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Trial evidence shows desperation in Fair Finance's final days

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The men who presided over Fair Finance were at their wits end by late 2009.

In government-recorded phone calls and intercepted emails introduced as evidence in U.S. District Court in Indianapolis this week, they come across as exhausted, angry and determined.

Defense attorneys will argue that's because Tim Durham and co-defendants Jim Cochran and Rick Snow were working around the clock to save Fair from the recession, bad press and inquiries by skeptical regulators in Ohio, where the company was based.

But the prosecution's evidence suggests the defendants were desperate for another reason: They wanted to preserve their outsize lifestyles and prevent authorities from discovering how they had used cash from Fair investors to pay for cars, homes, parties and country club memberships.

By 2009, Fair co-owners Durham and Cochran had fallen behind on mortgages for their mansions, overdrawn their bank accounts, and missed payments on income and property taxes, their own emails show.

Credit card companies including American Express slashed their available credit lines, prompting Cochran to complain in one email he couldn't even afford a hotel when he visited Fair Finance headquarters in Akron, Ohio. His credit score had fallen to 510, he wrote.

Durham responded that his was probably lower. "I don't even want to look," he wrote on Sept. 8, 2009.

In another message, Cochran complained about having to sell his Corvette and live on only $10,000 for a period of 25 days.

"I don't have cash to go to McDonald's for my kids," he wrote.

The prosecution opened their fraud case this week with testimony from Fair employees and investors who lost a total of more than $200 million in what the government describes as a Ponzi scheme. Now prosecutors are trying to hang the defendants with their own words, introducing emails and playing wiretap recordings that detail the final days at Fair before an FBI raid on Nov. 24, 2009.

(MORE FROM IBJ - Durham prosecutors seek to admit '09 IBJ story as evidence)

Fair's leaders were trying desperately to win authorization from the state of Ohio to sell another $250 million in investment certificates and persuade concerned investors to stay the course. Some sought to cash out after Fair fell behind on interest payments and the investors learned most of the company's assets were tied up in related-party loans.

As its existing authorization to sell certificates wound down, Fair began taking cash deposits from investors while promising to issue investment certificates later, against the advice of its own counsel, the prosecution alleges. Fair employees were told to blame computer errors or state regulators for delayed payments. Fair's owners also allegedly discussed ways to dress up the firm's financials, including showing loans for businesses that already had closed to appease regulators.

Still, the executives felt confident the state of Ohio had no choice but to allow Fair to continue.

"If their [sic] gonna blow us up, we're gonna blow them up," Cochran vowed in a phone call with Durham on Nov. 13, 2009, according to a transcript provided by the prosecution. "I mean nobody wins and everybody loses, but we lose the worst. But at the end of the day, I mean, they gotta [expletive] put this thing on the street without a doubt. Fifty-four hundred investors aren't gonna ... [expletive] ... I mean it would be a catastrophic event in the State of Ohio. And I'm sure they don't want that kinda headline."

Durham and Cochran had relied on Fair for capitalization of both their businesses and lifestyles, FBI Special Agent Dennis Halliden said in testimony Wednesday. But the homes, cars and other fancy accoutrements did not provide nearly enough collateral to offset the loans they had taken from Fair.

Cutting back

During a brief respite in Fair's ongoing cash-flow crisis, Cochran confronted Durham about his lavish spending and failure to heed the "signs of a poor economy."

In a July 14, 2009, email, he questioned Durham's decisions to spend $12,000 for two nights in a condo for New Year's Eve and for throwing lavish parties in Las Vegas and on a rented yacht.

"These costs are ultimately paid by Fair upstream of funds .. .assigned to Obsidian [Enterprises, Durham's buyout fund] and never paid back," Cochran wrote. "With the reprieve of funds this week, you should work on clearing the garage of cars, because these funds won't last and we'll be back to the strugglin position."

Cochran suggested the companies start a round of layoffs and asked Durham to consult him on every bill that got paid. He also asked for $104,000 to pay property taxes, $71,000 for unpaid income taxes and $193,000 for hurricane windows for a home in Naples, Fla.

Durham agreed they needed to cut back, and said he had "flushed in" about $5 million over the previous 18 months by selling two antique Duesenberg cars and other assets he had bought with his own cash but later "secured to defaulted Fair money."

