DBSI officials face sentencing in August

jsowell@idahostatesman.comApril 17, 2014 

Company president Douglas Swenson, convicted Monday of 44 counts of securities fraud and 33 counts of wire fraud following a 10-week trial in federal court, will be sentenced on Aug. 20.

Meanwhile, Swenson is seeking the return of $1.3 million seized by the government from two investment accounts so he can pay his defense attorneys.

At the same time, government prosecutors say they will drop forfeiture claims against the defendants — claims that would have required additional testimony and a decision by the same jury that rendered the guilty verdicts — and instead will ask Chief District Judge B. Lynn Winmill for a $169 million judgment.

Swenson, who led the Meridian property management company, faces up to 20 years in prison on each of the wire fraud convictions and up to five years on each of the securities fraud counts.

DBSI attorney Mark Ellison and Jeremy Swenson and David Swenson, sons of Douglas Swenson who served as company secretaries, were all convicted of the same 44 securities fraud charges and could also serve up to five years for each of the counts. Ellison will also be sentenced Aug. 20, and Jeremy and David Swenson will be sentenced Aug. 21.

Ellison and the two Swenson sons were acquitted on the wire fraud charges. All four defendants were acquitted on charges of conspiracy to commit securities fraud, mail fraud and money laundering.

The four men remain out of custody until sentencing.

In a motion filed after Monday's conviction, Douglas Swenson said if the money he is seeking is returned, he will deposit it into a court account so his lawyers, Angelo Calfo and Patty Eakes of Seattle, can be paid.

The money was seized from two accounts at TD Ameritrade, an online broker service. The accounts were held by Code Six LLC and Code Six Trading Co., companies founded by Jeremy Swenson and David Swenson and under which Douglas Swenson was also listed as a manager.

The government claimed money was moved between the two Ameritrade accounts and bank accounts to hide cash siphoned from DBSI. Code Six LLC was formed in October 2008, a month before DBSI collapsed and the company declared bankruptcy. Code Six Trading Co. was formed in January 2009.

The money laundering charges came from those transactions.

Douglas Swenson agreed to pay Calfo and Eakes a flat fee for their services defending Swenson on the criminal charges and for an expected appeal. The fee was not publicly disclosed in court documents, but a filing said the amount was less than the amount seized by the government.

The law firm in which Calfo and Eakes are partners was given a security interest in Code Six for payment of their services.

Calfo argued unsuccessfully that the jury should decide any money judgment awarded to the government. Winmill agreed with prosecutors that he could decide the matter without jurors. However, he extended the jury's term of service for three months in case they need to be called back following an appeal.

At trial, the government argued the four DBSI officials hid vital information about the company's dwindling finances and that the lack of disclosure allowed the company to obtain new investments. Had the true conditions been revealed, investors would have gone elsewhere, prosecutors said.

The company grew increasingly reliant on cash from new investors to pay off guaranteed payments of between 6 percent and 7 percent annually to earlier investors who bought interests in shopping centers, office buildings and warehouses purchased by DBSI and sold to the investors.

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