Judge declines recusal in fraudster Durham’s case

Indiana Southern District Chief Judge Jane Magnus-Stinson has denied a motion for her recusal in a civil case against convicted fraudster Tim Durham, determining her relationships with leaders of Indiana’s Democratic Party did not create the appearance of or actual bias.

Durham – who was convicted in 2012 on numerous fraud and conspiracy counts in connection with his Ohio-based company, Fair Finance – filed a motion to dismiss his 50-year federal sentence in the related civil case in October 2017. He also filed a motion the same month for Magnus-Stinson’s recusal from the civil case, arguing her personal relationships with former Indiana Gov. Evan Bayh and Indianapolis Mayor Bart Peterson — Durham’s alleged political foes — made it impossible for her to fairly hear the remainder of the case.

In his 37-page motion for recusal, Durham wrote the “business and political life of Durham and Magnus-Stinson have intersected in very negative ways over the past several decades.” He alleged Magnus-Stinson was a staunch supporter of the Democratic Party, while his leadership in the Indiana Republican Party led to the ouster of Democrats, including Bayh and Peterson, in favor of former Gov. Mitch Daniels, former Mayor Greg Ballard and former Marion County Prosecutor Carl Brizzi, all Republicans.

Durham went on to write that Magnus-Stinson “owed” her career to Peterson and, in particular, Bayh, for whom she worked as legal counsel and deputy chief of staff, and who recommended her for appointment to the federal bench. Thus, because of her close relationships with the two high-profile politicians, he alleged she could not preside over his civil case without the appearance of bias, or actual bias.

Additionally, Durham alleged he executed a “hostile takeover and ouster” of the board of Brightpoint, Inc., a local cell phone distributor run with Robert Wagner as its director. The chief judge had worked for Wagner right out of law school and has publicly referred to him as her mentor, a relationship that indicates her actual and apparent bias, Durham said.

Next, Durham alleged Magnus-Stinson’s comments during his trial and at his sentencing demonstrated her bias and animosity toward him. He pointed specifically to her response to a question from the jury, which asked for guidance on where to find evidence involving one of the wire fraud counts against him.

Magnus-Stinson told the jury the court could not answer that question, a response Durham claims was born of the fact that the judge knew there was insufficient evidence to support that particular count. Though a jury convicted him, the 7th Circuit Court of Appeals later reversed that and another wire fraud conviction against him.

Then, when the criminal case proceeded to sentencing, Magnus-Stinson “commented extensively and derogatorily about Durham’s affluent lifestyle,” including a comment that he felt “entitled to a lifestyle that involved two airplanes, several yachts, these cars that were allegedly owned by Fair investors… .”

The chief judge’s negative opinions toward Durham were not formed during his criminal trial, he wrote, but instead had been developed over multiple decades as a result of her relationships with local political leaders. Thus, the comments indicated both her actual and apparent bias, he said.

Finally, Durham alleged Magnus-Stinson played an improper role in the selection of his counsel in connection with his resentencing motion. Durham wrote in his recusal motion that the chief judge relied on Monica Foster, executive director of the Indianapolis Federal Public Defender’s Office, to select his attorney.

According to Durham, Magnus-Stinson and Foster were law school classmates and are now “close friends.” Each appointment Magnus-Stinson made was on Foster’s recommendation, he wrote, and two of those appointments recused themselves due to conflicts of interest. The court denied Durham’s motion for resentencing less than a year after the 7th Circuit reversed his two wire fraud convictions.

Durham also took aim at Foster’s husband, Indianapolis attorney Bob Hammerle, whom Durham alleged “expressed his utter disdain for Brizzi and his alliance with Durham” and his “extreme confidence that all of Magnus-Stinson’s rulings were … absolutely beyond reproach.”

“It seems that every associate of Magnus-Stinson is not only prejudiced against Durham, but they are openly hostile toward him,” he wrote. “In fact, if Magnus-Stinson is not biased or prejudiced against Durham, she is the only one in her circle who is not.”

In addition to actual and apparent bias, Durham also alleged Fifth Amendment due process violations if the chief judge did not recuse herself from his case. In her initial response, Magnus-Stinson admitted to her relationships with the individuals Durham referenced, but maintained she had no knowledge of their animosity toward Durham, or of his political actions against them.

She then randomly reassigned the case in November, sending it to Judge Tanya Walton-Pratt. Pratt found “a lack of evidence to show any actual bias on the part of Judge Magnus-Stinson toward Durham,” but left the question of apparent bias open for Magnus-Stinson to resolve.
The chief judge determined in a Jan. 26 opinion that her personal friendships, trial comments and appointment of counsel did not give the appearance of bias toward Durham, nor did those factors create a due process violation. She noted that on two critical issues in the civil case — whether it should be stayed pending Durham’s appeals in the criminal case, and the calculation of disgorgement — were resolved in his favor. The chief judge agreed to stay the case, and ordered him to pay only $1.3 million in disgorgement, compared to the more than $200 million the Securities and Exchange Commission had sought.

“Finally, the Court notes that if such an allegedly obvious bias was anticipated by Mr. Durham, it would seem prudent to have sought recusal immediately, rather than litigate this case for over six years (including obtaining a summary judgment ruling) prior to seeking recusal,” she wrote.

The case is Securities and Exchange Commission v. Timothy S. Durham, James F. Cochran, and Rick D. Snow, 1:11-cv-00370.

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