Category Archives: Obsidian Enterprises

The debacle involving Fair Finance and owner Tim Durham just keeps getting bigger. There are more than 13,000 outstanding Fair Finance investment certificates valued at more than $208 million, according to a just-released report from Brian Bash, the court-appointed trustee of Fair Finance. Translation: More than 13,000 claims will be filed as part of the Chapter 7 bankruptcy proceeding.

The offices of Fair Finance have remained closed since Nov. 24, after federal agents seized banking records and company computers. On that same day, the U.S. Attorney’s Office in Indianapolis filed court papers alleging that Fair Finance operated as a Ponzi scheme, using money from new investors to pay off prior purchasers of the investment certificates.

In other Fair Finance news, friends and business associates of Durham who accepted millions of dollars in loans from his company could be facing problems of their own.

As reported March 6 by the Indianapolis Business Journal, the trustee in the case, Brian Bash, is going to try and turn Fair Finance’s assets into cash wherever possible. That means firms and companies with outstanding loans from Fair Finance can expect to hear from Bash in the near future.

Extending loans enabled Durham to continue listing the money as assets on Fair Finance’s balance sheets, which in turn gave investors the false impression that the company was fiscally sound.

Moreover, Fair Finance had no outside auditor. In other words, there was no one to sound the alarm that there was something awry with Fair’s accounting procedures.

The various people and companies listed as owing money include Scott McKain, former vice chairman of Durham’s Indianapolis-based business Obsidian Enterprises; Joan SerVaas, Durham’s ex-wife and owner of Curtis Publishing; Jeff Osler, Durham’s brother in law and owner of Geist Sports Academy; Henri Najem, an Indianapolis restaurant owner who is best known for his Bella Vita restaurants; and MyGhetto.com, a social-networking site created by the rapper Ludacris, a close friend of Durham’s.

As reported in the IBJ article, some of the people and firms listed cite inaccuracies with the trustee’s list.

Embattled businessman Tim Durham apparently will not oppose the appointment of an interim receiver for Fair Finance and its parent corporation, Fair Holdings. The story was first reported on Feb. 11 by the Akron Beacon Journal. The news comes one week after the law firms of Maddox Hargett & Caruso and David P. Meyer and Associates Co. filed paperwork asking a Summit County, Ohio, court to appoint a receiver for Fair Finance and Fair Holdings.

Attorneys for Fair Finance deny the company has been involved in any wrongdoing.

The offices of Fair Finance have remained closed since Nov. 24 when the FBI raided the company’s Akron headquarters and the offices of a related business in Indianapolis, Obsidian Enterprises. According to court records, federal investigators suspect that Fair Finance was being operated as a Ponzi scheme.

Meanwhile, a federal judge is weighing whether to unseal search-warrant documents related to the FBI’s November raids. On Feb. 11, during a court hearing in Youngstown, Ohio, a representative of the U.S. Attorney’s Office in Indianapolis argued that unsealing the search warrants could damage the federal government’s ongoing investigation.

As investigations continue into the business dealings of Tim Durham and Fair Finance, a motion has been filed on behalf of some Fair Finance investors to appoint a receiver in the case. The motion was filed Feb. 4 by the law firms of Maddox Hargett & Caruso and David P. Meyer and Associates.

“The remaining Fair Finance assets are in imminent danger of being siphoned away by [Tim] Durham and [Jim] Cochran now that their Ponzi scheme has been exposed,” said David Meyer of David P. Meyer and Associates, in a Feb. 4 article in the Indianapolis Business Journal.

In December, Meyer’s law firm, along with the law firm of Maddox Hargett & Caruso, filed a class-action lawsuit on behalf of investors who purchased $200 million in unsecured investment certificates from Akron, Ohio-based Fair Finance. Fair Finance is owned by Durham and Jim Cochran.

Following the November FBI raids on Fair Finance, investors have grown increasingly fearful that the company’s owners may be spending what remains of the company’s finances. The Akron offices of Fair Finance have been closed since the FBI raids, with no word from Durham on when or if his company will ever repay investors.

In December, Ohio Congressman John Boccieri called for an asset freeze on Fair Finance and its owners. He reiterated that plea in late January at a town hall meeting held in Ohio. As reported Jan. 27 by the IBJ, Boccieri was seeking the asset freeze after learning Fair Finance co-owner Jim Cochran had posted an ad on Craigslist for an estate sale at his $3.5 million Naples, Florida, residence. According to the article, the sale went as planned, with Cochran selling off everything from Bentley and Porsche automobiles to a 28-foot boat and a large potted plant.

The Feb. 4 motion for a receiver was filed in Summit County, Ohio. It asks that the receiver take control of Fair Finance and its parent company, Fair Holdings.

