A federal magistrate on Wednesday afternoon ordered indicted financier Tim Durham held at a halfway house for seven days until he can provide a better accounting of his finances.
Durham, 48, appeared in court in downtown Indianapolis for an initial hearing following his indictment and arrest March 16 on 12 felony counts, including conspiracy to commit wire and securities fraud.
He and two business partners, 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.
A federal magistrate in Los Angeles on March 21 ordered Durham, who 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 has been held on home detention since his release.
But Magistrate Kennard P. Foster, unsatisfied with Durham’s financial disclosures, ordered him to a halfway house at 611 N. Capital Ave. operated by Volunteers of America of Indiana Inc.
“There’s a lot of money [involved],” Foster said. “Money means flight.”
One of Durham’s lawyers told the magistrate that financial disclosures have been made.
But Foster shot back: “What I saw was not sufficient.”
The lawyer later objected to the seven-day lockdown, but the magistrate promptly overruled the objection.
Foster set a time of 2 p.m. April 11 to re-evaluate Durham’s release from detention.
Durham, dressed in a dark-colored suit, barely spoke at the conference, only answering the magistrate when asked if he had read the indictment or had any questions.
A status conference to discuss issues of the case is set for 9:30 a.m. Thursday.
Durham and his two business partners are set to be tried May 16, though Assistant U.S. Attorney Winfield Ong admitted after Durham’s hearing that it’s “unlikely” a trial could be conducted that soon.
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 Obsidian’s offices in Indianapolis and Fair’s Akron headquarters.
Prosecutors worked for more than a year to piece together the complex 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 can be found here.