Question #1: What effect will the criminal convictions of Douglas Swenson, Jeremy Swenson, David Swenson and Mark Ellison have on the Liquidating Trusts?

On April 14, 2014, a jury in Boise, Idaho found former DBSI President Douglas Swenson guilty of 44 counts of securities and 34 counts of wire fraud. David Swenson, Jeremy Swenson and Mark Ellison were found guilty of 44 counts of securities fraud. The defendants were acquitted of the remaining charges.

Doug Swenson was sentenced to 20 years.  Mark Ellison was sentenced to 5 years.  David and Jeremy Swenson were sentenced to 3 years each.  However, each of these defendants have pursued appeals and they have all been granted bail pending the resolution of their appeals.  Gary Bringhurst reached a plea bargain deal where he was sentenced to 5 years probation along with thirty days and fifteen weekends of prison time.

The criminal prosecution was brought by the United States federal government. Neither the Liquidating Trustee nor the Litigation Trustee was responsible for the criminal prosecution. The liquidation of the Liquidating Trusts’ assets for distribution to beneficiaries is a separate and distinct process from the criminal prosecution.

The Litigation Trustees have pursued civil damages claims against the defendants and other parties. This litigation was stayed during the criminal trial, and is now scheduled to resume. The criminal convictions may assist the Litigation Trustee in proving his civil damages claims. If the Litigation Trustee is able to obtain a recovery on civil damages claims, the Liquidating Trusts’ beneficiaries will share in the proceeds. The federal government also may seek restitution damages against the defendants for the benefit of DBSI investors.

The fraud convictions may have tax implications for investors. However, each person’s tax situation is different, so please contact your tax advisor to determine if and/or how this information may apply to your particular circumstances.