Tim Durham’s Fair Finance Company has officially withdrawn its request from the Ohio Department of Commerce’s Division of Securities to sell additional investment certificates to Ohio investors. The company has remained on lock down since Nov. 24 after federal prosecutors filed court papers accusing Durham of running a Ponzi scheme. That same day, FBI agents stormed Durham’s Indianapolis office and the Akron, Ohio, offices of Fair Financial where they seized boxes of banking records and computer equipment.

No one has been charged with criminal wrongdoing.

The FBI raids occurred one month after IBJ reporter Greg Andrews published an in-depth investigative story that raised questions about the financial health of Fair Financial and whether the company had enough money to repay the $200 million it owed to Ohio investors.

A number of stories have since come forth citing evidence that Durham and others used Fair Finance as a personal bank for years.

“We concluded some time ago that Ohio would never allow Fair Finance to register any more securities,” said Thomas Hargett of Maddox Hargett & Caruso P.C., in a Jan. 13 article in the Indianapolis Star. Hargett and David P. Meyer & Associates Co. are working to get class-action status on behalf of investors. Their complaint, filed last month in Akron, Ohio, accuses Fair Finance and its officers of violating the Ohio Securities Act and other breaches of legal duty that included duping investors into buying investment certificates from Fair Finance.

Late last month, more than 1,000 Fair Finance investors packed the Fisher Auditorium at the Ohio Agricultural Research and Development Center in hopes of getting some answers about their investments.

The meeting was spearheaded by Ohio Congressman John Boccieri, who invited area attorneys, Ohio securities officials and representatives from the FBI to answer questions and offer guidance to investors.

As reported Jan. 27 by The Daily Record, one investor asked what was being done about potential asset liquidations, noting that Durham’s 98-foot yacht is reportedly up for sale. Other investors wanted to know why the U.S Attorney’s Office decided to drop the civil suit against Durham and unfreeze his assets.

“Reports have said that Mr. Durham doesn’t want to be known as one of the richest men in America, he wants to be the richest man in America,” Boccieri said in the article. “I find that absolutely egregious and that people would do this and perpetuate such acts on people who have put their life savings in these types of investments.”

If you have questions about investments in Fair Finance, contact us.

Troubled financier Tim Durham can likely look forward to an equally troubled 2010. His reputation as a formidable businessman and leveraged buyout specialist is in obvious disarray. He is the subject of a federal investigation that accuses him of running a Ponzi scheme and defrauding Ohio investors of more than $200 million. And investor lawsuits against Durham and his company, Fair Finance, are growing in numbers. 

Here’s a look back at the 2009 timeline of Durham’s current business and legal issues. 

• January 2009. Investors in Obsidian Enterprises, a leveraged buyout firm owned by Durham in downtown Indianapolis, charge in five lawsuits that Durham defaulted on promissory notes and owes them more than $200,000.

• March 2009. Durham is accused of “self-dealing” after CLST Holdings, where Durham resides as chairman, acquires assets from Fair Finance, an Ohio company owned by Durham.

• October 2009. The Indianapolis Business Journal breaks a story that Durham has treated Fair Finance as his personal bank, using it to fund a range of personal and business-related investments. Investors who purchased investment certificates sold by Fair Finance are now owed more than $200 million.

• November 24, 2009. The FBI executes search warrants on two of Durham’s businesses – Obsidian Enterprises and Fair Finance. Boxes of documents and banking-related materials are collected and taken away by federal agents.

• November 25, 2009. Ohio securities regulators announce that Fair Finance will no longer be able to sell additional investment certificates to investors until it provides sufficient information that the company has the financial ability to pay them back.

• November 26, 2009. Republican candidate for Marion County Sheriff Tim Motsinger withdraws from the campaign amid the FBI investigation into Durham’s businesses. Durham previously served as the campaign finance chairman for Motsinger, as well as a large financial contributor.

• November 2009. Connections between Durham and Marion County Prosecutor Carl Brizzi come to light. Brizzi, a close friend of Durham, had previously agreed to serve on the board of director of Fair Finance and then changed his mind following news that Fair Finance was under investigation.

• November 28, 2009. The federal government files court papers alleging that Durham committed wire fraud and seeks forfeiture of various properties owned by Durham. Among the assets sought: Durham’s 30,000-square-foot mansion and his 2008 Bugatti sports car. The complaint states that Durham and various associates told prospective investors who purchased Fair Finance investment certificates that the money would go toward investments in low-risk consumer loans. Instead, the court papers allege that the money was used to carry out a Ponzi scheme, with money from new investors used to pay prior investors.

