Corporate & Securities Law

Lawsuits Multiply For Tim Durham, Fair Finance

By Mark Maddox

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.

Full post as published by Representing Investors on December 23, 2009 (boomark / email).