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Judge moves Durham fraud trial to next year

April 7, 2011

A federal judge in Indianapolis on Thursday morning set a new trial date for indicted financier Tim Durham while his lawyers again argued for his release from a halfway house that a magistrate sent him to on Wednesday.

Judge Jane Magnus-Stinson vacated the original trial date of May 16 and instead set jury selection for June 8, 2012, a Friday.

The trial for Durham and two business partners would start the following Monday and could last four weeks, federal prosecutors estimated.

Durham along with James Cochran and Rick Snow are accused of defrauding about 5,000 investors in Akron, Ohio-based Fair Finance Co. of more than $200 million.

“The complexities of the case outweigh the public's and defendants’ interests in a speedy trial,” Magnus-Stinson said.

In the meantime, telephone conferences involving the judge, prosecutors and defense lawyers will be held every 60 days to monitor the status of the case.

A federal magistrate in Los Angeles on March 21 ordered Durham, who now lives in California, released on $1 million bond. The bond was posted by Joan and Beurt SerVaas, Durham’s ex-wife and her father. Durham had been held on home detention since his release.

He appeared for an information hearing on Wednesday, where Magistrate Kennard P. Foster, dissatisfied with Durham’s financial disclosures, ordered him to a halfway house at 611 N. Capital Ave. operated by Volunteers of America of Indiana Inc.

Durham’s lawyers objected to the seven-day lockdown but were overruled by Foster.

The magistrate set a time of 2 p.m. April 11 to re-evaluate Durham’s release from detention. However, Durham’s lawyer Thursday morning asked Magnus-Stinson to vacate Foster’s detention order and requested his release.

Howard Srebnick, of Miami, cited a previous federal case to argue that only a judge, and not a magistrate, can alter release orders.

“It appears that Magistrate Judge Foster did not have the authority to make the order,” Srebnick told Magnus-Stinson. “We simply ask that Judge Foster’s order be vacated, and [Durham] be released to home detention.”

Srebnick further argued that Durham poses no flight risk. But during Wednesday’s hearing, Foster ordered Durham to the halfway house because he said there’s a lot of money involved, and “money means flight.”

Magnus-Stinson took the matter under advisement and could rule as soon as the end of the day Thursday.

The judge did grant a request by Srebnick to allow Durham to meet with lawyers at a downtown law office until 4 p.m. Thursday.

Lawyers for Cochran and Snow also attended Thursday’s status conference.

Each defendant faces a maximum of five years in prison for the conspiracy charge, 20 years in prison for each wire fraud count, and 20 years in prison for the securities fraud. In addition, each could be fined $250,000 for each count on which they are convicted.

Charges stem from a lengthy FBI investigation that made headlines in November 2009 when agents raided offices of Durham's business, Obsidian, in Indianapolis and Fair’s Akron headquarters.

Prosecutors worked for more than a year to piece together the case and present it to a grand jury.

Cochran and Snow were released on their own recognizance following a March 16 initial hearing in Indianapolis before Magistrate Foster.

Durham and Cochran bought the then-68-year-old business for $23 million in 2002, using almost entirely borrowed money.

They immediately began doling out related-party loans, adding to the debt load, while scaling back what had been Fair’s profit-making business—buying customer-finance contracts from fitness clubs, time-share developers and other firms that offered customers extended-payment plans.

Durham and Cochran allegedly sold off additional receivables over the years to pay off investors even as they used money from Fair Finance to pay for extravagances like a $250,000 garage remodeling project, a $150,000 gambling spree and $50,000 in country club dues.

Fair Finance was forced into involuntary Chapter 7 bankruptcy in early 2010.

More of IBJ's coverage of Tim Durham and Fair Finance can be found here.
 

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