Friday, January 30, 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

 
Teens earn right to perform with symphony

By Amy Maginnis-Honey | From Page: B1 | Gallery

From classical to Queen: Chamber Players are ready

By Amy Maginnis-Honey | From Page: B1 | Gallery

 
Photographer has a passion for color

By Amy Maginnis-Honey | From Page: B1 | Gallery

Solano summit focuses on ways to end poverty

By Kevin W. Green | From Page: A1 | Gallery

 
Fraud among challenges immigrants face, Fairfield panelists say

By Ryan McCarthy | From Page: A1 | Gallery

 
Girls on the Run expands, seeks volunteers

By Ian Thompson | From Page: A3

 
Cadets learn skills for future careers

By Susan Hiland | From Page: A3

 
‘Souper Bowl’ coming to Solano County

By Bill Hicks | From Page: A4

 
Sports aircraft company CEO recalls effort to locate in Solano

By Kevin W. Green | From Page: A4 | Gallery

 
SolTrans announces changes to bus routes

By Kevin W. Green | From Page: A5

Fairfield police log: Jan. 28, 2015

By Susan Hiland | From Page: A12

 
Suisun City police log: Jan. 28, 2015

By Susan Hiland | From Page: A12

.

US / World

California’s snow survey shows far less snow than last month

By The Associated Press | From Page: A1 | Gallery

 
Boy Scouts reaches settlement in sex abuse case

By The Associated Press | From Page: A5

Doctors starting to shy away from non-vaccine advocates

By The Associated Press | From Page: A5

 
Protestors shun sister-city relationship

By The Associated Press | From Page: A5

City event criticized for Mexican mafia connection

By The Associated Press | From Page: A5

 
State to move more than 2,000 inmates

By The Associated Press | From Page: A5

Tech advances lower chance that driver will die in car crash

By The Associated Press | From Page: A6

 
Killer says his ideas influenced family suicide

By The Associated Press | From Page: A7

NASA astronaut memorial stirs memories for shuttle veteran

By The Associated Press | From Page: A7

 
‘Anonymized’ credit card data not so anonymous, study shows

By The Associated Press | From Page: A7

Poll shows giant gap between what public, scientists think

By The Associated Press | From Page: A7

 
Fort Hood gunman Hasan says he wants to keep top lawyer

By The Associated Press | From Page: A7

Attorney General nominee wins GOP endorsements

By The Associated Press | From Page: A7

 
Police: Family killed man over child custody dispute

By The Associated Press | From Page: A7

Ukraine: Russia-backed rebels overrun another town in east

By The Associated Press | From Page: A10

 
Simultaneous attacks in Egypt’s Sinai kill 26

By The Associated Press | From Page: A10

Indonesian investigators: Crashed AirAsia flown by co-pilot

By The Associated Press | From Page: A10 | Gallery

 
Gas blast at Mexico children’s hospital, at least 2 dead

By The Associated Press | From Page: A10 | Gallery

Families plead for lives of IS hostages as swap hopes fade

By The Associated Press | From Page: A10

 
Deadly San Francisco blaze spurs look at fire alarms

By T. Burt McNaughton | From Page: A12 | Gallery

California meets judges’ prison crowding goal 1 year early

By The Associated Press | From Page: A12

 
.

Opinion

Editorial Cartoon: Jan. 30, 2015

By Daily Republic Syndicated Content | From Page: A8

 
Left’s missteps show themselves – given time

By Bud Stevenson | From Page: A11

 
 
.

Living

Today in History: Jan. 30, 2015

By The Associated Press | From Page: A2

 
Community Calendar: Jan. 30, 2015

By Susan Hiland | From Page: A2

My cousin’s 14-year-old son sleeps in the same bed as his grandma

By Kathy Mitchell and Marcy Sugar | From Page: A9

 
Horoscopes: Jan. 30, 2015

By Holiday Mathis | From Page: A9

.

