(INDIANAPOLIS) - A prominent Indianapolis businessman, who along with his former business partner and accountant is charged with bilking investors out of $200 million made poor decisions trying to keep the company afloat amid the 2008 financial crisis, but it didn't amount to fraud, his attorney said Monday at the outset of the men's trial.
Federal prosecutors allege Seymour native Tim Durham, his business partner and his accountant used a Ponzi scheme to bilk about 5,000 mostly elderly investors in Akron, Ohio-based Fair Finance Co. and looted the company to fund lavish lifestyles. In Durham's case, that included a pricy Indiana mansion, a yacht, private jets, country club fees and a collection of classic and exotic cars.
A number of civil lawsuits have been filed in the wake of the collapse of Fair Finance, naming individuals, businesses and others in an attempt to recoup what is alleged to be stolen money.
Defendants in the civil 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 campaign. 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 discussing 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 company, Obsidian Enterprises.
But defense attorney John Tompkins said in his opening statement the recordings represented only a small slice of time and were recorded 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 reaction to a panicked situation,"
Tompkins said, adding that Durham made some poor business decisions that harmed his companies but that it doesn't represent 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 securities 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 company was on solid financial ground and investors could expect a good return. Fair Finance had debts of about $ 37 million and income-producing assets of about $48 million.
By the time Fair Finance closed in November 2009, prosecutors 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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