Defense ready to begin its case in DBSI trial

A witness says company officials never asked him to promote misleading information.

jsowell@idahostatesman.comMarch 27, 2014 

Prosecutors in the eight-week-old DBSI fraud trial were ready to rest their case Wednesday, but a dispute over the admissibility of a document prevented that from happening.

Federal prosecutors want to place into evidence a document written by DBSI president Douglas Swenson and seized from his office at the company's Meridian headquarters by the trustee in the DBSI bankruptcy case.

Attorneys defending Swenson in the fraud trial in federal court said the document is privileged and isn't subject to disclosure. The prosecution argued the document is part of a group of papers that Swenson waived the right to keep private.

The nature of the document and how it could impact the case against Swenson, company attorney Mark Ellison and company secretaries Jeremy Swenson and David Swenson — Douglas Swenson's sons — has not been publicly disclosed.

The dispute must be settled before the prosecution rests or it would not be able to introduce the disputed document later.

Chief District Judge B. Lynn Winmill said he did not have enough information Wednesday to make a ruling. He suggested the bankruptcy trustee may be needed to testify to clear up the legal issue.

"I don't know what else to do," Winmill said. "Privilege is always important."

The Swensons and Ellison are charged with a combined 89 counts of conspiracy, fraud and money laundering related to the operation of property management company Diversified Business Services and Investments.

The government used its final witness, senior sales director Josh Hoffman, to make it appear Ellison ordered Hoffman to continue pushing sales of DBSI investments even as the company was heading toward financial ruin in September 2008.

An email sent by Hoffman to Ellison and four other company officials on Sept. 4, 2008, included a statement for the company's sales staff to use if questioned by outside brokers who sold DBSI's investments to customers. With a reply from Ellison saying "Looks good to me," it appeared Ellison approved the use of the statement.

On cross-examination, attorney Jeffrey Robinson, who represents Ellison, showed that Hoffman's email had been sent back and forth numerous times among the recipients before Ellison sent out his message eight days after the initial email. Ellison also forwarded the message on Sept. 4 to company controller Paris Cole and Matt Duckett, the company's vice president of accounting and finance, seeking their views.

None of the responses were included in the government exhibit.

Hoffman said he did not recall adding several handwritten notes on the copy of the email presented by prosecutors. The notes, which Hoffman said were in his handwriting, appeared to be talking points for sales representatives.

Robinson claimed the notes were lifted from a different email and pasted onto that email after company records were seized.

Hoffman testified that neither Ellison nor Douglas Swenson told him to withhold information about the company's financial status or to give out misleading information.

Winmill told jurors the case is expected to wrap up in another couple of weeks. Original estimates were for the trial to last eight to 10 weeks, placing it on track with the latter estimate.

The defense, Robinson said, plans to call between six and 10 witnesses.

John Sowell: 377-6423, Twitter: @IDS_Sowell

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