Some 16 months after FBI raids closed Fair Finance Co., co-owners Timothy Durham and James Cochran face the possibility that they could go from living the high life to living the jail life.
The Indiana businessmen, along with Fair Finance's former chief financial officer, Rick Snow, were indicted by an Indianapolis grand jury on 12 criminal counts alleging they defrauded thousands of Ohio investors out of more than $200 million since Durham and Cochran bought the longtime Akron finance business in 2002.
The indictment said that starting about February 2005, Durham, Cochran, Snow and unnamed others ''devised, intended to devise and executed a scheme to defraud investors.''
Durham, chief executive of comedy movie maker National Lampoon Inc., was arrested in Los Angeles, where he has been living. Snow — also chief financial officer of National Lampoon — and Cochran were arrested and charged in Indiana and released with electronic monitoring. Durham is expected to be brought to Indiana, a spokeswoman for the U.S. attorney's office in Indianapolis said.
The U.S. Securities and Exchange Commission also filed securities charges against the three men on Wednesday.
''These executives looted Fair Finance and exploited unsuspecting investors who trusted the company to prudently invest their funds, as it had done for decades,'' said Robert Khuzami, director of the SEC Division of Enforcement. ''To add insult to injury, they squandered the stolen funds on such extravagances as multiple homes, a private jet, a yacht and more than 40 classic and exotic cars.''
Ohio also may file charges, according to the state Department of Commerce.
The Indiana indictment shows federal investigators had an undercover agent, apparently using a concealed recorder, pose as a Fair Finance investor on Sept. 11, 2009, more than two months before FBI raids on Nov. 24 ultimately shuttered the business that had been operating since 1934.
The indictment also hints, via snippets of quoted telephone conversations, that wiretaps were used in the weeks preceding the FBI raids; a federal official declined comment on whether the government monitored and recorded Fair Finance-related telephone conversations, saying any evidence would come out during trial.
''All of them [Durham, Cochran and Snow] were arrested without incident at their homes,'' said Tim Morrison, first assistant U.S. attorney in Indianapolis.
Federal officials will continue investigating all aspects of Fair Finance, Morrison said. ''The investigation will continue, right up until it is resolved,'' he said.
Fair Finance was forced into bankruptcy in February 2010 and its estimated 5,300 investors, many of them elderly Ohio residents who trusted Fair Finance with their life savings, are wondering whether they will get any of their money back. The investors purchased uninsured investment certificates — short-term loans — that paid interest rates higher than could be found at banks.
Dan Sciury, 72, of Canton Township, invested more than $200,000 in Fair Finance, making him one of the biggest losers in the alleged scheme.
He said he wants the feds to throw the book at the three.
''It's just a travesty what they have done,'' Sciury said, ''and they should be punished to the full extent of the law. . . . If they keep them there [in prison] for the rest of their lives, it probably still would not be ample punishment for all the pain and suffering they've inflicted on people.''
Sciury, the son of Italian immigrants, had been investing money for himself and two of his children in Fair Finance since the late 1990s.
Sciury argued against any deal allowing the three to stay out of prison and work, saying they cannot be trusted.
Wadsworth widow Beverly Barabas had been waiting for the day Fair Finance's owners would face criminal charges.
''Thank God,'' she said when told about the indictments. ''I feel they deserve to be punished. They hurt a lot of people.''
Barabas originally thought she lost $30,000 but later discovered her investments totaled $41,000, including money from insurance benefits she received after her husband's death.
''When somebody does this to you, you feel like you've really been robbed,'' she said.
''I doubt if we ever get anything back. And if we do, it's going to be something small.''
Durham, Cochran and Snow and their legal representatives could not be reached for comment Wednesday.
Durham was known as a high-living playboy in Indiana who flaunted a large car collection, mansions, art and more. He was prominently featured in a 2008 documentary on business network CNBC that highlighted some of America's wealthiest residents. It estimated his wealth at $75 million.
Cochran lived a more low-key lifestyle but still purchased multiple homes.
Documents and e-mails obtained by the Fair Finance trustee and featured in a lawsuit last month indicated the two men were living largely on borrowed money, with Cochran complaining he was unable to to make his mortgage payments, despite a nearly $500,000 salary.
According to SEC filings, Snow was a senior manager at the Akron accounting firm Brockman, Coats, Gedelian & Co. and an accountant with Grant Thornton LLP.
The Department of Justice and SEC investigations mesh with the Fair Finance bankruptcy trustee's own investigation into the business, said Kelly Burgan, counsel for trustee Brian Bash.
''It's satisfying to us that wholly independent investigations came to similar conclusions we did,'' Burgan said.
Bash, a Cleveland attorney, said in a civil lawsuit filed last month that Fair Finance was a ''Ponzi scheme'' and had been ''utterly looted'' by its owners.
The Department of Justice 23-page criminal indictment unsealed Wednesday does not use the word ''Ponzi.''
''It is always difficult to characterize criminal enterprises with code words,'' Morrison said. ''We attempted not to use code words in this indictment.''
No trial date set
The three men face a maximum prison term of five years on the one conspiracy charge and as much as 20 years on the wire fraud and securities fraud charges, Morrison said.
Any trial will take place in Indiana, he said. No date has been set, he said.
The Ohio Department of Commerce said it believes the men should be tried in Ohio.
''The Ohio Department of Commerce and its Division of Securities are aware of the federal indictment of Timothy Durham, James Cochran and Rick Snow in regards to the Fair Finance Co. that once operated in Akron, Ohio,'' the department said. ''The department/division has referred its investigative findings regarding the Fair Finance matter to the appropriate local prosecuting authority and is working with that office to bring state charges against all responsible parties. White-collar crime cases like these are complex. The department/division believes strongly that this case should be tried in Ohio, as all of the alleged crime victims — more than 5,300 Fair Finance investors — reside here in this state.''
Investor Cindy Scott doesn't expect the indictments to result in any additional money coming to jilted investors.
''What money they've gathered up is going to go to the attorneys,'' said Scott, a Cuyahoga Falls woman who put more than $9,000 into Fair Finance.
The money was for her children's college tuition, she said.
Scott, an administrative assistant, argued against prison time, saying the three should be put under house arrest.
''They should have to work and all their money should go to paying us back and then the lawyers,'' Scott said.
Otherwise, she said, ''they're going to be sitting in a cushy jail, being fed and exercising, and we [taxpayers] are paying for it.''
Beacon Journal staff reporters Cheryl Powell, Betty Lin-Fisher and Katie Byard contributed to the story.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org.