Tim Durham’s attorney has spent months trying to get key evidence against his client thrown out in court. None of that worked, so now John Tompkins’ challenge is to persuade a jury that that the collapse of his client’s company, Fair Finance, stemmed from the financial crisis, not fraud.
The criminal case against Durham and co-defendants Jim Cochran and Rick Snow is set to begin at 9 a.m. Friday in front of federal Judge Jane Magnus-Stinson. Selection of the 12 jurors and four alternates is expected to take much of the first day. Prosecutors and defense attorneys expect the trial to last about three weeks.
According to a filing by the judge this week, one of the topics jurors will be quizzed about is whether they can be impartial and disregard anything they have seen, read or heard about the high-profile case.
Durham, a 49-year-old Indianapolis financier, has been under house arrest since March 2011, when a grand jury indicted him, Fair co-owner Cochran and Fair Chief Financial Officer Snow on 10 counts of wire fraud, one count of securities fraud and one count of conspiracy to commit wire fraud and securities fraud.
Prosecutors charge that after buying Akron, Ohio-based Fair Finance in 2002, Durham raided its coffers for personal expenses and to cover losses at money-losing businesses he owned. They say it was soon operating as a Ponzi scheme, relying on the sale of ever-larger amounts of investment certificates to Ohio investors to pay off earlier investors. Fair’s collapse in late 2009 left more than 5,000 Buckeye investors owed more than $200 million.
Like Durham, Cochran, 56, is accused of pulling millions of dollars from the company under the guise of loans that were never repaid. Meanwhile, Snow, 48, is accused of helping conceal the company’s financial problems from regulators and investors.
Court filings show prosecutors plan to rely heavily on wiretapped recordings of Durham’s phone calls in late 2009, just before the government raided his office atop Chase Tower in Indianapolis and Fair’s Akron headquarters.
In those conversations, Durham and Cochran are on a desperate quest to win approval from Ohio securities regulators to sell additional certificates. Strategies they discuss range from overwhelming regulators with paperwork to recasting financials in a way that Durham said would make $28 million in bad debt “just vanish.”
Tompkins told IBJ last month that the government is guilty of “mischaracterization by abbreviation,” using snippets of conversations from the wiretaps to create a false impression of what occurred.
“If I wanted to pick and choose sentences here and there, I could give you five or six sentences where Mr. Durham can be heard saying, ‘We can’t guess about this, we have to get it right, we must be accurate—and paint a pretty glowing picture.’”
He said Fair “was a credit business trying to survive the credit crisis that was precipitated by the financial collapse of 2008,” not a firm that collapsed because of wrongdoing by his client.
Late last year, Tompkins asked Judge Magnus-Stinson to dismiss the indictment or suppress the wiretaps because of “outrageous government misconduct,” including starting the wiretaps before it had court approval.
In an order issued in April, Magnus-Stinson found no wrongdoing.
“Given that Mr. Durham has been unable to marshal any case authority for his claim that merely testing software in anticipation of obtaining judicial authorization violates the statute, the court finds the … testing here—conducted on FBI lines with only an FBI technician speaking—falls within the express authorization that Congress provided the wire-tapping statute,” Magnus-Stinson wrote.
The judge also turned down Tompkins’ request to throw out evidence obtained in the raids. Durham’s attorney had argued the government relied on false and misleading information to obtain the warrants.
Tompkins told IBJ last month that he is determined to prevent prosecutors from showering the jury with evidence of Durham’s lavish lifestyle. Durham had a high profile locally, in part because of his waterfront mansion, fancy cars and wild parties. But Tompkins said how a person spends money is no more a sign of guilt than charitable contributions are a sign of someone’s innocence.
“The only reason you talk about things like that is to try to make the jury feel alienated from Mr. Durham personally, as opposed to trying to prove to the jury that Mr. Durham did anything wrong,” said Tompkins, an attorney with locally based Brown Tompkins Lory & Mastrian.
Leading the prosecution for the government is veteran Assistant U.S. Attorney Winfield Ong. Cochran’s attorney is public defender William Dazey, and Snow’s is Jeffrey Baldwin of locally based Voyles Zahn Paul Hogan & Merriman.
For all of IBJ's coverage of Fair Finance and Durham, click here.