An article in the Idaho Statesman describes a pending lawsuit against DBSI and its officers that alleges the real estate investment company illegally collected $500 million in profits.  According to the paper, the lawsuit alleges conduct that is frequently the subject of criminal charges.  The lawsuit says DBSI was involved in a "ponzi scheme" in which new investor dollars were used to pay "guaranteed interest payments" promised to earlier investors.  Did it happen? Time will tell I suppose, but this lawsuit reminds us that there are remedies out there for investors who may have been told one thing and now face another and there are dangers out there for employees and officers of investment companies. Persons in their shoes are frequently sued and sometimes made defendants in criminal cases.

Now I do not represent anyone in the DBSI lawsuit, nor do I know anything about it. Real estate investing is risky stuff, just ask anyone who ever tried to "flip" a house. There are other investment fraud cases pending in Boise in civil and criminal court cases.  I have been involved in these cases before (and currently) so I have seen how they progress.  Investors who believe they were promised a particular rate of return frequently find themselves on the losing end of that "promise" when the underlying investment goes south, or when there never was an underlying property.

Imagine Joe Investments promises you 15% return on your money and you invest $100,000 expecting the money is going to be pooled with other investor money to buy a commercial building. The commercial building was supposed to be rented out, but now it is empty.  When the first interest payment is due to you, Joe uses some other investor’s money to pay your 15%.  Of course that may mean that Joe has used your $100,000 to pay the promised interest to some other investor. When you want your money back – it isn’t there, and neither is the investment that it was supposed to be used for. In the classic "ponzi scheme" there never was any intent to use investor money to buy the underlying investment (sometimes real estate, sometimes something else). I have represented investors who lost money, and people who were part of the investment company that is alleged to have "stolen" the money. Sometimes there is a real explanation – like the investment lost all its value – so it is seldom clear from the outside.  A claim that a company has "engaged in securities fraud, banking fraud and tax fraud" is the worst kind of publicity its investors could get. Whether true or not, finding new investors will be almost impossible, increasing the risk of the investment promise.

Here’s the other thing we need to remember – there is no "guaranteed investment."  Any investment carries risk, and risk makes "promised returns" nearly impossible to count on. So be careful out there as you invest. If you buy a "share" of a promise, make certain that the promise could be fulfilled. The federal government is not going to step in and bail out every investment gone bad.

Of course there is the "other shoe" waiting to drop in any securities, banking or tax fraud case. Many times the civil case sets the scene for another case, brought by your friends at the federal government.

If you even think that you could be a potential defendant in a criminal case, get a criminal lawyer now! I am representing a defendant in a crop insurance fraud case where the federal government simply sat back and let the civil lawyers do all the work to build its case. We have given them the transcripts from the depositions which include the other parties’ answers under oath. This past week the other side flinched – demanding that the civil case THEY BROUGHT against my defendant be stayed because of a "pending criminal investigation." Yes indeed – there is a pending criminal case for those folks – but not my client. Do not go to a deposition in one of these cases (as a defendant or plaintiff) without your own criminal lawyer, and remember – your answers there may be scrutinized later by a prosecutor.  And yes, those answers WILL BE USED AGAINST you – maybe in a criminal case.