Former Idaho Real Estate Executive Headed to Prison for Fraud
BOISE (KTVB) –The founder of a real estate company that defrauded its investors out of millions of dollars is headed to prison.
Meridian-based company founder and CEO Doug Swenson was sentenced to 20 years in federal prison Wednesday, while Mark Ellison, general counsel for the company, was sentenced to five years. Both had faced up to life behind bars.
Both men were convicted of wire and securities fraud in April. Swenson’s sons, Jeremy and David Swenson, were also convicted and are set to be sentenced Thursday.
The DBSI executives were responsible for bilking investors out of millions, while painting a rosy picture of the company’s profits even as it teetered on the brink.
Swenson was supposed to invest the money in low-risk ways, ensuring a monthly payout to investors, many of whom sought to supplement their retirement with the savings from a life of work. Instead, he took the money and invested it in a number of speculative technology startups – many of which failed to pay off.
Prosecutors say DBSI misled investors by hiding the company’s worsening financial situation while still encouraging more people to get on board.
The bottom fell out in fall of 2008, when the company filed for bankruptcy and thousands of people learned their money – in many cases, their life’s savings – were gone.
Among them was Judy Bowatz, who described Swenson in court Wednesday as “a wolf lying in wait.” She and her husband invested $250,000 in DBSI in June 2008. By September, all of it was gone.
“It’s 35 years of work for us,” Bowatz said, recounting how her husband had to emerge from retirement to return to his old job, fielding constant questions from coworkers about why he was back. Finally, she said, he began saying he just wasn’t ready for retirement so he wouldn’t have to reveal the painful truth.
Even after Swenson’s conviction on dozens of counts of fraud, Bowatz knows she’ll probably never see her money again. It was mishandled, not slipped into Swenson’s bank account or used to buy luxury cars and yachts, so even an order for restitutionwill likely do little to recoup her savings.
“It seems like it’s only money that exists to us and no one else,” she said. “We’re just a faceless couple to them, and they have no idea what they’ve done to our family.”
Jeffrey Mitchell testified that he is struggling to pay the $37,000 yearly tuition for his severely dyslexic daughter’s specialized school after losing money with DBSI. He’s been borrowing money from family to continue making the payments, but said he worries that soon 13-year-old Annie won’t be able to continue on in the program that has helped so much with her learning disability.
“There’s no nest egg to resort to,” he said.
Another victim is Dixie Bushman, who is on the cusp of losing her family’s ranch after the money she invested evaporated, leaving her unable to pay taxes on the property.
More than anything, she said, she wishes she could turn back time to before she had ever heard of DBSI. Like Bowatz, she’s not counting on a light at the end of the tunnel.
“The Swensons are going to make sure this never ends,” Bushman said. “I’ve had to live with the weight of this every day for six years.”
But others in the courtroom were there to support the two men, writing letters to the judge about the their integrity and good works in the community and arguing investors should have known there were risks.
“I realized at the time I made that investment that I was taking a risk that could result in a total loss,” said Crane Simmons, a 15-year friend of the Swensons who also lost money with the company. “Unfortunately, we can’t redo history.”
Others argued that a lengthy prison sentence may as well be a death sentence for the two men, both in their late 60′s.
But Prosecutor Mark Williams said Swenson showed no remorse for the lives he had ruined, and asked U.S. District Judge B. Lynn Winmill to pass down a sentence of no less than 25 years.
“This fraud was not a mistake, it was not a desperate measure to save a company,” he said. “Doug Swenson’s scheme was as ruthless as it was devastating.”
Swenson’s attorney Patricia Eakes teared up, calling Swenson’s conviction “baffling” and insisting that a long sentence would be unjust.
“I know in my heart that you’re about to sentence an innocent man for a crime he did not commit,” she told Winmill. She asked him to sentence Swenson to probation, not prison time.
But the judge decided a significant sentence was merited based on the magnitude of the fraud.
“The loss to investors in this case is staggering,” he said, noting that many of the people who had lost money with DBSI were of retirement age, with few chances to rebuild their savings.
But he handed down a lighter sentence to Ellison, the company’s lawyer. Prosecutors described Ellison as a law-savvy expert who took steps to cover his tracks, while the defense argued his only crime was trusting his long-time friend, Swenson, too much and trying to fix the financial chaos from within, rather than resigning.
Winmill said he weighed Ellison’s involvement in the scheme against his lack of criminal history and dozens of letters written to the judge on his behalf, many of which described Ellison as a kind man who selflessly helped others.
Both Swenson and Ellison declined to speak when asked if they had anything to say.
The court will determine restitution in the case in the next 90