Category Archives: Fair Financial

Fair Finance, the Akron, Ohio, company co-owned by Indianapolis businessman Timothy S. Durham, faces a class action lawsuit that is seeking to rescind $200 million in investor purchases of Fair Finance securities. The lawsuit, which was filed Dec. 4 in Summit County, Ohio, by the law firms of Maddox Hargett & Caruso P.C. and David P. Meyer & Associates, LPA., is the first investor lawsuit filed following allegations last month by the U.S. Attorney’s Office that Fair Finance was operating as a Ponzi scheme.

In addition to Durham and Fair Finance, the Complaint names parent company Fair Holdings, Inc., DC Investments, LLC, Obsidian Enterprises, James F. Cochran, Daniel S. Laikin and other current and former directors of Fair Finance as defendants.

Among the allegations, the Complaint cites violations of the Ohio Securities Act and other breaches of legal duty tied to sales of investment certificates sold by Fair Finance, which allegedly caused millions of dollars in damages to the plaintiffs and class members, all of whom are residents of Ohio.

“These investors, many of whom are retired and on a fixed income, were tricked into buying investments based on representations that Fair Finance was in the same line of business that it had been in since 1934,” said David P. Meyer, co-counsel for the plaintiffs and an attorney with David P. Meyer & Associates, LPA. “The problem is that as soon as the new owners bought the company in 2002, they drastically changed that business.”

Fair Finance (which also goes by the name of Fair Financial) was founded in 1934 by car dealer Ray Fair to provide loans to customers during the Great Depression. In 1959, the business entered into other avenues, including second mortgages, small consumer loans, and financial investments.

The company was sold by the Fair family in 2002 to Durham.

On Nov. 24, the offices of Fair Financial, as well those of another Durham-owned business, Obsidian Enterprises in Indianapolis, were raided by the FBI, with federal agents taking numerous computers and files. As of Dec. 4, the offices of Fair Finance have remained closed.

The basis of the Dec. 4 Complaint focuses on millions of dollars in “insider loans” that allegedly have been made to various individuals and entities associated with Fair Finance’s co-owners, Durham and Cochran. The loans total $168 million and constitute almost 70% of Fair Financial’s assets.

In addition, the Complaint alleges misrepresentation and omission of facts concerning the investment certificates. According to Thomas Hargett, co-counsel for the plaintiffs and an attorney with Maddox Hargett & Caruso P.C., the written offering circulars used to sell the investment certificates failed to adequately inform prospective investors of the “unfettered” discretion Durham and other insiders had in loaning money to themselves and their related businesses. There also was no apparent oversight or disclosure of the substantial credit risks these loans posed to Fair Financial investors, the Complaint alleges.

Between May 2004 and May 2009, the Complaint alleges that more than 900 wire transfers totaling approximately $84 million had been directed to Fair Holdings by Fair Finance Company. This money was then allegedly wired to nearly 50 individuals and businesses over a five-year period, including:

• $6.9 million to U.S. Rubber Reclaiming (a subsidiary of Obsidian Enterprises);
• $5.3 million to Speedster Inc. (a classic car replica manufacturer owned by Timothy S. Durham);
• $1.8 million to Danzer Industries (former parent company of Obsidian Enterprises); and
• $1 million to Champion Trailer (former subsidiary Obsidian Enterprises).

A copy of the Complaint will be available at InvestorProtection.com and InvestorClaims.com.

Offices of Tim Durham’s Akron-based Fair Finance Company remain closed following FBI raids that occurred on Nov. 24. Today, a lawyer representing Durham said customers may have access to their accounts next week, although not to 100% percent of their investments.

The FBI, the U.S. attorney’s office and the Securities and Exchange Commission (SEC) all have been investigating whether Fair Finance is a Ponzi scheme that defrauded Ohio investors. As reported Dec. 2 by the Akron Beacon Journal, reopening the company, as well as offices elsewhere in the Ohio area, depends in large part on whether Fair Finance is able to get its computers back from federal investigators.

Durham, an Indiana businessman, bought Fair Finance (also known as Fair Financial) in 2002.

Meanwhile, investors sit and wait, hoping for a glimmer of hope. One man arriving at the offices of Fair Finance on Monday morning said he saw an 85-year-old investor who appeared distraught about his investments.

