INDIANAPOLIS: Timothy Durham was given a 50-year prison sentence Friday for being the ringleader of the $200 million fraud scheme involving Fair Finance Co.
“It’s likely an effective life sentence,” U.S. District Court Judge Jane Magnus-Stinson said in addressing Durham, age 50, in court Friday afternoon.
Durham’s co-owner of the Akron company, James Cochran, was given 25 years. Cochran is age 57.
During the sentencing proceedings, the judge said the losses suffered by more than 5,000 investors involved deceit, greed and arrogance by Durham.
She added, “Mr. Durham, you were raised better than that. All of that was jettisoned so you could live a lifestyle that I don’t know how you keep track of.”
Magnus-Stinson said the Fair Finance fraud case “undermines the heart of the country.”
“The court finds there is no remorse on your part that is sincere,” she added.
“This is the heartland. This is where we work hard. We drive Chevys, Buicks and Fords, not Bugattis,” the judge said. Durham’s possessions at one time included a Bugatti auto.
Durham spoke briefly, addressing the court. He never used the word “sorry.”
He said, “I feel terrible about the lost money. My family lost all its investments. I feel very badly for all the other people. I never intended these companies wouldn’t succeed, but they have.”
He expressed admiration for co-defendants Jim Cochran and Rick Snow, also set for sentencing later in the day. Durham added, “I did not want anyone to suffer. I have regrets. I truly feel badly for them.”
Durham said he was surprised to find that there were 5,000 investors in Fair Finance. He said he thought there were 14,000 to 15,000.
He said other people harmed included investors in Obsidian Enterprises, a related company he controlled. He ended by saying, “That’s all I have at this point and I appreciate your time.”
The judge told Cochran she believed his punishment “may be an effective life sentence.”
She added, “You betrayed the very people you grew up with. You were the guy who lied. You were the guy who bragged about it.”
Earlier in the day, people who had investment certificates with the company choked up when telling the judge what the scandal had done to their lives.
Four people from Northeast Ohio traveled to testify just prior to the proceedings.
“What has happened is shameful,” said 74-year-old Barbara Lukacik, a nun who lost $125,000 — all of her savings — as she looked directly at Durham. She said she was speaking not just for herself but for all 5,300 victims.
“I certainly forgive you. I do, with all my heart,” Lukacik said. “I honestly believe justice must be served because it is the righteous thing to do.”
She said giving the three men a “slap on the wrist” would be wrong.
“Shame on you,” she said.
Lukacik said that she invested money with Fair Finance so that she would not be a burden on society.
Kristen Schroeder, who lives on the west side of Cleveland, said she lost her entire savings of $60,000 in Fair Finance. She planned to use the money to pay off bills from her wedding and to start an acupuncture business, she said.
The loss affected her emotionally and physically, she said.
“All of my dreams fell. They were shattered,” she said, “It was hard to be a good mom and a good wife.”
U.S. District Court Judge Jane Magnus-Stinson said she received 1,035 letters from victims in the three-year-old case.
“I read every one,” she said.
One letter from a man in his 90s simply read, “Now what? Help,” the judge said.
Sentencings were to start at 1 p.m. with Durham, followed by Cochran at 2:30 and Snow at 3:30.
Durham and Cochran arrived dressed in prison garb, handcuffed and shackled. Snow, who has been living under house arrest, was dressed in a dark suit and wearing a white shirt.
The defense and U.S. Attorney’s office spent most of the morning arguing over appropriate sentencing guidelines.
The proceeding took place in the same courtroom as the trial in the Birch Bayh Federal Building in the city’s downtown.
The sentencing took place shortly after the three-year anniversary of the FBI raids of the headquarters of the company on East Market Street in Akron. The raid led to the three men’s indictments and arrests in 2011.
Durham, Cochran and Snow were convicted June 20. The trial started June 11; the three men never testified.
Defense attorneys had argued that Fair Finance failed not because of criminal activity but because of bad business decisions and the onset of the Great Recession.
All three were convicted of one count apiece of conspiracy and of securities fraud. Durham was found guilty on all 10 counts of wire fraud; Cochran was found guilty of six of 10 counts and Snow found guilty of three of 10 counts.
The courtroom windows looked out at the Indianapolis high rise building that formerly held the headquarters of Durham’s umbrella corporation, Obsidian Enterprises.
The FBI raided Fair Finance’s Akron area offices the day before Thanksgiving in 2009. The long-established business never reopened and is now in bankruptcy proceedings.
The U.S. Attorney’s office argued the three men deserved life sentences for defrauding about 5,300 Ohio residents — primarily from Northeast Ohio — out of more than $200 million.
Lawyers for the three men argued for much lighter prison terms.
Durham’s attorney suggested a five-year term, including two years of home arrest.
Attorneys for Cochran and Snow argued that Durham was the mastermind behind Fair Finance. Snow’s attorney argued that his client never took Fair Finance money other than his salary as chief financial officer and that he never led the lavish lifestyles of Durham and Cochran.
Durham and Cochran bought Fair Finance in January 2002 from Don Fair, the son of the company’s founder, Ray, who started the business in the 1930s.
Fair Finance’s long-time business model was to buy and process accounts receivables from other businesses. It sold uninsured investment certificates to Ohio residents to provide working capital. The certificates paid interest rates higher than what banks paid.
Most of the people who bought Fair Finance investment certificates were considered unsophisticated investors; many of them are elderly.
The bankruptcy trustee has brought in a bit more than $6 million into the company’s estate; no money has been distributed to date to the thousands of creditors.