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Durham fate rests in judge's hands

November 29, 2012
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Convicted Ponzi schemer Tim Durham and two accomplices will find out Friday whether they will spend the rest of their lives in prison.

Federal Judge Jane Magnus-Stinson is scheduled to listen to testimony and consider filings from the federal probation office, the prosecution and defense in the morning before announcing her decisions from the bench in the afternoon.

A federal jury in June found Durham guilty on 12 felony charges including wire and securities fraud stemming from the collapse of Akron, Ohio-based Fair Finance Co. Durham co-owned Fair with Indianapolis businessman Jim Cochran, who was convicted on eight of 12 felony charges. Snow, the company’s chief financial officer, was convicted on five of 12 counts.

The government is recommending a 225-year prison sentence for Durham, 145 years for Cochran, and 85 years for Snow.

Likely factors in the judge's sentencing decision include the amount lost by investors, the number of victims, duration of the scheme and any prior criminal history of the defendants, said Mark D. Stuaan, a Barnes & Thornburg partner and former federal prosecutor.

He called it “risky” to predict what a judge will do in a particular case, only that a judge's job is to make sure the punishment is “sufficient but not greater than necessary to achieve justice.”

“I would be surprised if Mr. Durham does not get a very substantial sentence,” Stuaan added.

Judges have wide discretion on sentencing, though the precedent in recent years has been toward long sentences for financial criminals. Bernard Madoff was sentenced to 150 years, and R. Allen Stanford got 110 years.

Those convicted at the federal level can expect to serve at least 80 percent of their sentence, unlike at the state level where prisoners can get 50 percent off their sentence for good behavior.

Durham, 50, and his co-defendants are expected to appeal their convictions following sentencing.

At least one member of the jury that convicted the three men has been following the case closely including news reports about the sentencing recommendations of the prosecution and defense.

“This wasn’t something anyone in that room took lightly,” said Andrew J. Ozlowski, 42, of Carmel, in a phone interview. “We didn’t know what sentencing guidelines were, but we knew it was serious and we looked at it that way. We were given a job and we took a lot of time making sure we had it right as a group.”

Ozlowski said he feels good about the jury’s decision but is glad sentencing rests in the judge’s hands. He was struck by the portrayal of Durham by his defense team in a filing suggesting a five-year sentence.

“After having gone through trial, listened to calls and evidence and read documents, I disagree with the painting of Mr. Durham as a modern-day Robin Hood of trying to save the company and trying to do great things, when he did so many things along the way to hurt the company,” Ozlowski said. “This was serious. There were people’s lives affected greatly.”

A government sentencing memorandum says Durham has earned a spot among "the greediest, most selfish and remorseless of criminals" who with his co-defendants executed "one of the largest and most brazen frauds in Midwest history."

"At least $208 million in investor money has been squandered," the report says. "There is perhaps no better evidence of the extraordinary scope of this scheme than the fact that today, almost three years after Fair's collapse and despite the best efforts of a bankruptcy trustee, only about $6 million has been collected from Fair's debtors with almost no prospect for more recoveries."

In a defense filing, Durham attorney John Tomkins called the sentencing recommendation "absurd" and said the suggestion was "heavily influenced by an erroneous loss calculation under the advisory guidelines."

He asked the judge to give Durham a five-year sentence, with three years in prison followed by two years of home confinement.

Tompkins argued in the filing that Durham was a law-abiding citizen with no criminal history before the jury returned its guilty verdicts. He said Durham never intentionally defrauded the investors, and that actual losses were as much a result of the recession as Durham's actions.

“In this case, there is absolutely zero evidence that Mr. Durham subjectively intended any investor to experience a loss, and that’s what the law requires if ‘intended loss’ is to be used for the sentencing calculation,” Tompkins said.

Durham and Cochran bought Fair in a 2002 leveraged buyout. Durham drained tens of millions from the company by making loans to himself and failing businesses he owned, accourding to court documents. Millions also went toward Durham’s mansions, a yacht, part ownership of an airplane and extravagant gambling trips.

At trial, the prosecution's case leaned on hours of wiretapped conversations between Durham and Cochran, as they scrambled to keep Fair afloat. IBJ collected some key exchanges in a series of edited recordings. Among them was a brief discussion between Durham and Cochran about the possibility they could serve jail time (see video below).

 

“The government put forward a pretty extensive and elaborate case with lots of evidence,” said Ozlowski, who served on the jury. “In a situation like that you would expect the defense to come back with a lot more than they ultimately did.”

He added that the paltry defense did not factor into his read of the evidence or the jury’s ultimate decision.

For all of IBJ's coverage of Tim Durham and Fair Finance, click here. Visit IBJ.com beginning at 9 a.m. Friday for updates on the sentencing of Durham, Cochran and Snow.

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