A Tale Of Two Subpoenas

Last month, two major Indianapolis law firms belatedly received subpoenas from the bankruptcy trustee for Fair Finance, presumably concerning work the law firms had performed for convicted Ponzi schemer Tim Durham or one of the many businesses to which he funneled more than $200 million he defrauded from Ohio investors.

Barnes & Thornburg and Bingham Greenebaum Doll each received Rule 2004 examination subpoenas requesting designated persons of the firms produce and permit inspection of certain documents related to the debtor. Toby McClamroch was served with Bingham's subpoena, while Kenneth Inskeep was served with Barnes' subpoena. Both were commanded to produce the documents at the bankruptcy trustee's offices in Cleveland, Ohio for inspection on October 28 or provide objections to the production of the requested documents.

Previously, the bankruptcy trustee sued and recovered legal fees that Durham and his business entities had paid out to a number of  law firms, including several law firms in Indianapolis. Neither of these two firms were the subject of those actions.

In 2009, lawyers for Durham succeeded in getting then-acting U.S. Attorney Tim Morrison to drop a federal civil forfeiture action the government had filed against Durham only a week after FBI agents raided Durham's business offices in Indianapolis and Ohio. Although nobody officially entered an appearance on his part in the matter, rumors circulated throughout the legal community that Barnes & Thornburg's high-profile white collar criminal defense attorney Larry Mackey had successfully intervened on behalf of Durham to get the civil forfeiture action dropped.

The federal prosecutor's decision to drop the civil forfeiture action against Durham proved to be a serious setback to the defrauded investors, who were forced to seek the appointment of a trustee through an involuntary bankruptcy proceeding, a much slower and more costly process for recovering defrauded funds. A federal bankruptcy judge named Brian Bash of Baker & Hostetler to serve as the bankruptcy trustee. To date, he has recovered only a small fraction of the more than $200 million lost by the defrauded investors, most of which has been consumed by the trustee's legal fees and expenses.

Criminal defense attorneys at the law firm of Bingham Greenebaum Doll, as a matter of public record, provided counsel to Durham at least during part of the criminal proceedings that were later filed against him in Indianapolis, which led to his conviction--the same law firm where the current U.S. Attorney Joe Hogsett was a partner at the time. By the time Durham was finally indicted by the feds, Hogsett had been named by President Obama and confirmed by the Senate as the southern district of Indiana's new U.S. Attorney. Initially, he announced he was recusing himself from the matter because of his law firm's prior representation of Durham; however, he stepped before TV cameras and applauded prosecutors and FBI agents who worked on the case after a federal jury returned guilty verdicts against Durham and his business partners and otherwise gave the impression that he was in charge of the case. By the time of Durham's trial, attorneys for Hogsett's former law firm no longer appeared to be representing him in any capacity. Indianapolis attorney John Tompkins represented Durham during his trial. Unconfirmed rumors circulated throughout the Indianapolis legal community that Tompkins was paid $1 million to handle Durham's criminal defense.