“He couldn’t talk. There were tears in his eyes,” he said in the Dec. 2 story by the Akron Beacon Journal. “This guy couldn’t afford to lose it. My heart went out to him.”

CLST Holdings (CLHI) revealed in a recent 8-K filing that it had received a subpoena from the Division of Enforcement of the Securities and Exchange Commission (SEC) in connection to financial dealings between it and Fair Finance, the Ohio-based consumer finance firm owned by Timothy Durham and the same company that is the subject of an ongoing federal probe.

According to the SEC’s subpoena, CLST Holdings must produce voluminous amounts of information relating to its portfolio transactions, including those with Fair Finance. The subpoena also seeks documents, emails, BlackBerry messages, personal and business contact lists and more pertaining to select individuals on CLST’s board of directors, including Durham, Robert Kaiser, and David Tornek, each of whom received subpoenas from the SEC. Durham is CLST’s chairman of the board.

The fact that the SEC has launched an investigation of CLST Holdings casts further questions over Durham and his business dealings. Last week, federal agents conducted simultaneous raids at two of Durham’s companies – Obsidian Enterprises and Fair Financial (also known as Fair Finance). On Nov. 24, the federal government filed a civil lawsuit against Durham and Fair Finance, alleging that Durham operated the business as a Ponzi scheme by using money from new investors to pay what it owed prior investors, thereby “lulling the earlier victims into believing that their money was being [handled] responsibly.”

The Ponzi scheme allegation is the same claim cited last week by Tim Porter, one of Durham’s former business partners.

“It’s a mini Bernard Madoff. A mini Ponzi scheme and when you stand back and look at it from the outside in, you see exactly what they’re doing,” said Tim Porter in an interview with WTHR News.

The government’s complaint against Durham was mysteriously withdrawn on Nov. 30, although the investigation is continuing.

As reported Dec. 1 by the Indianapolis Business Journal, Dallas-based CLST Holdings was at one time a wireless telecommunications business known as CellStar Corp. Approximately three years ago, the company sold off its business units to several buyers, including Plainfield-based Brightpoint, Inc. Shortly thereafter, Durham was elected to CLST’s board of directors, “in part by pledging to dissolve the company quickly and distribute remaining cash to shareholders,” according to the IBJ article.

Instead, CLST began buying consumer finance contracts, including about $3.6 million it acquired from Fair Finance, IBJ says.

When federal officials filed a complaint on Nov. 24 to seize the assets of Fair Finance owner Tim Durham, the allegations focused on Durham’s alleged involvement in a Ponzi scheme to defraud Ohio investors. On Nov. 30, U.S. Attorney Timothy Morrison mysteriously withdrew the request for seizure of Durham’s properties and banking accounts on grounds that the assets in question “would not dissipate.” The federal investigation is continuing, however, according to Morrison.

As reported Dec. 1 in the Akron Beacon Journal, Morrison said his office has not accused or charged Durham or anyone else with a crime, although the withdrawn complaint alleges a Ponzi scheme. The search warrants used in last week’s raids on Durham’s businesses – Obsidian Enterprises and Fair Finance – remain sealed. If federal charges are filed, it is likely the search warrants will be unsealed, according to the article.

The government’s initial complaint against Durham alleged that money from investors in Durham’s Akron-based Fair Finance company – also known as Fair Financial – was moved to companies controlled by Durham in thousands of transactions to support investments other than the low-risk, high-yield, short-term consumer debts represented to investors. Instead, the document says, the money was used to make interest and redemption payments to “earlier victims of the scheme.”

The document also alleges that Durham kept for his personal use a “portion of the funds entrusted to him by purchasers of the investment certificates”

Between May 2004 to May 2009, Federal Reserve records show 6,400 transactions occurred in which millions of dollars from Fair Finance were directed to its parent company, Fair Holdings, and then wired to 21 companies controlled by Durham and Fair Financial co-owner James Cochran.

