Jurors begin deliberations in DBSI fraud case

jsowell@idahostatesman.comApril 9, 2014 

Following 10 weeks of testimony spread over 42 days of court hearings, jurors will decide the fate of four DBSI officials accused of a combined 89 counts of conspiracy, fraud and money laundering.

Two of the 14 jurors — including one who had advised the court she was suffering a financial hardship because of the length of the trial — were selected as alternates Wednesday and were allowed to leave the federal courthouse.

The 12 remaining jurors will have to sift through the evidence and decide whether defendants Douglas Swenson, Jeremy Swenson, David Swenson and Mark Ellison are guilty of the charges against them. In order to convict or acquit the defendants on any of the individual charges, the vote will have to be unanimous.

U.S. Attorney Mark Williams told the jury the defendants withheld critical financial information about how the Meridian property management company was losing money when it issued reports sent to independent brokers considering the company's investment offerings for their clients.

The reports also failed to mention, he said, that several technology companies owned by DBSI owed the company $200 million on outstanding loans and that the loan totals represented the largest asset for the company. Nor did the company share that it was using investor money meant for improvements for their properties for general DBSI expenses.

"It was not a mistake," that the information wasn't shared with the brokers and ultimately investors, Williams said. "It was fraud."

On Tuesday, defense attorneys said the government had failed to prove the four defendants lied and cheated investors. They asked jurors to return not-guilty verdicts on each of the counts.

Founded in 1979, the company formerly known as Diversified Business Services and Investments grew greatly in the new century after an IRS interpretation that allowed sellers of investment properties to avoid capital gains taxes by sinking their profits into new investments.

DBSI specialized in selling shopping centers, office buildings and warehouses in which a group of a dozen or more investors would jointly buy a property and lease it to DBSI to manage in exchange for guaranteed payments of between 6 percent and 7 percent annually. By the time the company declared bankruptcy in November 2008, there were more than 8,500 investors.

At its peak, DBSI managed properties in 30 states and had more than 500 employees.

In a separate bankruptcy case, 22,000 claims have been filed by investors, vendors and others seeking $102 billion.

By 2007, DBSI was losing $3 million a month, prosecutors said in court.

After the jury left to begin deliberations Wednesday, Chief District Judge B. Lynn Winmill praised prosecutors and defense attorneys for their work on the case and for remaining professional even when things got testy at times. Winmill then left the bench and personally shook hands with each of the nine attorneys.

Earlier, outside the jury's presence, Winmill said two jurors who were left on the panel expressed concerns about missing planned vacations that were scheduled to begin toward the end of next week. The judge said they would have to remain on the jury, but he said he would work to provide compensation if those jurors end up missing their vacations or have to reschedule and suffer out-of-pocket losses.

"It's critical that this verdict be reached only on the evidence presented and not because of time pressures," Winmill said.

The jury is expected to deliberate until about 2:30 p.m. Wednesday and for a full day on Thursday. Jurors will have Friday off and return on Monday.

Read previous coverage of the trial and bankruptcy by clicking here.

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