Wednesday, March 4, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Another financial scam, another cautionary tale

sievers column sig

By
From page B7 | April 27, 2014 |

Yet another financial scam has finally run its course with very bad results.

Four top executives of DBSI Inc., one of the leading syndicators of private-placement investments, were convicted by a federal jury in Boise, Idaho, earlier this week on multiple counts of fraud.

Investors lost millions in phony private placement that turned out to be a Ponzi scheme. One of the attorneys involved observed correctly that this event is just another warning sign for investors to stay away from such deals.

The trial lasted 42 days and showed that though the real estate investments were “universally unprofitable” yet DBSI “cooked the books” to portray themselves as a thriving company with a net worth of $105 million.

DBSI acted like a Ponzi scheme, relying on new investor funds to continue operations and pay returns to other investors. It raised money primarily by defrauding investors of $89 million with sales of high-yield notes in 2008 and sales of securities known as “tenant-in-common” 1031 exchanges.

They also had regular real estate investment deals going back into the 1990s where they siphoned off money for their personal benefit and then had the limited partnership declare bankruptcy.

The list of injured investors is large, including some broker-dealers who sold the products. But DBSI was not alone. The firm was one of the big three syndicators of phony private placements that decimated independent broker-dealers over the past decade.

Though the DBSI executives deserve to be convicted and they deserve to go to jail for a long time, the investors are still damaged. The conviction does not result in the return of the money to those people who invested in these products. In fact, the pain is not yet over for the investors because some of the defunct partnership investments are still in the midst of the bankruptcy legal morass.

Recall what happened with the Madoff fraud. Anyone who received money thinking it was distribution from the investment may have suffered a “claw back” of the money. The legal premise is that creditors have valid claims and should receive their money before the investors do. So the bankruptcy trustee has authority to demand back money received by the investors even though they were innocent victims also. Truly this is adding insult to injury.

The demise of DBSI and the conviction of its leaders is another cautionary tale about this area of the financial markets. This episode is just another reason why investors should be skeptical about the more exotic and complex investment structures. The track record of private placements, most hedge funds and numerous “special” alternative investments is horrible.

In today’s security markets where you can find almost any kind of investment idea in a liquid, easily tradable form, these special products without liquidity are highly questionable. Frankly, they simply play to greed.

This does not mean that every such deal is bad. The legal form is not at fault, but it depends heavily on the management. The old phrase, “It’s the owner, not the dog,” certainly applies. The investment vehicle can be used for good or for bad reasons.

I would comment that everyone should be skeptical of investment deals with the following characteristics: There is a complicated legal structure requiring a veritable book to explain the offering; the promised results seem too good to be true; it is a black box and the details cannot be divulged because that would jeopardize their special situation.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from the University of California, Berkeley. Contact him at [email protected]

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

 
County honors Meadows Trigueiro as Woman of the Year

By Kevin W. Green | From Page: A1, 1 Comment | Gallery

Police shut down Fairfield street after shooting

By Glen Faison | From Page: A1, 8 Comments | Gallery

 
Celebrity chef motivates Armijo students

By Susan Winlow | From Page: A2 | Gallery

 
State schedules work on Highway 12

By Kevin W. Green | From Page: A4

 
Bridge work to shut down Highway 12 east of Rio Vista

By Kevin W. Green | From Page: A4

Highway 12 Association to meet this month

By Kevin W. Green | From Page: A4

 
Caltrans reschedules work on J-Mack Ferry

By Kevin W. Green | From Page: A4

 
 
 
Robots, raucous businessmen set to arrive on big screen

By Amy Maginnis-Honey | From Page: A7

Teen hit by SUV remains in hospital

By Glen Faison | From Page: A9

 
College looks at Measure Q project changes

By Susan Winlow | From Page: A9

 
 
 
Fairfield police log: March 2, 2015

By Susan Hiland | From Page: A12, 1 Comment

Fairfield police log: March 1, 2015

By Susan Hiland | From Page: A12

 
Fairfield police log: Feb. 28, 2015

By Susan Hiland | From Page: A12

Suisun police log: March 2, 2015

By Susan Hiland | From Page: A12

 
Suisun City police log: March 1, 2015

By Susan Hiland | From Page: A12

Suisun City police log: Feb. 28, 2015

By Susan Hiland | From Page: A12

 
Enrollment of non-residents to be capped at some UC campuses

By The Associated Press | From Page: A13

.

US / World

California survey finds Sierra snowpack far below normal

By The Associated Press | From Page: A1

 
California shuts down oil wells to protect ground water

By The Associated Press | From Page: A10

Ex-CIA chief admits sharing military secrets with mistress

By The Associated Press | From Page: A12 | Gallery

 
California lawmakers show wide discrepancy in missed votes

By The Associated Press | From Page: A13

Agents target industry helping Chinese women have US babies

By The Associated Press | From Page: A13 | Gallery

 
Family of girl declared brain-dead sues Oakland hospital

By The Associated Press | From Page: A13

US marshals say man killed by Los Angeles police was wanted

By The Associated Press | From Page: A13, 2 Comments | Gallery

 
72 passengers reach settlements in Asiana crash

By The Associated Press | From Page: A13

Netanyahu warns US ‘bad deal’ would put Iran on nuclear path

By The Associated Press | From Page: A13

 
Mines, bombs slow Iraqi advance on Islamic State-held Tikrit

By The Associated Press | From Page: A13

 
India orders TV stations not to give rapist a platform

By The Associated Press | From Page: A13

Health officials perplexed by vaccination skeptics

By The Associated Press | From Page: A13, 1 Comment

 
Lawmakers taking another crack at expanding gun checks

By The Associated Press | From Page: A13

.

