DBSI calls state lawsuit inflammatory, potentially illegal

DBSI is hitting back at the state Department of Finance, calling claims in a civil securities lawsuit filed on Jan. 16 “erroneous and inflammatory” in a series of public statements. The Meridian real estate investment company, which filed for Chapter 11 bankruptcy in November, says it intends to investigate whether the department’s lawsuit violates the federal law that halts further litigation following a company’s filing for Chapter 11 reorganization.

The state claims in the lawsuit that DBSI; its president and chief executive officer, Doug Swenson; and other companies controlled by Swenson, schemed to defraud thousands of investors, many of them elderly, out of millions of dollars through the sale of unregistered securities.

Thomas Banducci, outside counsel for DBSI Group of Companies, counters that DBSI investors were experienced real estate owners provided with substantial information about investment properties and represented by independent real estate professionals.

 “The company operated under a lawful business model, and over the course of the last four years, has cooperated fully with the State of Idaho, answering any questions regarding its business operations,” Banducci said in a statement.

Banducci stated the company has taken steps to work in the best interests of investors and employees since filing for bankruptcy in Delaware on Nov. 10. He stated investors are represented by a creditors committee that has an important voice in the proceedings.

The company also issued the following statement after receiving the court complaint on Jan. 15:

“DBSI Group of Companies for decades has been a responsible organization working with investors to secure opportunities in real estate that are lawful and above board. Claims being made by the Idaho Department of Finance are not only untrue, they are inflammatory and completely misrepresent the respectful nature of DBSI’s relationship with its clients and DBSI’s sound business principles and ethics.  DBSI looks forward to addressing these issues as this matter works through the court system.”