The prosecution in the Tim Durham fraud trial on Wednesday sought to introduce into evidence an IBJ investigative report from October 2009, but a judge agreed with a defense attorney and denied the request.
The prosecution asked to include the Oct. 24, 2009, story as Exhibit 113 shortly after FBI Special Agent Dennis Halliden, the lead investigator in the case, began his testimony Wednesday afternoon.
The report, written by IBJ Managing Editor Greg Andrews, detailed how Durham and his partners and related firms had taken more than $168 million in so-called related-party loans from Ohio-based Fair Finance Co. The loans represented about 70 percent of Fair's assets and a dramatic change in business model from before Durham and partner and co-defendant Jim Cochran acquired the comsumer-loan company in 2002.
Durham defense attorney John Tompkins objected to the prosecution's request under federal courts evidentiary Rule 403, under which a judge can exclude relevant evidence if its tendency to prejudice a jury outweighs its value in evidence.
"It is a critical article by a journalist," Tompkins argued. "We don't know the sources."
Later, during a break, Tompkins told a reporter he had never seen a prosecutor attempt to introduce a newspaper article into evidence.
Assistant U.S. Attorney Winfield Ong told Judge Jane Magnus-Stinson that the jury should be able to see the article for context, without relying on the facts contained within.
A chunk of the prosecution's evidence in the case centers around the reaction to the story by the defendants, both in e-mails and on phone calls the government recorded under an authorization it requested shortly after the article appeared.
"It's been discussed at length here, and by at least two witnesses, and extensively on the wiretaps," Ong said of the IBJ story. "It would be puzzling at best for the jury not to have it."
Magnus-Stinson sided with the defense and did not admit the story into evidence, but noted Rule 403 provides for a sliding scale, allowing her the option to change her mind as the case proceeds.
The article, which highlighted disclosures Fair had made in legalese-laden offering circulars, led some Fair investors in Ohio to ask questions or request refunds of their investments. Ohio regulators also put up roadblocks to a request by Fair to sell another $250 million in investment certificates.
Matthew Ogden, a former investor relations employee with Fair, said Wednesday that he reviewed the offering circulars more carefully and began raising questions after seeing the IBJ story.
He said he was already skeptical of his bosses since they asked him and other employees to blame computer glitches when investors asked about missing interest payments. The checks were piling up at the office he worked at in Wooster, Ohio, but the orders had been to delay sending them.
Also Wednesday, the prosecution played a recording of a November 2009 phone conversation between Cochran and Gary Zuercher, who expressed concern about his mother's investment with Fair Finance after reading the IBJ story.
Cochran said the story was payback from IBJ co-owner Mickey Maurer, who Cochran claimed had lost millions of dollars on an investment in Obsidian Enterprises before Durham took the company private.
Maurer said he never purchased any Obsidian stock.
Cochran continued, describing IBJ's reporting as "yellow journalism and quite frankly libelous and tortuous."
"Uhm, there's nothing in there, there's nothing at Fair Finance that he's done illegal," Cochran said, according to a transcript. "There's nothing we've ever hid from anybody."
Zuercher asked whether Fair had filed suit against IBJ.
Cochran replied that the company had decided not to sue "right now" because the story's author, Greg Andrews, would "like to just raise this thing up to, to many many different levels then can still write whatever he damn well pleases."
To catch up on IBJ's coverage of Durham and Fair Finance, click here.