DBSI which went bankrupt last fall, was “doomed to fail,” said Joshua R. Hochberg, an examiner appointed by a bankruptcy court to examine DBSI’s business affairs.
But the company’s troubles did not stop founder and president Douglas Swenson and other officers, directors, owners and top employees from giving “significant amounts of money to themselves,” according to the report.
Since 2000, the company paid out $75.1 million in what the examiner called “excessive insider distributions” to 14 people, with more than half of it – $38.6 million – going to Swenson. The payments included salaries, bonuses and redemption of ownership interests.
DBSI managed commercial property investments for investors around the country. Before filing for bankruptcy in November, the company controlled 244 commercial properties and had more than 8,500 investors. Its holdings include several shopping centers and office buildings in the Treasure Valley.
DBSI collapsed as real estate values fell and lending dried up. Investors sued in October 2008 after DBSI stopped paying them. Idaho securities regulators also filed suit in February. Those lawsuits are pending.
DBSI has denied the state’s fraud allegations, but the examiner’s report will provide fuel for investors and Idaho regulators in their claims.
FINRA arbitration is a dispute resolution process administered by the Financial Industry Regulatory Authority (FINRA). It provides a forum for resolving monetary disputes between investors and securities firms or brokers without going to court. The process is generally faster and less formal than traditional litigation, and decisions are made by a panel of arbitrators who are knowledgeable in securities law and industry practices. Arbitration through FINRA is binding, meaning the decision is final and enforceable in court. This process is commonly used for disputes involving investment losses, unsuitable recommendations, or misrepresentation. Investors must agree to arbitration in their brokerage agreements, often as a condition of opening an account. While arbitration can be a more efficient way to resolve disputes, it also has limitations, such as limited appeal options and potentially high costs. Despite these challenges, FINRA arbitration remains a crucial mechanism for investor protection and dispute resolution in the securities industry.