"So if I spent 4K on a weekend boat trip or got comped on a vegas trip, then I don't feel bad about it," Durham wrote. (You can read this entire exchange here. Warning: There's some profanity.)

The partners agreed to put aside their differences in an attempt to keep Fair in business; Cochran's mission was to "save" investors who had requested to withdraw their funds from Fair.

"Go baby go," Durham cheered Cochran in an email after Cochran persuaded an investor with $98,000 in Fair to cancel a cash-out request.

Getting creative

In a phone call on Nov. 9, 2009, Cochran and Durham complained that Fair's employees weren't smart enough to say the right things to hold onto investors concerned about late interest payments.

"It's like [expletive] Larry, Curley and Moe over there," Cochran said, according to a transcript.

But the partners decided they couldn't "address" the situation by firing or reassigning anyone.

"These guys know a little bit too much," Cochran said. "They can take it ... bust us."

"No. We can't," Durham agreed. "We've got to get through this."

A few days later, on Nov. 13, 2009, Durham called with an idea to make some of Fair's bad debt disappear by distributing the debts to the partners.

"This is the answer," Durham said. "I mean, it's just basically we make twenty-five, twenty-eight million dollars in loans just vanish."

"Halle-[expletive]-lujah," Cochran said.

"Yep. Yep," Durham answered.

"[Expletive] brilliant," finished Cochran.

In another call, between Durham and Chief Financial Officer Snow, Durham suggested he could resign as chairman of a subsidiary company to which Fair had loaned millions. At that point, Durham said, the loan balance would no longer have to be classified as "related-party," allaying some concern among investors.

"I don't know what the related party rules are but that makes sense," Snow answered.

Setting priorities

Durham and Cochran were feuding as early as 2005 over how to use Fair to restructure their struggling business empire, emails show. Cash flows from Fair would rise and fall depending on how willing Ohioans were willing to invest at a given time.

In a March 2005 note, Cochran complained that millions of dollars in loans to Durham-led firms Obsidian and DC Investments put Fair in a "poor position." But his primary concern was not Fair investors.

"Through the years, you have to agree, there has been no benefit in it for me. I am in all this debt that has no benefit to me," he wrote, before ending with: "Tim, it's time for me to look out for me ... because no one else will."

Cochran wrote in a September 2008 email exchange with Durham that his assets including homes weren't enough to offset the loans he had received from Fair (about $8 million), which would pose trouble in a potential audit.

He said Obsidian couldn't afford to pay its employees without money from Fair. He also noted loans of $14 million "we'll never recover" from Fair investors to Obsidian subsidiaries including Danzer Industries, Speedster Motor Cars and Champion Trailer.

But he wasn't writing Durham to discuss how to handle the loans or account for them with Fair. He was asking for a raise.

"It is really time for me to bring in $1 million per year," Cochran wrote. "In retrospect, it is time for this type compensation ... as strange as that seems from me. With the new fundings, it will easily support this comp. package."

At the time, his pay was $8,365 per week, or about $435,000 per year.

One month later, Cochran asked for another $22,000 from Fair to pay his taxes to the IRS, and $43,000 to pay the fourth installment of his $175,000 initiation fee at Grey Oaks Country Club in Naples. Fair had paid the other installments, too.

"This is full equity and I am assigning the full equity amount to (Fair)," he wrote.

Boom and bust

By December 2008, Durham and Cochran were trying to sell homes and cars to raise cash, sublease Obsidian's office space on the 48th floor of Chase Tower, and sell off National Lampoon Inc. They also discussed ways to collect on loans to friends and family members (most of whom had never made a single payment). In early 2009, Durham suggested they take themselves off the payroll, taking loans from Fair instead, to minimize payroll taxes.

"My credit report will go real bad ... altho, saving a company is more important," Cochran wrote on Dec. 31, 2008, after discovering he had not received money from Fair to pay a mortage payment on his home in Naples.

The finances had turned around a bit by early 2009, in part because Fair instituted a 60-day hold for investors wanting to cash out their certificates. The move "generated" $1 million in "additional cash," Durham wrote.

On the afternoon of May 4, 2009, with a subject of "$$$$$$$$," Cochran told Durham in an email he was "running on fumes" and needed some "moolah."