Opinion

 
Editorial cartoon: March 3-4, 2015

By Daily Republic Syndicated Content | From Page: A11

Minority outreach that works

By Jennifer Rubin | From Page: A11, 3 Comments

 
Israelis worry about inequality, not Iran

By Daniel Gordis | From Page: A11, 3 Comments

 
.

Living

Today in History: March 4, 2015

By The Associated Press | From Page: A2

 
Community Calendar: March 4, 2015

By Susan Hiland | From Page: A2

Mushrooms are nutrient-packed, with a deep, savory flavor

By The Washington Post | From Page: B5

 
Get ready to add white to the rainbow of produce you eat

By The Associated Press | From Page: B5

 
My husband and I want different things in our retirement

By Kathy Mitchell and Marcy Sugar | From Page: B7

Horoscopes: March 4, 2015

By Holiday Mathis | From Page: B7

 
.

Entertainment

Apollo to celebrate Holiday birthday

By The Associated Press | From Page: A7

 
Oprah’s Chicago studios to close down

By The Associated Press | From Page: A7

Fashion week moves Milan to Paris

By The Associated Press | From Page: A7

 
TVGrid

By Daily Republic Syndicated Content | From Page: A8

.

Sports

Bumgarner hit hard in spring debut, A’s beat Giants 9-4

By The Associated Press | From Page: B1

 
 
Vanden girls roll, advance to SJS championship game

By Marcus Lomtong | From Page: B1

Raiders officially release S Tyvon Branch

By The Associated Press | From Page: B2

 
Trooper: Fingerprints show victim in Hernandez’s rented car

By The Associated Press | From Page: B2

 
Play ball! Quickly! Baseball tries to speed game this spring

By The Associated Press | From Page: B2

Australian rugby star Hayne signs 3-year deal with 49ers

By The Associated Press | From Page: B2

 
Maid: Hernandez messed with security camera after killing

By The Associated Press | From Page: B2

Pacquiao big hit so far in Vegas sports books vs Mayweather

By The Associated Press | From Page: B2

 
Kings bring back former player Divac in front-office role

By The Associated Press | From Page: B2

No ‘floating rubbish’ collection for Olympic sailing venue

By The Associated Press | From Page: B2

 
Cal senior Reshanda Gray named Pac-12 Player of the Year

By The Associated Press | From Page: B2

Rudy Gay, Kings hand Knicks worst loss of season, 124-86

By The Associated Press | From Page: B2

 
Cubs’ scramble on Wrigley Field hits bump when mayor balks

By The Associated Press | From Page: B2

.

Business

Oil glut could soon lead to plummeting prices

By The Associated Press | From Page: A8, 2 Comments

 
.

Obituaries

Jacqueline Mendes

By Nancy Green | From Page: A4

 
Robert C. Thierry

By Nancy Green | From Page: A4

Garland (Curly) Henry Tackett

By Nancy Green | From Page: A4

 
Otto Vasak

By Nancy Green | From Page: A4

John Henry Fechter, Jr.

By Susan Hiland | From Page: A4

 
.

Comics

Blondie

By Daily Republic Syndicated Content | From Page: B6

 
Pickles

By Daily Republic Syndicated Content | From Page: B6

Zits

By Daily Republic Syndicated Content | From Page: B6

 
Beetle Bailey

By Daily Republic Syndicated Content | From Page: B6

Rose is Rose

By Daily Republic Syndicated Content | From Page: B6

 
Dilbert

By Daily Republic Syndicated Content | From Page: B6

Get Fuzzy

By Daily Republic Syndicated Content | From Page: B6

 
B.C.

By Daily Republic Syndicated Content | From Page: B6

Peanuts

By Daily Republic Syndicated Content | From Page: B6

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: B6

Sally Forth

By Daily Republic Syndicated Content | From Page: B6

 
Wizard of Id

By Daily Republic Syndicated Content | From Page: B6

Baby Blues

By Daily Republic Syndicated Content | From Page: B6

 
Baldo

By Daily Republic Syndicated Content | From Page: B6

Garfield

By Daily Republic Syndicated Content | From Page: B6

 
Frank and Ernest

By Daily Republic Syndicated Content | From Page: B6

Sudoku

By Daily Republic Syndicated Content | From Page: B7

 
Crossword

By Daily Republic Syndicated Content | From Page: B7

Bridge

By Daily Republic Syndicated Content | From Page: B7

 
Word Sleuth

By Daily Republic Syndicated Content | From Page: B7

Cryptoquote

By Daily Republic Syndicated Content | From Page: B7