In 907 transactions, $84.2 million went from Fair Finance to Fair Holdings, according to the complaint. Of that amount, the lawsuit alleges that some of the transactions included:

• 6.9 million to U.S. Rubber Reclaiming (a subsidiary of Obsidian Enterprises, owned by Durham;
• $5.3 million to Speedster, Inc. (a classic car company owned by Durham);
• $1.8 million to Danzer Industries (former parent company of Obsidian Enterprises);
• $1 million to Champion Trailer (former subsidiary of Obsidian Enterprises);
• $804,000 to Playa Del Racing (IndyCar racing team controlled by Durham);
• $155,000 to United Expressline Trailers (a subsidiary of Obsidian Enterprises);
• $277,000 to Car Collector Magazine (a Durham-owned company);
• $30,000 to James Cochran (co-owner of Fair Financial); and
• $100,000 to Tim Durham (co-owner of Fair Financial)

Durham’s legal woes escalated following a recent Indianapolis Business Journal investigative story that questioned whether his company, Fair Financial, could repay investors who bought nearly $200 million in investment certificates.

Durham’s attorney, John Tompkins, has stated that Durham believes he has done nothing wrong in response to the FBI seizing banking records and other documentation at his two businesses.

Calls to Fair Finance’s offices continued to be greeted by a prerecorded phone message telling callers that offices are closed for the Thanksgiving holiday and will reopen on Nov. 30. That hasn’t happened. Instead, a sign is taped on front door that reads: “DUE TO UNFORSEEN CIRCUMSTANCES, FAIR FINANCIAL SERVICES IS TEMPORARILY CLOSED. WE LOOK FORWARD TO SERVING YOU UPON OUR REOPENING.’”

The federal government withdrew its request to seize the assets of Indianapolis financier Tim Durham on Nov. 30. According to the Indianapolis Business Journal, the U.S. Attorney’s Office based its decision on assurances that Durham’s assets were not being dissipated. There’s no word on who provided those assurances.

The previous lawsuit had been filed Nov. 24, and alleged that Durham, his associates and his companies misled investors into buying investment certificates in which they believed their money would be invested in low-risk, high-yield short-term consumer debt.

“Instead, the money provided by victims of the scheme was used to make interest and redemption payments to earlier victims of the scheme, thereby lulling the earlier victims into believing that their money was being (invested) responsibly,” the complaint said.

On the same day the now-dismissed civil lawsuit was filed, the FBI raided two of Durham’s companies – Fair Finance Co. and Indianapolis-based Obsidian Enterprises.

The Akron Beacon Journal reported on Nov. 30 that the headquarters of Fair Finance remained closed and empty today as a steady stream of worried customers drove in to try to check on their investments.

Timothy Durham’s rich and famous lifestyle may have had less to do with investing prowess and more to do with his ability to allegedly defraud investors, according to court papers filed by the federal government on Nov. 24. The documents accuse Durham of committing wire fraud and seek forfeiture of Durham’s $30 million mansion, his residence in Los Angeles, a 2008 Bugatti Veyron and 18 different investment accounts.

The complaint alleges that Durham, his companies and various associates concocted a scheme to defraud investors, convincing them to buy investment certificates from Durham’s company – Fair Finance – and that their money would go toward low-risk, high yield, short term consumer debts. In turn, investors were to receive high regular interest payments on their investments.

Instead, court papers allege that the money essentially was used to carry out a Ponzi scheme, with funds “provided by victims of the scheme used to make interest and redemption payments to earlier victims of the scheme, thereby lulling the earlier victims into believing that their money was being [used] responsibly and enticing new investors into the scheme in order to fund payments to the earlier investors.”

The civil forfeiture action was filed on the same day that the FBI conducted simultaneous raids on Durham’s businesses in Indianapolis and Ohio – Obsidian Enterprises and Fair Financial (also known as Fair Finance).