Entertainment

Week in preview Jan. 30 through Feb. 5, 2015

By Amy Maginnis-Honey | From Page: B1

 
Jim Parsons to play God in Broadway’s ‘An Act of God’

By The Associated Press | From Page: B2

Lady Gaga, Ariana Grande to pay tribute to Stevie Wonder

By The Associated Press | From Page: B2

 
Review: A tired gimmick weakens thriller ‘Project Almanac’

By The Associated Press | From Page: B2

‘The Thorn Birds’ author Colleen McCullough dies at age 77

By The Associated Press | From Page: B2

 
Hilary Duff, George Lopez help in search for stolen dog

By The Associated Press | From Page: B2

Justin Bieber apologizes for bad behavior in online video

By The Associated Press | From Page: B2

 
Musician Geezer Butler arrested in Death Valley altercation

By The Associated Press | From Page: B2

Lil Wayne sues mentor’s record label for $51M, seeking split

By The Associated Press | From Page: B2

 
 
Bernie Mac widow drops malpractice lawsuit against doctor

By The Associated Press | From Page: B3

Entertainment Calendar: Jan. 30, 2015

By Susan Hiland | From Page: B4

 
TVGrid

By Daily Republic Syndicated Content | From Page: B6

Desert stars: Celebs converge on Phoenix for Super Bowl 49

By The Associated Press | From Page: B6

 
.

Sports

Serena aims for 19th major in Aussie final vs. Sharapova

By The Associated Press | From Page: B7

 
Marshawn Lynch talks about why he doesn’t talk to the media

By The Associated Press | From Page: B7

 
Vanden boys pull away from feisty Fairfield 86-66

By Brian Arnold | From Page: B7

Gronkowski and Chancellor make for must-see Super Bowl matchup

By The Associated Press | From Page: B8

 
This date in sports history for Jan. 30, 2015

By The Associated Press | From Page: B9

Signups for Friday, Jan. 30, 2015

By Paul Farmer | From Page: B9

 
.

Business

Chevrolet polishes its mid-size truck

By Ann M. Job | From Page: C1 | Gallery

 
Prospect of Chinese cars in US still remain years away

By The Associated Press | From Page: C2

Senate passes Keystone XL bill, battles loom

By The Associated Press | From Page: B11

 
McDonald’s under siege as new CEO steps in

By The Associated Press | From Page: B11

Obama seeks spending spike for defense, domestic

By The Associated Press | From Page: B11, 1 Comment

 
Who wants a bite of Hershey…jerky?

By The Associated Press | From Page: B11

.

Obituaries

Dzhon Athanc

By Nancy Green | From Page: A4

 
Gloria Elizabeth Neal

By Susan Hiland | From Page: A4

Anthony Neal Hunley

By Nancy Green | From Page: A4

 
Joseph Phillip Raiff

By Nancy Green | From Page: A4, 3 Comments

Frank Z. Perez

By Nancy Green | From Page: A4

 
.

Comics

Baby Blues

By Daily Republic Syndicated Content | From Page: A8

 
Wizard of Id

By Daily Republic Syndicated Content | From Page: A8

Beetle Bailey

By Daily Republic Syndicated Content | From Page: A8

 
Pickles

By Daily Republic Syndicated Content | From Page: A8

Baldo

By Daily Republic Syndicated Content | From Page: A8

 
Rose is Rose

By Daily Republic Syndicated Content | From Page: A8

Sally Forth

By Daily Republic Syndicated Content | From Page: A8

 
Peanuts

By Daily Republic Syndicated Content | From Page: A8

Get Fuzzy

By Daily Republic Syndicated Content | From Page: A8

 
Dilbert

By Daily Republic Syndicated Content | From Page: A8

Frank and Ernest

By Daily Republic Syndicated Content | From Page: A8

 
Zits

By Daily Republic Syndicated Content | From Page: A8

B.C.

By Daily Republic Syndicated Content | From Page: A8

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: A8

Blondie

By Daily Republic Syndicated Content | From Page: A8

 
Garfield

By Daily Republic Syndicated Content | From Page: A8

Sudoku

By Daily Republic Syndicated Content | From Page: A9

 
Word Sleuth

By Daily Republic Syndicated Content | From Page: A9

Crossword

By Daily Republic Syndicated Content | From Page: A9

 
Bridge

By Daily Republic Syndicated Content | From Page: A9

Cryptoquote

By Daily Republic Syndicated Content | From Page: A9