DBSI Inc., once a heavy hitter in the world of tenant-in-common investments, continues to make headlines in the wake of its bankruptcy filing. In addition to an ongoing criminal probe, DBSI founder and CEO Doug Swenson may be looking at charges of tax evasion, money laundering, racketeering and securities fraud.
TICs in general experienced a number of financial woes following the downturn in the real estate market, but in the case of DBSI, the problem may have more to do with deception rather than economics.
At least that’s what many of the thousands of investors who put their money into DBSI believe. Now it appears some high-ranking officials, including Idaho’s Attorney General, the Internal Revenue Service and the FBI, may share their opinion.
The court-appointed examiner in DBSI’s bankruptcy case, James Zazzali, stated in a 264-page report that DBSI executives ran “an elaborate shell game,” one that included improper and fraudulent use of investor money to prop up the company, to spend on pet projects and to enrich themselves.
DBSI filed for Chapter 11 bankruptcy protection in November 2008. At the time, it held more than $2 billion in property nationwide and managed other assets worth more than $2.65 billion.
Many of DBSI’s 10,000-plus investors lost their life savings when DBSI filed for bankruptcy, while others took huge, life-changing financial hits. Bill Marvel invested $3.5 million into DBSI buildings. After the firm’s bankruptcy, Marvel lost three buildings to foreclosure, and expects to lose a fourth. Out of his initial $3.5 million investment, Marvel expects to hold onto only about $500,000, according to a Feb. 9 Idaho Statesman article.
Then there’s DBSI investors like Barb Korducki, who is still trying to pick up the pieces from her doomed investment foray in DBSI properties.
“I was told that DBSI had made profits for all of their investors, year over year, for over 20 years. Like most owners, I sold a rental (owned before marriage) and put all the proceeds into a building. Three years after the bankruptcy, we are still plagued with attorney bills. Though we have never missed a payment, our loan has been turned over to a special servicer, who continues to make unreasonable demands. He has added thousands of dollars in attorney fees and hotel stays. It is like a never ending nightmare,” she says.