In what has become the largest corporate fraud case in Indiana history, former Indianapolis investment manager Tim Durham was formally charged Wednesday with fraud by a federal grand jury, alongside his former business partners, James F. Cochran and Rick D. Snow.
The three men face 12 charges each for allegedly running a Ponzi scheme that managed to tally 5,000 victims across Ohio and Indiana. Investors with Fair Financial, a small financial company based in Akron, OH, are out more than $200 million.
An undercover investigation began in September 2009; the FBI's raids in November 2009 of Fair Financial and Obsidian Enterprises, Durham's main investment firm in Indianapolis, were prominently publicized. Federal agents have since seized his assets, which will eventually be sold in an auction.
Regulators at the Securities and Exchange Commission brought a civil lawsuit against Durham and Cochran as well. The suit highlights the business partners' use of loans from Fair Financial to fund their lives in the lap of luxury, "including mortgages for multiple homes, more than 40 classic cars worth over $7 million, a $3 million private jet, a $6 million yacht, hundreds of thousands of dollars of gambling and travel expenses, credit card bills, and country club dues, and for elaborate parties, and other forms of entertainment and expenditures."
The SEC goes on to point out that large amounts of money were distributed to family members and friends. Meanwhile, the firm kept quiet about its rapidly deteriorating financial status. "Fair did not have sufficient cash flow to meet its obligations to investors," say SEC regulators.
The highlighted grandeur stands in sharp contrast to the small-town families who have each lost thousands — in some cases hundreds of thousands — in college funds, life savings and retirement nest eggs. Confronted with this, Durham told WTHR, Eyewitness News:
"I really don't want anybody to feel sorry for me. I'm a man and I can restart my life. I have many times before and I'll survive so I don't look for pity or sympathy from anybody. I do feel sorry for a lot of the other people whose lives have been destroyed in this aftermath."
It's a flimsy mea culpa considering the claims of innocence he's publicly maintained for more than a year, as recently as November 2010. Durham said his investors knew the risks, and that he believes all of his business dealings were legitimate.
Following Tuesday's arrest at his Los Angeles-area home, Durham will be brought to Indiana to stand before a judge. The trial is set to begin on May 16. If convicted, he and his associates each face a maximum of 225 years in prison.
Update: As of March 23, Durham's trial in Indiana has been rescheduled to begin April 6.