District Judge B. Lynn Winmill sentenced Douglas Swenson, 66, on Wednesday. Former DBSI legal counsel Mark Ellison, 66, was sentenced to five years. A restitution amount will be set later. Federal prosecutors have said they will seek at least $75 million. A federal magistrate judge ordered $1.5 million seized from Swenson in April 2013.
Winmill said Wednesday that he didn't believe the defendants set out to defraud their clients, but he said they concealed the company's financial problems and continued to accept new investments when they knew the company was failing.
University of Maryland Professor Jeffrey Mitchell testified Wednesday that he invested $113,000 in DBSI 70 days before the company collapsed. Company officials gave no indication DBSI was in financial trouble, he said.
"They shouldn't have allowed my investment or anyone else's," Mitchell said.
Other investors said they understood the risks. Federal regulations required investors in DBSI to have minimum yearly incomes of $200,000 or a net worth of more than $1 million. They also were required to sign a document that said there was no guarantee of a return on their investment and that they could afford to lose their investment.
Groups of investors would buy a property and lease it back to DBSI in exchange for guaranteed annual returns of up to 9.5 percent, paid monthly. The investments appealed to people who were looking to avoid capital-gains taxes after selling other investments.
Prosecutors said DBSI's investments were almost entirely unprofitable and dependent on new investor funds to continue operations.
DBSI once managed 280 shopping centers, office and other commercial buildings in 34 states. It filed for bankruptcy in 2008. More than $102 billion in claims were filed in bankruptcy court.
In April, Swenson was convicted of 44 counts of securities fraud and 34 counts of wire fraud. Ellison was convicted of 44 counts of securities fraud, as were Swenson's sons, Jeremy and David. Both served as executive secretaries at DBSI.
Jeremy Swenson, 41, of Meridian and David Swenson, 38 of Boise, were each sentenced to three years in prison on Thursday, followed by three years of supervised release.
Attorneys for Douglas Swenson and Ellison advised them not to address the court during their sentencing hearing Wednesday because they plan to appeal their convictions.
"We are very disappointed in the jury's verdict and the court's sentencing decision," said Angelo Calfo, Swenson's attorney. "Doug is an innocent man. He had and has an enormous commitment to DBSI and its investors, his family, his community and his church. This is a good man who has effectively been given a life sentence."
Calfo said he believes jurors were bothered that no one stopped sales to new investors in the months before the company's bankruptcy filing
U.S. Attorney Wendy Olson said the sentences serve as a warning. "Today's significant sentences for Douglas Swenson and Mark Ellison send the clear message that those who induce investors to trust them with their money, in some instances with their life savings, have a solemn and legal obligation to be honest and truthful," Olson said in a written statement.
Douglas Swenson and Ellison will remain free until they are assigned to a federal prison. Winmill said he would recommend they serve their time in Sheridan, Oregon.
Investors, including Republican former U.S. Rep. Rick Hill of Montana, accused DBSI of fraud in a $1 billion class-action lawsuit. In March 2009, the Montana auditor's office said 80 Montanans had lost $32 million in the DBSI collapse.