• November 30, 2009. The asset-seizure lawsuit is mysteriously rescinded by the federal government.

• November 30, 2009. Fair Finance’s headquarters in Akron and eight satellite offices in Ohio fail to reopen.

• December 1, 2009. CLST Holdings, a Dallas-based firm where Durham serves as chairman, reveals that the Securities and Exchange Commission (SEC) is investigating financial dealings between it and Fair Finance.

• December 4, 2009. Maddox Hargett & Caruso and David P. Meyer & Associates file the first class action lawsuit on behalf of investors against Durham and Fair Finance co-owner James Cochran, alleging that the two men, as well as other executives of Fair Finance, pulled tens of millions of dollars out of the company for their personal use.

• December 10, 2009. Businessman James F. Scott files a lawsuit against Durham, accusing him and other defendants of manipulating a Sept. 3 auction involving one of Durham’s prized automobiles: a 1930 Duesenberg.

• December 11, 2009. A press release from Fair Finance says it plans to resume regular billing and collection efforts with regard to its loan receivables business. It does not say if or when it will be able to do the same concerning sales and redemption of its investment certificates.

• December 16, 2009. The Indianapolis Star and the Akron Beacon Journal file a motion to unseal search warrant documents tied to the federal investigation of Durham and Fair Finance.

• December 22, 2009. A second lawsuit is filed on behalf of 36 Wooster, Ohio, investors against Durham and Fair Finance. According to the lawsuit, the investors are owed amounts ranging from $2,000 to $500,000. 

• December 23, 2009. Reports surface that Durham’s Obsidian Enterprises will vacate its offices on the 48th floor of the Chase Tower in downtown Indianapolis. According to a story in the Indianapolis Business Journal, Obsidian, which subleases the space from JPMorgan Chase, hasn’t paid rent for “a couple of months.”

Tim Durham’s name used to be associated with a lavish lifestyle that entailed a 30,000-square-foot mansion and an eclectic collection of exotic and classic cars. Now, it’s a Ponzi scheme being linked to the flamboyant businessman.

Durham is the subject of a federal investigation for running an alleged Ponzi scheme through his company, Fair Finance, which advertised and sold supposedly safe, but high-yielding, investment certificates to Ohio investors, many of whom were elderly. Money from the investors was then filtered to other companies that Durham owns or controls, according to court documents. 

Last month, the FBI raided Durham’s businesses, Fair Finance and Obsidian Enterprises. On the same day, Nov. 24, that the raids occurred, the U.S. attorney’s office in Indianapolis filed court documents accusing Durham and at least some of his companies of defrauding investors out of hundreds of millions of dollars. 

To date, no criminal charges have been filed against Durham. However, Durham did just recently hire James Voyles, a top Indianapolis criminal defense attorney.

On Dec. 4, Maddox Hargett & Caruso P.C. and David P. Meyer & Associates filed a lawsuit against Durham on behalf of an Akron couple who invested in Fair Finance. The lawsuit, which is seeking class action status, contends that Durham and James Cochran, co-owner of Fair Finance, used the company “as their own personal bank.”

“A lot of people are just scared to death that they have lost their entire life savings,” said David Meyer of David P. Meyer & Associates in a Dec. 21 article in the Wall Street Journal.

A second lawsuit was filed against Durham on Dec. 21 on behalf of 36 Wooster, Ohio, investors who say Durham owes them $2.2 million. Many of the plaintiffs in that lawsuit are believed to be members of the Amish community. 

Following the FBI’s raids of Nov. 24, the nine offices of Fair Finance have remained closed. The company owes approximately $200 million to Ohio investors who purchased the investment certificates, which do not have a government guarantee. 

In an interview with the Wall Street Journal, Durham, 47, said he was “shocked” by the raids on his businesses and that the allegations against him were “untrue.”

Tim Durham’s holiday season is getting filled with presents of lawsuits and investigations over allegations that his company, Fair Finance, was running a Ponzi scheme, using money raised from selling investment certificates to pay off earlier investors. Adding to the growing list of legal actions against Durham is a Dec. 10 fraud lawsuit filed by Virginia businessman James F. Scott, who accuses Durham and other defendants of manipulating a Sept. 3 auction involving one of Durham’s notorious automobiles: a 1930 Duesenberg that was first built for publishing tycoon William Randolph Hearst.

Also named as defendants in the lawsuit: Missouri collector car dealer Mark Hyman; Donald D. Lyons, of Dowagiac, Mich.; Kruse International; and the Auburn Cord Duesenberg Museum.

Specifically, Scott’s lawsuit alleges that Durham and others who had a financial interest in the sale of the Duesenberg drove up the price during the bidding process and then split the profits. Scott eventually won the bid for $2.9 million. The other bidder was Hyman, who attended the auction with Durham.

