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Tuesday, March 31, 2020  Spokane, Washington  Est. May 19, 1883
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News >  Idaho

Meridian businessmen who led fraud scheme that hurt 8,500 investors imprisoned at last

Douglas Swenson heads to court Tuesday at the James McClure Federal Building in Boise. He was later taken into custody and will serve 20 years in federal prison on fraud charges. (Katherine Jones / Idaho Statesman)
Douglas Swenson heads to court Tuesday at the James McClure Federal Building in Boise. He was later taken into custody and will serve 20 years in federal prison on fraud charges. (Katherine Jones / Idaho Statesman)
By John Sowell Idaho Statesman

A few minutes before entering the courtroom of U.S. Magistrate Candy Dale, Douglas Swenson turned to his wife and handed her his wallet.

It was unclear before the hearing Tuesday morning whether Swenson, 70, the founder and CEO of bankrupt Meridian property management company DBSI, would be taken into custody. But already facing 20 years in prison, Swenson may have figured it was inevitable.

Dale later rejected defense arguments that Swenson, company attorney Mark Ellison and Swenson’s sons, Jeremy Swenson and David Swenson, should be given up to 60 days to self-report to the federal prisons where they will serve their sentences four years after they were convicted of multiple counts of fraud.

The four men were convicted in 2014 of fraud stemming from the collapse of DBSI — short for Diversified Business Services and Investments.

Doug Swenson, convicted of 44 counts of securities fraud and 34 counts of wire fraud, was sentenced to 20 years in prison.

Ellison, 69, and brothers Jeremy Swenson, 45, and David Swenson, 40, — Douglas Swenson’s sons — were each convicted of 44 counts of securities fraud. Ellison was sentenced to five years in prison. The younger Swensons were each sentenced to three years.

The company managed office buildings and shopping centers throughout the nation and sold ownership in those properties to investors, many of them retired individuals and couples. During the Great Recession, business slowed and DBSI began using money from new investors to make income payments to older investors.

There wasn’t enough money to cover those payments, and the company declared bankruptcy in 2008. Prosecutors said the operation had become a Ponzi scheme.

Typically in the federal system, defendants who have remained free while awaiting trial are contacted by the federal Bureau of Prisons and told where and when to report. The attorneys for the four DBSI defendants asked for the same consideration.

Assistant U.S. Attorney Ray Patricco argued that because the 9th U.S. Circuit Court of Appeals had upheld the four men’s convictions and last month the U.S. Supreme Court declined to hear the case, they should be taken into custody immediately.

Dale agreed, saying the policy of allowing defendants to remain free did not apply once they had exhausted all of their appeals.

“There is no further recourse for the defendants,” Dale said.

The judge allowed to let the defendants report to the U.S. Marshals Office elsewhere in the courthouse, rather than having the men taken into custody in the courtroom.

“We hope that the incarceration of the DBSI defendants provides the victims of their crimes some degree of closure, and that restitution payments by the defendants to the victims may now commence,” U.S. Attorney for Idaho Bart Davis said in a statement.

Douglas Swenson was earlier ordered to pay $180.6 million in restitution. The other three defendants were each ordered to pay $32.2 million.

In the bankruptcy, more than 22,000 claims totaling $102 billion were filed. The 8,500 investors, and vendors who did work for the company, received pennies on the dollar.

Investor Joan Mattox, of Meridian, who attended the hearing and had attended much of the trial, said many lives had been upended because of Douglas Swenson’s greed. She said she and her husband lost $300,000, a third of their retirement savings.

“I came home and cried and cried from sheer relief that it really was all over and they were on their way to jail,” Mattox said.

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