Corporate & Securities Law

Tim Durham, Fair Financial Probe Continues On

By Steven Caruso

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Beacon Journal, Morrison said his office has not accused or charged Durham or anyone else with a crime, although the withdrawn complaint alleges a Ponzi scheme.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.’?

Full post as published by Representing Investors on December 01, 2009 (boomark / email).