn't have a second home or other luxuries.
"You might expect to hear that a person committing fraud would be living an extravagant lifestyle. He wasn't," Eakes said. "He believed in the company and wanted it to succeed."
John Sowell: 377-6423, Twitter: @IDS_Sowell