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An examiner working with the U.S. Bankruptcy Court in Delaware concluded in a 2009 report that DBSI was engaged in “an elaborate shell game” and was in need of new investor funds to cover existing obligations as far back as 2005.
In other words, DBSI had become an alleged Ponzi scheme.
DBSI booked profits from “inflated markups” of properties it sold to investors, the examiner concluded.
“DBSI Inc.’s guarantees of investments were illusory and were based on the cultivated false appearance that DBSI had substantial value,” the examiner reported.
Williams and Edward Sheu, attorneys for the Minneapolis law firm Best & Flanagan, are among the few to get anything but pennies on the dollar for investors in the now-bankrupt business.
After filing an arbitration claim in 2009, Williams and Sheu obtained a $3.1 million award on behalf of seven clients who invested approximately $3 million with DBSI in 2008 just months before the company filed for bankruptcy.
“This was one of the most egregious situations I’ve seen,” said Williams. “Swenson made this case as time-consuming and complicated as possible.”
“He was swinging for the fences and trying to hit a home run,” Sheu added. “He’s been trying to come up with a ruling that shows his innocence rather than cutting a deal.”
As for Dykstra, she recently received a settlement check from one of the lawsuits against DBSI. It was for $500.
“If I get more, it will be very, very modest,” she said from home Wednesday. “Most of us long ago decided we had to move on.”
David Phelps • 612-673-7269