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Last updated on Tuesday, June 12, 2012
(INDIANAPOLIS) - A prominent IndiÂanapolis businessman, who along with his forÂmer business partner and accountant is charged with bilking investors out of $200 milÂlion made poor decisions trying to keep the comÂpany afloat amid the 2008 financial crisis, but it didn’t amount to fraud, his attorÂney said Monday at the outset of the men’s triÂal.
Federal prosecuÂtors allege Seymour native Tim Durham, his business partner and his accounÂtant used a Ponzi scheme to bilk about 5,000 mostÂly elderly investors in Akron, Ohio-based Fair Finance Co. and looted the company to fund lavÂish lifestyles. In Durham's case, that included a pricy Indiana mansion, a yacht, private jets, country club fees and a collection of clasÂsic and exotic cars.
A number of civil lawÂsuits have been filed in the wake of the collapse of Fair Finance, naming individuals, busiÂnesses and others in an attempt to recoup what is alleged to be stolen money.
Defendants in the civÂil suits include Durham's mother, who lives in Seymour, and Girls Inc. of Jackson County.
The Girls Inc. claim involves a $ 250,000 pledge that Durham made to the agency's capital projects camÂpaign. He paid just $37,000 of the pledge in 2007 and 2008 before payments stopped.
Prosecutor Henry Van Dyck told jurors they would hear wiretap recordings of Durham and the others disÂcussing how to hide from investors that Fair Finance was running out of money in late 2009 before the FBI raided the company's offices and those of Durham's Indianapolis-based comÂpany, Obsidian EnterÂprises.
But defense attorney John Tompkins said in his opening statement the recordings repreÂsented only a small slice of time and were recordÂed as Durham was struggling to keep his companies afloat after the 2008 financial crisis. He said the government had "extrapolated" what was said in some of the recordings to paint an inaccurate picture of massive fraud.
"There is no massive scheme. There is a reacÂtion to a panicked situaÂtion,"
Tompkins said, adding that Durham made some poor busiÂness decisions that harmed his companies but that it doesn't repreÂsent fraud. " The government is trying to convince you that struggling in the bad economy is fraud," he said. "Bad business judgment is not fraud, either."
Durham, business partner James F. Cochran and their accountant, Rick D. Snow, were indicted last year on 10 counts of wire fraud, one count of securities fraud and one count of conspiracy to commit wire and securiÂties fraud. Their trial is expected to last three to four weeks.
Van Dyck said that when Durham and Cochran bought Fair Finance in 2002, the nearly 70-year-old comÂpany was on solid finanÂcial ground and investors could expect a good return. Fair Finance had debts of about $ 37 million and income-producing assets of about $48 milÂlion.
By the time Fair Finance closed in November 2009, proseÂcutors allege its debts had soared to more than $200 million because the defendants had changed the company's business operations, gave loans to family and friends and spent investor funds on personal indulgences.
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