The complaint of forfeiture further alleges that Durham wired $84.2 million of Fair Finance’s funds to a First Indiana bank account of Fair Holdings, the parent company of Fair Finance. Fair Holdings then wired money to 50 individuals and businesses over a five-year period, according to the complaint. Among the most significant transactions noted, approximately $20 million went to:

•$6.9 million to U.S. Rubber Reclaiming (a subsidiary of Obsidian Enterprises, owned by Durham;

•$5.3 million to Speedster, Inc. (a classic car company owned by Durham)

•$1.8 million to Danzer Industries (former parent company of Obsidian Enterprises)

•$1.4 million RM Auctions (a classic car auctioneer; as of June 2008, Durham owned 70 classic and exotic cars)

•$1 million to Champion Trailer (former subsidiary of Obsidian Enterprises)

•$804,000 to Playa Del Racing (IndyCar racing team controlled by Durham)

•$730,000 to Pyramid Coach (former subsidiary of Obsidian Enterprises)

•$690,000 to Evaco Acquisition Corp. d/b/a Superline Trailers

•$495,000 to McDonald Investments (a brokerage firm)

•$155,000 to United Expressline Trailers (a subsidiary of Obsidian Enterprises)

•$277,000 to Car Collector Magazine (a Durham-owned company)

•$30,000 to James Cochran (co-owner of Fair Financial)

•$100,000 to Tim Durham (co-owner of Fair Financial)

The FBI isn’t talking, but local and national news outlets have plenty to say about simultaneous raids that took place Nov. 24 on two Tim Durham companies – Indianapolis-based Obsidian Enterprises and Fair Financial in Akron, Ohio. At both locations, federal agents hauled away numerous boxes containing banking-related information and other documents.  

The basis for the search warrants is still unknown, but many believe they stem to whether Fair Financial has the money to repay Ohio investors who purchased some $207 million in investment certificates – a question that initially sparked attention following an investigative story published in October by theIndianapolis Business Journal. 

A follow-up IBJ story dated Nov. 28 says the latest situation involving Durham has some investors becoming increasingly concerned: “Many have been purchasing or rolling over investment certificates for years, enticed by lofty interest rates. Fair has been paying as much as 9% on 24-month notes,” the article said. 

That amount – 9% – is three times what commercial banks pay on certificates of deposit with similar terms. CDs have a government guarantee – something Fair Financial investors most definitely do not.  

The IBJ story cites one Fair investor, Harley Himes, 82, who said that he and his wife live off the monthly interest payments they receive from their Fair certificates.  

“I was an investor back when the original owner owned it,” said Himes. “We didn’t have any problem with him. You kind of get used to a good thing. Then you find it is not such a good thing.” 

The original owner of Fair Financial that Himes refers to was car dealer Ray Fair, who founded the business to provide loans to customers during the Great Depression. The company, which also does business as Fair Finance, stopped making vehicle loans in 1959 and began providing second mortgages, small consumer loans, and financial investments. 

Durham bought the business from the Fair family in 2002.  

One of the key issues now facing Durham may be the offering circulars that were provided to prospective Fair Financial investors and, specifically, whether that information contained any material misrepresentations or omissions. 
 
The circulars themselves are more than 40 pages in length, difficult to understand and offer confusing information about insider loans and what constitutes as collateral for the loans. 
 
“Are you telling enough about the entities receiving insider loans, and what kind of shape they are in?” asked Mark Maddox in the IBJ article. Maddox serves as an Indianapolis securities attorney with the law firm of Maddox Hargett & Carusuo P.C., which is considering representing investors in civil litigation against Fair Financial and Tim Durham. 

Read the entire IBJ Nov. 28 story about Durham here.  

If you’ve had investment dealings with Tim Durham or Fair Financial, we want to hear your story. Leave a message in the Comment Box below or via the Contact Us form.

Obsidian Enterprises and Fair Financial Services

Tim Durham is so rich he once stated during a CNBC interview that he often lost track of how many cars he actually owned. Durham runs Obsidian Enterprises and Fair Financial Services, which specialize in buying debt-ridden companies. On Nov. 24, Durham caught the attention of the FBI, which conducted dual raid on the Indianapolis and Akron, Ohio, offices of Obsidian and Fair Financial. 

The FBI did not give a reason for the raids or for questioning Durham in Los Angeles, but it’s believed the warrants have something to do with Fair Financial selling uninsured investment securities and allegedly being unable to repay investors nearly $200 million. The Indianapolis Business Journal published an investigative story on the subject last month.  

According to the IBJ article, Durham purchased Fair Financial in 2002, but has treated “it like a personal bank since.” Ohio securities filings show that Durham, partners and relative firms owe investors more than $168 million.  

