Prosecutors: 225-Year Sentence Appropriate for "Greediest, Most Selfish and Remorseless" Ponzi Schemer

Prosecutors: 225-Year Sentence Appropriate for "Greediest, Most Selfish and Remorseless" Ponzi Schemer

Prosecutors urged a federal judge to adopt a 225-year sentencing recommendation for an Indiana man convicted of running a $200 million Ponzi scheme, arguing a guaranteed life sentence was appropriate for someone they described as one of the "greediest, most selfish and remorseless of criminals."  Tim Durham, a former prominent Indianapolis businessman, was convicted this summer of securities fraud, conspiracy and 10 counts of wire fraud.  Prosecutors have also urged steep sentence for Durham's convicted co-defendants, Jim Cochran and Rick Snow, maintaining that terms of 145 years and 85 years, respectively, were warranted.  United States District Judge Jane Magnus-Stinson is scheduled to sentence the three men on Friday.

Durham, along with Cochran and Snow, were convicted by a federal jury of operating a massive Ponzi scheme through their company Fair Finance Company ("Fair Company").  Fair Finance promised lucrative returns by engaging in the purchase of high-interest contracts between businesses and their customers, profiting by pocketing the difference between the contract's purchase price and the total stream of interest payments collected over the life of the contract.  Durham and Cochran purchased Fair Finance in 2002, and purported to continue in the profitable business practice, ultimately raising approximately $230 million from oer 5000 investors lured from the prospect of steady above-average returns.

However, instead of using investor funds for legitimate purposes, Durham diverted large amounts of money to unauthorized purposes, including the financing of various businesses owned by Durham and Cochran.  Investors continued receiving what they thought were interest payments, which in reality were simply the re-distribution of existing investor's principal.  Durham and Cochran also lived extravagant lifestyles, which included a particular affinity for motor vehicles - at one point, their collection included more than 40 classic and exotic cars worth over $7 million, a $3 million private jet, and a $6 million yacht in Miami.  When the scheme began to unravel due to the drying up of investor funds, the company declared bankruptcy and authorities soon indicted Durham, Cochran, and Snow. 

Not surprisingly, attorneys for the three have radically different views of the prison sentences their clients deserve.  Durham's attorney, John Tompkins, called the 225-year recommendation "absurd", and argued that a five-year sentence was appropriate, of which Durham would spend three years in federal prison while serving the remaining two years in home confinement.  Tompkins pointed to Durham's extremely low rate of recidivism - the proclivity to commit later crimes - and argued that the sentence was based on an erroneous calculation under federal sentencing guidelines.  Snow and Cochran's attorneys have echoed Tompkin's claims that their proposed sentence is too severe, but have not proposed an appropriate prison term.  

Of the estimated $208 million in investor losses, only about $6 million of that amount has been recovered for eventual distribution to victims, and prospects of further recovery are bleak.

For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

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