The vehicle itself was put up for consignment by a group of sellers – Durham, Hyman, Lyons and the Lyons Family Trust.

Scott, who participated in the auction by telephone, contends he had no knowledge that the sellers reserved the right to bid or that they were in fact offering bids on the vehicle. That meant that the price of the car was artificially inflated by those who had a financial interest in getting more money for the car, according to court documents.

After Scott transferred more than $3.1 million to the museum’s bank, the money was divided up and distributed to Hyman, Lyons and the museum, with Durham’s knowledge.

To top it off, Scott has yet to receive the title for the 1930 Duesenberg vehicle, according to lawsuit.

On Dec. 23, there was yet another twist to the Durham saga. An IBJ article reports that another company owned by Durham, Obsidian Enterprises, is planning to vacate its offices on the 48th floor of the Chase Tower in downtown Indianapolis. According to the story, Obsidian leases the space from JPMorgan Chase & Co. and hasn’t paid rent for “a couple of months.”

Like Fair Finance in Akron, Ohio, Obsidian Enterprises has been closed since Nov. 24 when federal agents conducted simultaneous raids on the two businesses.

Meanwhile, investors who are owed some $200 million sit and wait for answers.

For the second time this month, Fair Finance and owner Tim Durham face a lawsuit filed on behalf of disgruntled investors. The most recent legal action involves a group of Wayne County residents, including Amish investors, who are suing Akron-based Fair Finance over allegations the company owes them nearly $2.2 million.

The first lawsuit against Fair Finance, Durham and other executives was filed Dec. 4 by the law firms of Maddox Hargett & Caruso P.C. and David P. Meyer & Associates, LPA. That lawsuit, which accuses Fair Finance’s owners of bilking investors out of millions of dollars by using company assets for their own enrichment, is seeking class action status.

As reported Dec. 22 by the Akron Beacon Journal, the latest lawsuit against Fair Finance was filed yesterday in Wayne County Common Pleas Court. Twenty members of the group behind the lawsuit created a limited liability company named Fair Recovery to protect their privacy. Twenty other plaintiffs, including two trusts, also are named.

Offices of Fair Finance have remained closed following a Nov. 24 FBI raid on the finance company and another business owned by Durham, Obsidian Enterprises.

Previous court records allege that federal investigators suspect Fair Finance of operating as a Ponzi scheme, using money from new purchasers of investment certificates to pay off earlier investors. Today, more than $200 million is outstanding.

Two newspapers have filed a motion to unseal federal search warrants connected to FBI raids of businesses owned by Timothy S. Durham. The Indianapolis Star and the Akron Beacon Journal filed their motions on Dec. 18, stating that the public has a right to know what federal investigators were seeking in the Nov. 24 raids.

The newspapers’ motion says: “The overriding public interest in recovering millions of dollars in investments for thousands of investors, as well as the overriding public interest in the integrity of the political system in which one influential person may have destroyed thousands of retirement dreams, require that all documents issued in connection with Fair Finance and Timothy S. Durham be public.”

In a previous court filing, federal authorities alleged that Fair Finance, purchased in 2002 by Indianapolis businessman Timothy S. Durham, was being operated as a Ponzi scheme.

Fair Finance has yet to reopen its doors for business. The only signs of life at the company’s Akron headquarters: Several more signs behind the building have been recently marked with the words, UnFair Finance.

Last week, a news release issued by lawyers for Fair Finance said the company hoped to restart its accounts receivables billing and collection business on Dec. 14 but did not know when it would reopen. The company also gave no indication of when or if it would be able to resume selling and redeeming investment certificates for investors.

Federal investigators have suspected that Fair Finance, bought by Indianapolis businessman Timothy S. Durham in 2002, was being operated as a Ponzi scheme. According to court documents, Ohio investors might have as much as $200 million in outstanding investment certificates with Fair Finance.

Meanwhile, the Akron Beacon Journal is reporting that at least one Fair Finance investor has been asked by federal officials to complete a questionnaire as part of an ongoing investigation into the company. According to the paper, the investor’s money with Fair Finance was part of an inheritance. When she went to retrieve a check from the company in late November for her relative’s $17,000, she was greeted by closed offices.

The investor said the money was supposed to go toward helping her bury a relative. Because she couldn’t get her money from Fair Finance, she had to come up with a down payment for her relative’s funeral and still owes $4,000.

On Nov. 24, the FBI raided the Akron, Ohio, headquarters of Fair Finance and another business owned by Tim Durham, Obsidian Enterprises in downtown Indianapolis.