A Decatur County judge approved a $3 million class-action settlement in lawsuits against Clive businessman Donald DeWaay and the broker-dealer he founded.
Barring any appeals, the ruling effectively ends a threat coming from multiple directions that DeWaay's lawyers said at one time threatened the financial collapse of his businesses and could force him to seek protection from creditors in bankruptcy court.
Judge John Lloyd approved the settlement, made up of insurance payments and nearly $1 million in DeWaay's personal funds, in combining two lawsuits that were brought by individuals who made private placement investments in deals promoted by DeWaay and his brokers.
Lloyd observed that investments were placed for about 5,000 people in 199 funds, many of them through tenant-in-common interests in real estate deals and others through investment in oil and gas exploration companies.
Investors claimed that DeWaay and his agents failed to conduct proper due diligence in promoting the placements, some of which paid commissions up to 13 percent, and nearly all of which promised returns that outpaced investments on public stock exchanges.
"Certification of a class action in these cases is the only effective means of adjudicating a large number of claims against these defendants and the only practical way that many small investors will have to assert a claim at all," Lloyd said in the ruling.
The investments were promoted for companies that have since filed for bankruptcy protection. The founder and three other employees of one those companies, DBSI Inc., were indicted last week by a federal grand jury in Idaho on 83 counts of bank, wire and securities fraud.
DeWaay and and his broker-dealer, DeWaay Financial Network LLC, had been the target of arbitration claims before the industry's private regulator as well as trustees seeking to collect for creditors in the DBSI bankruptcy and that of a Texas company that promoted investments in oil and gas leases.
In the DBSI case alone, the trustee had claims in excess of $20 million for investments sold by DeWaay and other broker dealers. Arbitrations before the Financial Industry Regulatory Authority Inc. (FINRA) totaled more than $15 million.Lloyd's ruling "adds some certainty. The thing that you're concerned about when you have litigation going on in multiple forums across the country are the costs of proceeding with them; you're concerned about inconsistent results. What this does is hopefully bring an end to all of that," said DeWaay attorney Steve Wandro.
If it holds, the ruling would block attempts to collect from DeWaay in connection with the DBSI bankruptcy, the Texas case and it blocks future arbitration hearings before FINRA.
Gail Boliver, an attorney who represented investors opposed to the settlement agreement, said the ruling was likely to be appealed.
Lloyd also approved a $2,500 payment to each named plaintiff in the case and awarded $750,000 to their attorneys.
In November, DeWaay shuttered the broker-dealer, but he has retained his broker's license.