About an hour later, Durham authorized a transfer of $10,000 from Fair to Cochran.

Cochran responded that he still had his mortgages to pay.

The following month, Cochran asked for $16,000 for "May mortgages," $20,000 for "Corvette payment to Susan's sister," $5,475 for "cement coping of pool," $2,200 for "landscapers (3) of the homes," and $10,000 for "normal bills."

This story originally ran in the June 14, 2012, IBJ Daily. The Indianapolis Business Journal is a sister publication of Indiana Lawyer.

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  1. Am I the only one who sees that the City is essentially giving away the MSA site AND giving millions to build new buildings on the site when this site would be the perfect place for the Justice Complex? Across from City-County, check; keeping it centrally located, check, etc. It's my understanding that the GM site must be purchased by the City from Motors Liquidation Company. STOP WASTING WHAT WE ALREADY HAVE AND OUR TAX DOLLARS! The Ballard Administration has not been known for it's common sense...never voted for him and never will!

  2. This guy sounds like the classic molester/manipulator.

  3. Louis D. Brandeis was born in 1856. At 9 years of age it would have been 1865. The Brandeis family did not own slaves. My source Louis D. Brandeis: A Life, by Melvin L. Urofsky.

  4. My name is Matthew Lucas Major, I recently went through a jury trial in Bloomington , In. It was the week of Feb 19-21. Although I have been incarcerated since August 5, 2014. The reason I 'am writing to you sir is on the 21 of February the jury came in with a very excessive and wrongful verdict of guilty on 6 child molesting charges against my daughter who was 9 at the time I was accused. I also had 2 other Felonies one of Intimidation and 1 of Sexual Vicarious Gratification. Judge Marc Kellam on the second day of trial gave me a not guilty on those 2 felonies. The jury was sent out during that time and when brought back Judge Kellam told them to not concern themselves with the 2 Felonies that he ruled on them. They were told to not let evidence they had already heard influence there verdicts. I never in my life touched any child sexually and definitely not with my own daughter. When I was arrested Detective Shawn Karr told me I would be convicted guilty just on my daughters word even without evidence. That's just what happened. my public defender did me so wrong he never once proved to the court and jury all the lies the child told, and Jeremy Noel my public defender could of proven the lies easily. The stories in Serenity's depositions and Forensic interview changed and were not consistent as Prosecutor Darcie Fawcett claimed they were. Yet my attorney never mentioned that. The facts that the child accused me of full penetration in her vagina and rectum was proven lies. Doctor Roberta Hibbard of Riley hospital in Indianapolis confirmed Serenity's hymen intact, no scars, no tearing, no signs of rape to her. Yet my attorney didn't use that knowledge . the DNA was all in my favor. I tell you I will spend my entire life in prison going through rape and beatings etc. even Judge Kellam abused his authority by telling the jurors to listen and believe what the prosecutors side in evidence like my daughters testimony. In one interview with the detectives my daughter got flustered with her mom and said on camera " I'm saying what you told me to mom"!! Yet Mr. Noel said nor did anything to even resemble a defense attorney. Judge Kellam allowed edited version of a taped conversation between the child and her mother. Also Judge Kellam allowed the Prosecutor too bring in to my case a knife found under my seat, the knife wasn't part of my case. She was allowed by my attorney and the judge to put a huge picture of it on the screen and huge picture of my naked privates in a full courtroom and open court. Ms. Fawcett says to jury see how easy Mr. Major could reach the knife and cut his Childs throat. Even though I had no weapons charge against these cases. This gave the jurors prejudice thought against me thinking I threatened her with that knife and how scared she would of been knowing i could get it and kill her. On my sentencing court March 19, 2014 my public defender told Judge Kellam he wish to resign from being my attorney and wished for the court to give me outside council to file a error to trial or appeal. We were denied. Now after openly knowing my public defender don't want to represent me he has to. Well when as parents we make our kids clean a room when they really don't wish to, well the child will but don't mean she will do a good job, that's where I'm at with Mr. Noel. please dont ignore mine and my families pleas for your help . we have all the legal proof you could need to prove Im innocent. Please dont make my spend years in prison innocent when you can fix this wrong. Im not saying Im a perfect man or that I was a perfect dad to my 2 children none of us are. Ive made some bad choices in life and I paid for them. But I didnt ever touch or rape my daughter . I love my children with all my heart. And now through needing attention and a ex-wife