On Nov. 25, Ohio Congressman John Boccieri issued a public statement calling for the federal government to seize the assets of Durham and Fair Financial as the FBI’s investigation proceeds. 

As reported Nov. 24 by Ohio.com, Akron resident Lou Laurich, 67, said he invested $8,000 with Fair Financial after reading ads that promised high interest rates on the company’s investment certificates.  

Fair Financial’s roots date back to 1934 when car dealer Ray Fair founded the business to provide loans to customers during the Great Depression. The company, which also does business as Fair Finance, stopped making vehicle loans in 1959 and evolved into providing second mortgages, small consumer loans, and financial investments.

The business was sold by the Fair family in 2002 to Durham. 

Meanwhile, legal questions continue to loom regarding another business where Durham has a vested interest: Los Angeles-based National Lampoon, Inc. The film company, which is best known for “Animal House” and the “Vacation” film series, has found itself in financial straits since last December, when the Securities and Exchange Commission (SEC) filed civil fraud charges against it and a grand jury indicted then-CEO Dan Laikin on charges of stock manipulation. 

Laikin pleaded guilty in September to conspiracy in exchange for prosecutors dropping a count of securities fraud. Durham, who was not implicated in the criminal case or named in the SEC’s civil lawsuit, currently serves as National Lampoon’s acting CEO. ? 

Obsidian Enterprises and Fair Financial

Tim Durham had all the toys and mansions that money could buy. Now he’s got even more on his plate: FBI raids on his two companies, Obsidian Enterprises and Fair Financial, and allegations of ties to ghost employment involving two New Castle police officers.  

FBI agents raided Durham’s offices in downtown Indianapolis and in northeast Ohio on Nov. 24. So far, investigators are giving few details about the reasons behind their interest in the millionaire, but a story last month in the Indianapolis Business Journal raised questions over whether Durham’s finance company had the funds to repay Ohio investors who bought nearly $200 million in investment certificates. The story went on to say that Durham used the company to fund other business interests. 

On Nov. 25, WTHR contacted one of Durham’s former business partners, Tim Porter, who apparently is cooperating with the FBI in its investigation of Durham. According to the story, Porter met Durham in May 2007 and the two became partners. Porter even lived in Durham’s mansion on Geist Reservoir at one time. The two later had a falling out over a business dispute. According to the WTHR story, Porter claims Durham has defrauded Ohio investors in Fair Financial for more $200 million. 

“It’s a mini Bernard Madoff. A mini Ponzi scheme. And when you stand back and look at it from the outside in, you can see what they’re doing,” said Porter in the story. ? ?Tim Durham’s rise to riches has been meteoric. Profiled on CNBC in a story called The Rise of the Super Rich, Durham had a passion for fast and collectible cars. He owned more than 70 vehicles, including Rolls-Royces, Ferraris, and Dusenbergs. He also frequently traveled via his own private jet and owned a $6 million to $7 million yacht in Florida.  The late Anna Nicole Smith once stayed at Durham’s 30,000-square-foot mansion near Geist Reservoir during the Indianapolis 500. 

In addition to FBI investigations of his two companies, Durham’s name is being linked to another scandal involving ghost employment. Last week, Lt. James Heffernan and Patrolman Matthew Patterson, along with Henry County Community Correction Director Doug Sheets were arrested on preliminarily charges of ghost employment, corrupt business influence and official misconduct. 

As reported Nov. 25 by WRTV news, Heffernan and Patterson worked part time for Henry County Community Corrections, with Heffernan serving as the assistant director of the facility. Both were hired by Sheets, a retired state police detective. 

John Tompkins, who is representing Durham, also is representing Heffernan and Patterson in their case. Durham is connected to the New Castle scandal because the off-duty officers often worked at his home. 

According to the WRTV story, Patterson was seen in possession of a Hummer SUV registered in Durham’s name. Meanwhile, court documents in the case indicate that Patterson’s GPS system showed that when he was at Durham’s Geist Reservoir mansion, he claimed on his time sheet that he was checking on people regarding a house arrest. 

If you’ve had dealings with Tim Durham and Obsidian Enterprises or Fair Financial, we want to hear your story. Leave a message in the Comment Box below or via the Contact Us form. We want to counsel you about your legal options.