Convicted Ponzi schemers Tim Durham and James Cochran will be held in a federal prison until sentencing under an order issued Monday afternoon by U.S. District Judge Jane E. Magnus-Stinson.
The judge agreed to release accomplice Rick Snow on home detention including GPS monitoring, noting his comparatively smaller role in the fraud and the young age of his children.
Magnus-Stinson did not set a sentencing date.
The defendants were convicted of operating Ohio-based Fair Finance Co. as a Ponzi scheme that swindled 5,000 investors out of more than $200 million. A jury last week found Durham guilty of 12 fraud-related charges, Cochran of eight and Snow of five.
Magnus-Stinson issued her ruling on whether the defendants would remain in jail at about 2:30 p.m. after 90 minutes of testimony, including from Durham's son and Snow's wife, both of whom said their loved ones have expressed no desire to flee. Defense attorneys argued their clients should be released under home detention pending a sentencing hearing.
The court's decision to jail Durham and Cochran is based on the fear some of the "missing money" from Fair Finance could help bankroll an escape, said Magnus-Stinson, who repeatedly referenced the infamous Ponzi scheme operated by Bernie Madoff in a stern ruling.
She scoffed in particular at a suggestion by Durham defense attorney John Tompkins that she could require a higher bond on Durham in exchange for allowing him to maintain an office and help find more money to pay back investors in Fair.
Durham's former father-in-law, local businessman Beurt SerVaas, had put up $1 million bond pending trial. The bond will be released since Durham will now be held indefinitely.
Magnus-Stinson suggested the SerVaas bond assets could have been "put up with Fair money in the first place" based on some of the insider loans the company had issued to Durham family members. And besides, she said, the jury's verdict suggests Durham has "no respect for other people's money."
She also expressed skepticism at Tompkins' simultaneous claim that Durham doesn't have the financial means to attempt to flee and that he's essential to recovering more money for Fair's victims.
"It's the missing money the court is concerned about," she said.
Durham and Cochran likely will be transferred to a federal correctional facility in Kentucky. Snow was released following the hearing and will be confined to his home, which he shares with his wife of 22 years and teenage children (who are 14 and 16).
"I'm happy she decided he wasn't a risk," said Snow attorney Jeffrey Baldwin. "I agree with the court's decision."
The judge had ordered all three defendants held in the Marion County Jail over the weekend, pending Monday's hearing.
Tompkins first called Gary Sallee, an attorney who represented a handful of Durham businesses over the years. Sallee said Durham has cooperated with the Fair Finance bankruptcy trustee, turning over more than 40 cars and artwork appraised at more than $6 million to help repay investors.
"It's always been his intention to transfer to the bankruptcy estate as many assets as he could," Sallee said.
Timothy Scott Durham added testimony that his father has never expressed a desire to flee. When he and his father heard the jury had reached a verdict, they put on their suits and were on their way to the court within 30 seconds, he said.
"There's only been talk of an appeal," he said.
Tompkins suggested Fair investors would have a better chance of recovery if the court allowed Durham to continue assisting the bankruptcy trustee.
He described as "farfetched" the suggestion by the prosecution that any of Durham's friends or family members might help facilitate an escape.
Assistant U.S. Attorney Winfield Ong called the prospect of a life sentence an "extraordinary incentive to flee."
"Tens of millions of dollars is missing," Ong added, noting the "cryptic, meaningless" accounting at Fair left plenty of room for Durham to squirrel away cash. "He has shown complete disregard for others in consideration of his own gain."
Ong said little else during the hearing, other than to request the judge consider the trial record in her decision.
Both Baldwin and Cochran attorney Bill Dazey called probation officers who had been assigned to their clients. The officers testified the defendants had followed the rules and made no attempt to flee.
Dazey also introduced exhibits to show the court Cochran does not have enough money to mount an escape: So far this year he has sold two of his three houses and is nearing a deal to sell the third, all for less than the first mortgage balance. And Cochran had a balance of $2,098.54 in his lone bank account at the end of May.
Baldwin called Snow's wife, Stacey, who said the family has spent most of its savings and drawn on a home equity line to keep up with expenses. He reminded the judge Snow never received a related party loan or wire transfer from Fair or exercised any control over the enterprise.
The next step is a sentencing hearing at which the defendants will be allowed to call character witnesses to appeal to Magnus-Stinson, who has wide discretion on sentencing. The hearing likely will be held in the next few months.
Durham, Cochran and Snow face decades in prison under federally recommended sentencing guidelines. They are expected to appeal their convictions.
Observers say succeeding at such an appeal is a longshot.
The jury returned the guilty verdict on June 20, after eight hours of deliberations, and a trial in U.S. District Court that began June 11.
The U.S. Attorney's Office offered six days of testimony, thousands of pages of documents and recordings from FBI wiretaps.
Prosecutors said the defendants gutted Fair by doling out tens of millions of dollars in related-party loans to Durham, Cochran, their friends and their failing businesses. Those loans were never repaid.
Defense attorneys blamed the 2009 collapse of the consumer-loan company on a "perfect storm" of a bad economy, bad press and newly skeptical Ohio regulators. Defense presentations lasted less than two hours and did not include testimony from Durham or his co-defendants.