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Judge orders Durham to pay $1.3M, sides with SEC in 6-year-old suit

August 21, 2017

A federal judge on Friday ordered convicted Ponzi schemer Tim Durham to pay $1.3 million after siding with the Securities and Exchange Commission in a six-year-old lawsuit alleging massive securities fraud.

The civil lawsuit had been on hold until last year, when Durham finally exhausted his appeals in a criminal case that culminated with the Indianapolis businessman’s sentencing in 2012 to 50 years in prison.

Judge Jane Magnus-Stinson granted the SEC’s motion for summary judgment, finding that the criminal case already had conclusively proved Durham violated securities laws. She tossed aside arguments by Durham, a trained attorney who is representing himself, that his criminal conviction was the result of ineffective assistance of counsel. Durham was represented in his 2012 trial by Indianapolis attorney John Tompkins.

That case wrapped up with Durham’s conviction on 12 felony charges, two of which were tossed aside on appeal. The jury found that after Durham bought Akron, Ohio-based Fair Finance Co. in 2002, he used it as a personal piggy back, drawing out tens of millions of dollars to support a lavish lifestyle and to fund other failing businesses he owned.

Durham replenished Fair’s coffers by repeatedly selling investment certificates to unsuspecting mom-and-pop investors in Ohio. More than 5,000 investors were owed $208 million when the company shut down in late 2009. Fair's bankruptcy trustee has since doled out $18 million to the investors, which works out to a 9-cents-on-the-dollar recovery.

The fine issued by Magnus-Stinson is unlikely to have anything more than symbolic significance, since Durham already faces hundreds of millions of dollars in court judgments that remain unpaid.

The SEC had asked Magnus-Stinson to order Durham to repay more than $200 million — reflecting the agency’s calculation of his “ill-gotten gains." However, she declined, saying the amount of investors’ losses aren’t the same thing as his gains. She said the SEC had not adequately established the amount of his gains.

She calculated the $1.3 million fine by assessing a $130,000 penalty — on the high end permitted under SEC rules — for each of his 10 criminal convictions.

Magnus-Stinson also barred Durham from serving as a corporate officer or director in the future.

 

 

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