Salesman says he questioned DBSI figures

The defense says Spence was a disgruntled employee looking for revenge.

jsowell@idahostatesman.comFebruary 26, 2014 

In 2004, DBSI stopped providing investors financial data for the company's full portfolio — and Robert Spence began receiving calls from financial advisers who sold DBSI's investment offerings.

Before the change, current and potential investors could see how much money the Meridian property management company was taking in and the profits that were generated. The information was vital to investors, said Spence, a registered DBSI securities broker who pushed the company's investments to the advisers and financial brokers-dealers, who then made the sales to individual investors.

"That history was very important to DBSI investors," said Spence, who worked for the company from 2000 to January 2008. "That report was one of my biggest selling points."

Douglas L. Swenson and three other top executives of the failed property investment giant are charged with a combined 89 counts of fraud, conspiracy and money laundering related to the company’s alleged practice of taking money from new investors to pay guaranteed returns to existing investors at a time when it was losing $3 million a month.

MORE: Complete coverage of the DBSI case

The company's investments appealed mostly to older people who were looking to avoid capital gains taxes after selling other investments, Spence testified Tuesday in federal court. They were also interested in investments that could be handed down to their children.

The majority of the investments comprised groups of investors who each owned a piece of a shopping center or an office building. Dividing up the ownership helped to spread out the possible risk.

The absence of the cash flow information made the financial advisers concerned that the company's situation might have changed, Spence said. He began asking questions of his boss, John Mayeron, a company principal and executive vice president of marketing.

According to Spence's testimony, Mayeron assured him that the company's cash flow continued to be positive and that the company was making money. Mayeron said the same thing, Spence said, at a series of meetings attended by the financial advisers, company president Douglas Swenson and legal counsel Mark Ellison.

Spence said Swenson also told him in private meetings that the company was doing well.

Swenson, Ellison and Swenson's sons, executive secretaries Jeremy Swenson and David Swenson, are charged with a combined 89 counts of conspiracy, fraud and money laundering tied to the collapse of DBSI.

The financial advisers were told that federal regulations prohibited investors from obtaining specific financial information on investments other than their own.

Those meetings seemed to allay the advisers' fears, Spence said, as investment sales picked up after each of them.

Defense attorneys attempted to show that Spence was an upset employee when his commissions dropped after DBSI hired additional sales associates.

Spence earned $800,000 from DBSI in 2004 but only $500,000 in 2005, $200,000 in 2006 and $100,000 in 2007.

In response to a question from defense attorney Patricia Eakes, who represents Douglas Swenson, Spence said he did not recall emailing company documents to the FBI.

"Thank you for reminding me," Spence said, after Eakes showed him a copy of the email.

Likewise, Spence said he could not recall meeting with an FBI agent in 2010.

"I met with a lot of people in that time frame. I didn't know who was who," he said.

Spence, who admitted he doesn't have any specialized accounting or financial training, said he was unaware of financial documents that showed the company's true financial picture. Eakes said the documents were available to investors. She also got Spence to acknowledge he hadn't given other financial documents more than a quick glance.

"It was not important for me. It was important for the investors," Spence said.

Eakes introduced documents that suggested the company was open about its finances. One noted that several technology companies DBSI heavily invested in were expected to have $10 million to $11 million in negative cash flow for 2006.

Another outside analysis concluded that DBSI would have a hard time meeting its financial obligations if the real estate market crashed.

Cross-examination of Spence will continue Wednesday.

John Sowell: 377-6423

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