United States v. Timothy Durham
2014 U.S. App. LEXIS 17267
| 7th Cir. | 2014Background
- Durham, Cochran, and Snow were convicted of a widespread financial fraud that harmed thousands of investors, including many elderly.
- They acquired Fair Finance and used investor funds to finance lavish personal lifestyles and related-party loans, with auditors fired when concerns arose.
- Fair issued investment certificates to primarily Ohio consumers; funds were used to fund loans to related parties rather than the receivables business.
- Auditors questioned the holding company’s viability and the statements were later unaudited and replete with misrepresentations.
- The scheme collapsed during the 2008–2009 financial downturn, leading to a government investigation, FBI seizure of servers, and Fair’s bankruptcy.
- Approximately 5,000 investors filed claims totaling about $215 million; the trustee recovered only a small portion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence for Counts 2 and 5 | Counts 2 and 5 were supported by transfers and related evidence of the Fraud scheme. | The record lacks sufficient documentary proof linking the transfers to the fraud. | Counts 2 and 5 reversed for lack of sufficient evidence. |
| Necessity for wiretap | Wiretap necessity was properly established by extensive investigative steps. | The necessity showing was inadequate and overly generic. | Wiretap necessity sustained; the affidavit tied limitations to this case and demonstrated need. |
| Securities-fraud jury instruction | Defendants' proposed instruction correctly stated law for § 10(b) liability. | Instruction should’ve limited liability to a narrow 'in connection with' scope tied to the purchase/sale. | District court did not err; proposed instruction not supported by law or evidence. |
| Prosecutorial misconduct | Rebuttal remarks crossed into improper personal opinion about guilt. | Any error was prejudicial and violated fair-trial rights. | No plain error; remarks did not deny a fair trial given strength of evidence and context. |
| Sentencing and loss calculations | Loss calculations used supported by trustee evidence; restitution based on actual loss. | Intended loss and possible repayments were improperly determined; some criticisms of the district court's method. | Convictions and restitution affirmed; two counts reversed only as to Counts 2 and 5; sentencing otherwise affirmed. |
Key Cases Cited
- United States v. Leahy, 464 F.3d 773 (7th Cir. 2006) (elements of wire fraud test)
- United States v. Love, 706 F.3d 832 (7th Cir. 2013) (standard for sufficiency review)
- United States v. Campos, 541 F.3d 735 (7th Cir. 2008) (necessity for wiretap analysis)
- United States v. McLee, 436 F.3d 751 (7th Cir. 2006) (abuse-of-discretion standard for wiretap necessity)
- S.E.C. v. Zandford, 535 U.S. 813 (2002) (in connection with scope in § 10(b))
- Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71 (2006) (broad meaning of 'in connection with' in § 10(b))
- Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) (purchaser-seller standing; context for § 10(b) scope)
- United States v. Walker, 746 F.3d 300 (7th Cir. 2014) (theory-of-defense jury instructions standard)
- United States v. Brownell, 495 F.3d 459 (7th Cir. 2007) (credit against loss for repayments)
- United States v. Mei, 315 F.3d 788 (7th Cir. 2003) (placed-at-risk for intended loss in sentencing)