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.