Leaders of an Idaho investment company that promised high commissions and high returns on real estate deals to financial advisers and their clients, including those of former Clive broker-dealer DeWaay Financial Network LLC, were charged Wednesday with 83 counts for running a "Ponzi scheme," according to a federal indictment.
The collapse of DBSI Inc. is believed to have affected 8,500 investors in 30 states, including Iowa, and led to the shuttering of DeWaay's multifaceted financial services business that operated out of a lodge-style business park on University Avenue in Clive.
DBSI filed for bankruptcy in 2008 after losses on properties that were valued at more than $2 billion and were scattered across the country.
Donald DeWaay and the company named for him are targets of two proposed class-action lawsuits that were filed last year in Decatur County in which plaintiffs claim that DeWaay and his brokers misled them or failed to conduct adequate due diligence on private placements and tenant-in-common investments in securities promoted by DBSI, as well as another failed company that sought investors for oil field operations.
A judge is expected to rule soon on whether to certify the class and a $3 million settlement agreement in that case.
DeWaay notified the Financial Industry Regulatory Authority Inc., a private organization that oversees broker dealers, that he was giving up his license.
According to the indictment, DBSI President Douglas Swenson and three other employees, including the company's chief legal counsel, concealed crucial financial information from "investors, financial officers, broker dealers, due diligence officers," as well as other DBSI employees who were responsible for marketing the company's financial instruments.
Swenson and others maintained that DBSI was a thriving business with assets exceeding $105 million and access to enough cash to cover annual returns of at least 6 percent as well as operating costs on properties. The company is accused of misleading institutional and individual investors.
Instead, the firm was spending nearly $3 million a month of investors' funds to meet its obligations and had liabilities of more than $200 million, according to the indictment.
At one time, a DBSI entity owned the Greater Des Moines Partnership building at 700 Locust St.
Also indicted were Mark Ellison, an original founder of DBSI who left the company, then returned as general counsel, and David Swenson and Jeremy Swenson. All of the defendants face multiple counts of bank, mail, securities and wire fraud, and each faces a single count of conspiracy.
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