by Brian Mahany
We represent dozens of tenants in common – TICs – across the United States. While TICs and like kind exchanges are a legitimate way of investing in real estate, several large TIC promoters have marred the reputation of the industry. This week the government responded with several indictments against the top executives from DBSI.
A federal grand jury in Idaho indicted DBSI founder Douglas Swenson along with 3 other officers including the company’s lawyer. The U.S. Attorney says that between 2007 and 2008, the men publicly told investors that the company was profitable and had a net worth of $115 million. In fact, prosecutors say that the business was losing money. More ominously, new money coming in was simply being used to pay off old investors, the classic sign of a Ponzi scheme and $80 million from reserve accounts was stolen and used for other purposes.
The men are collectively charged with dozens of counts of wire fraud, securities fraud, interstate transportation of stolen property and bank fraud. Swenson also faces a money laundering charge. If convicted of all counts, the men could face life in prison.
Investors were told that DBSI was going to lease back the property sold to the Tenants In Common (investors) pursuant to a Master Lease agreement that provided the investors with a reliable, steady income stream. Prosecutors say those statements were false.
Prior to the current indictments, the former Chief Operating Officer of DBSI, Gary Bringhurst, pleaded guilty to a single count of conspiracy to commit securities fraud. He is expected to cooperate against his former boss and colleagues.
Douglas Swenson claims that he is innocent and that he and the company are merely victims of the economy. U.S. Attorney Wendy Olson disagrees, “Investment fraud undermines markets, bilks investors of promised returns and creates unnecessary loss at a time when our economy is struggling to recover. Those who seek to induce others to invest their hard earned money in complex financial deals have a solemn duty to act with honesty and integrity.”
The case was investigated by both the IRS and FBI. IRS Special Agent In Charge Stephen Boyd said, “Defrauding investors is like a ‘house of cards’; the underlying structure can fall apart at any time leaving many investors in financial ruin.”
Before going bankrupt in 2008, DBSI managed real estate projects across the United States, many of them shopping centers. During its heyday, it boasted 8500 investors and 240 commercial properties.
Many of the investors were retired and elderly. For some, the investment represents their life savings. They aren’t the only victims, however. Several of the brokerage firms who sold these TIC interests went out of business after being bombarded with claims from their former clients. (For more articles on claims against brokerage firms in the aftermath of DBSI, see our prior posts here, here, here and here.
We currently represent dozens of TICs, all victims of Carlton Cabot. Like DBSI, Cabot ran a national real estate empire promoting tenant in common investments in commercial real estate. His empire collapsed ruining many lives and forcing many people to fear loss of their retirement funds and life savings.
If you lost money to a Tenant In Common scheme, give us a call. Often we can recover your hard earned money from the promoter or others involved in the offering. This includes stockbrokers, investment advisers and real estate “professionals” that sell these investments. Most states say that TIC interests are securities but skillful promoters often fool insurance agents or real estate salespeople into believing they are not securities and can be sold without a securities license. Often these cases can be handled on a contingent fee basis meaning no legal fees unless we win and collect.
Facing a foreclosure, allegations of personal liability or certain hidden “springing guaranties”? We can also help you. For more information, contact attorney Brian Mahany at or by telephone at (direct dial).
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many jurisdictions.
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