Legal Issues and Fraud and Investment Losses and Investing and Banking & Finance and Criminal Charges and Tim Durham and Law

Judge unseals some Fair Finance raid records

March 30, 2011

Federal prosecutors have given some ground in their battle to keep search warrant records in the Fair Finance Co. probe sealed, agreeing to make public the FBI’s November 2009 application to search the company’s Akron, Ohio, headquarters and an inventory of what agents seized.

Judge Sara Lioi of the Northern District of Ohio unsealed the application and inventory this week at the request of prosecutors in Ohio and Indiana. Because a grand jury this month returned felony indictments against Fair co-owners Tim Durham and Jim Cochran, as well as Chief Financial Officer Rick Snow, “the need for sealing has been substantially mitigated,” prosecutors wrote in a filing.

But what was made public shed little new light on the inquiry. The application says the warrant related to an investigation into allegations of wire fraud, money laundering and securities violations. The inventory lists more than 200 items seized, including computers, computer servers and accounting ledgers.

The government did not request the unsealing of what likely would be a much more illuminating document—the FBI affidavit in support of the Fair Finance search warrant.

In their filing, prosecutors wrote: “The affidavit contains substantial substantive investigative information which would greatly prejudice the criminal case in a variety of ways if it were to be made public.”

Indianapolis Business Journal and the Akron Beacon Journal have been pressing in court for more than a year to get a judge to unseal all records related to the Nov. 24, 2009, Fair Finance raid. The newspapers are appealing Judge Lioi’s August 2010 ruling keeping all those documents under wraps.

Prosecutors revealed little about their inquiry until March 16, when they announced the indictment of Durham, Cochran and Snow on 10 counts of wire fraud, one count of securities fraud and one count of conspiracy to commit wire fraud and securities fraud.

The 23-page indictment says the three men worked together to devise and execute a scheme to defraud more than 5,200 Ohio residents who purchased Fair’s unsecured investment certificates. The now-defunct company owes the investors more than $230 million.

Authorities say Durham, the Indianapolis businessman who served as Fair's CEO, doled out loans with abandon to himself, to his businesses and to friends and associates. The loans, which weren’t repaid, stripped Fair of its ability to repay the Ohio investors.

The FBI raid occurred nearly a month after IBJ published an investigative story questioning the propriety of the related-party loans and casting doubt on Fair’s ability to stay afloat.

The indictment reveals that investigators were looking into Fair even before the article appeared. It says that a Fair sales representative on Sept. 11, 2009, provided false and misleading information about the company’s investment certificates to an undercover agent posing as an investor.

FBI agents two months later simultaneously raided Fair’s Akron headquarters and Durham’s office on the top floor of the Chase Tower in downtown Indianapolis.

Documents unsealed this week related only to the Ohio raid, which is the subject of the newspapers’ legal battle. Winfield Ong, an assistant U.S. attorney in Indianapolis, said no similar documents were released in Indiana, and he did not know whether they would be in the future.

Full coverage of the Durham case can be found here.
 

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