who told my granny several times she wish she could put me in prison to get me out of their lives. Well my ex finally accomplished her goal. Sad part is she is destroying our daughter with all this horrific lies and things she taught my daughter to say. My daughter will need therapist to ever hope for a chance of a normal life after what she had done to her by her mom and their side of the family. My daughter told everyone even on stand she had a dream months before i supposedly molested her in this dream I was molesting her and when I finally did it matched her dream perfectly. She admitted to watching movies about little girls being molested and watching U-Tube videos about child molesting all before it happened supposedly to her. Doesn't that sound very unusual that a non molested 9 yr old would need to know so much about being molested? The only reason I could think a 9 year old would need so much information is to be prepared to know what to say and be able to say how it felt what took place etc.. So when questioned by authorities she would be prepared. And there again sir if a parent is pre grooming a 9 year old child she would need intimate details . Like telling her daughter about a couple moles on my private area. The child admitted to sneaking my cell and looking many many times at nudes of me and my girlfriend even one where my penis was entering my girlfriends vagina. In that picture my moles are obvious. Yet when prosecutor showed everyone in court my privates and pictures of the moles she said the only way the child would know about them is if she saw them for herself. My attorney once again said nothing about the pictures my child saw. Or could a ex-wife be able to describe my moles to help her case against getting rid of me? I beg you help me. This is my very existence. Ive lost everything , a good job, a wonderful girlfriend, my freedom, but worse thing Ive lost is my children. They were my reason to get up every morning and strive to be better. The wonderful bond I had with my Serenity is gone. After this I would be afraid to even hug her for fear of what next can they do to me. I'm not afraid to tell you I sit here in this cell and try to hold back my tears. Everyone knows you cant show weakness in prison. My life has already been threatened here at Wabash Valley Prison. After only 3 days of arrival. I was tricked into signing a waiver now Im in G Block General Population with 6 child molesting felony charges. Mrs. Hart as a 18 year old I almost died hooked to machines in hospital almost 1 month and now I know that fear was childish compared to this . I cant help but put emotions in this, after all Mrs. Hart Im human and God help Me I never been more afraid in my life. I didnt hurt my little girl I didnt touch her sexually. As much as it shreds me and fills my mind what Im facing I worry more about my mom and granny because of their great love for me mam they are suffering so deeply. I aint done this things but my loved ones suffering right along beside me and If you take my case you will be in essence freeing them also. I sent momma this letter and asked her to email it to you. I'm scared I have been done so unjustly by our legal system and I need you to fix this and give me freedom. I ask you please don't just ignore my pleas. Here in America its nice to be able to trust our legal justice system, well they destroyed my and my loved ones trust in our justice system . And I'm trusting in You !!! My entire family is suffering this nightmare with me. My 77 year old granny had a stroke and isn't doing so well. My single mother that raised 3 kids alone is dying from Lupus and since my arrest has stayed so sick and weary. Our lives torn to peices by a government I was taught I could trust in. my momma has tried so many innocent project and wrongfully accused and cant get anywhere. please please help me. A quote from the late Nelson Mandela: To be free is not merely to cast off ones chains, But to live in a way that respects and enhances The Freedom Of Others. I have Faith in you and your clinic to cast my chains off and give me freedom I do deserve as a wrongfully accused Man, son, brother, father, friend. Matthew Major DOC# 246179 Cause # : 53c02-1308-FA-000779 God Bless you. Please contact me with your decision so I know you made a life changing decision for me , just please at least write me so I know you care enough about your citizens to respond to cries for your help. You can speak openly with my mother Charlotte Spain (828) 476-0406: 71 Lakeview Dr. Canton, NC 28716 Thank You Matthew Major I know yall get thousands of request and inmates claiming innocence, and each person who are innocent deserve to have organizations like yours willing to fight for them and I give yall so much Thanks and I thank God everyday yall are out there caring enough to help free the innocents. Since discovering firsthand how easily lives and families can be destroyed by Poor Defense attorneys not doing their job . And Prosecutors allowed to do as they please in court

  5. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

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