The former president and three executives of a failed Boise real estate company are facing fraud charges. Douglas L. Swenson, the founder and president of DBSI Inc, and a group of other companies, and three executives have all been indicted.
Boise, Idaho
Assistant U.S. Attorney Wendy Olson announced that Swenson, his company’s general counsel, and two other corporate officers have been accused of 83 counts of conspiracy to commit securities fraud, mail fraud, and wire fraud. Swenson has also been indicted on conspiracy to commit money laundering.
In the indictment, Olson alleges the executives misled investors by misrepresenting DBSI as a profitable company with a net worth of $105 million.
The indictment goes on to state that while investors were being told the company was doing well, the men knew it was in financial difficulty, and they were using money from new investors to pay returns to other investors.
The indictment alleges the defendants:
The government is seeking criminal penalties against the defendants, as well as forfeiture of properties and company assets to the value of $169 million.
The indictment was handed down following a four-year investigation by the Federal Bureau of Investigation (FBI) and the Internal Revenue Service (IRS).
DBSI’s former chief operating officer, Gary Bringhurst, has reached a plea agreement with federal prosecutors. Bringhurst, 46, will plead guilty to a single count of conspiracy to commit securities fraud for falsifying financial statements used to present the company in a more positive light and mislead investors about how their funds would be used, according to official documents.
DBSI had been in business since 1979 and grew into a group of companies which included DBSI Securities, DBSI Housing, as well as a separate company that invested in technology start-ups. Before DBSI filed for bankruptcy in 2008, it managed more than 240 commercial properties nationwide, many of which were strip malls. DBSI had more than 8,500 investors.
Swenson’s attorney, Angelo Calfo, stated that the government’s case is “misguided” and the reason the company went out of business was due to the recession, not any criminal acts. Calfo also said that DBSI was open with potential investors about the risks of investing in the commercial real estate market.
According to Calfo, “Nobody wanted to DBSI to succeed more than Doug Swenson. The government’s portrayal of DBSI reflects a fundamental misunderstanding of DBSI’s business model and paints a false picture, as will be demonstrated at trial.”
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