Would-be buyer: Durham double-dipped on Duesenberg deal

December 30, 2009

Beleaguered local businessman Tim Durham struck a deal to sell a vintage Duesenberg for $1 million before auctioning off the same vehicle for $2.9 million, according to the small-town Michigan mayor who said he agreed to buy it.

Dowagiac Mayor Donald Lyons issued a formal statement this week, more than two weeks after being named a defendant in a civil lawsuit alleging that he and others committed fraud by manipulating the price of the car at auction.

The plaintiff, James F. Scott of Charlottesville, Va., agreed to buy the car for $2.9 million at a Sept. 3 auction in Auburn. He alleges that the other bidder—Mark Hyman, owner of Hyman Limited Classic Cars in St. Louis—made offers in consultation with Lyons, and that they “were stakeholders and/or owners of the automobile.”

“By bidding up the price of the automobile to $2.9 million, without disclosing to the plaintiff that they were the owners of or had a material financial interest in the proceeds of the sale, the sellers intentionally, artificially and surreptitiously inflated the price for the automobile,” the lawsuit alleges.

Lyons said that assertion is simply not true.

“We never owned the vehicle. We never made a bid with the intent of driving up the price,” his statement read. “We bid at the auction because we wanted to buy the vehicle.”

In fact, he said, with Hyman’s help he struck a deal with Durham’s Indianapolis-based Diamond Auto Sales prior to the auction, agreeing to pay $1 million for the vehicle built for publishing scion William Randolph Hearst. The car is listed as a 1929 model in Lyons' statement, but the civil lawsuit calls it a 1930 model.

But it already was slated to be part of the Auburn Cord Duesenberg Museum’s annual Labor Day auction, so Lyons agreed to allow the sale to be finalized there—assuming he was the high bidder.

“Nobody expected that anyone would bid much more than $1 million for the vehicle,” according to Lyons’ statement. “We thought we were being nice and doing a favor to the museum to agree to do it this way.”

But with Scott bidding by phone, the price “quickly approached and surpassed $2 million,” Lyons said. Hyman, who bid on Lyons’ behalf, stopped at $2.8 million. Scott submitted the high bid of $2.9 million—a price Car Collector magazine called “amazing, particularly in these notoriously difficult times.”

After the auction, Lyons said he and Hyman talked with Durham, who agreed to allow the two men to share the proceeds of the sale if Diamond Auto received the original $1 million purchase price from Lyons within a week.

Scott’s lawsuit said the auction house disbursed the full $2.9 million he transferred to pay for the purchase. Lyons said he paid Diamond Auto and shared the profit with Hyman, giving a portion to the museum. But Scott never received title to the vehicle.

Lyons said he didn’t know until a few weeks ago that Diamond Auto had failed to provide the title. The auto dealer’s bank apparently has a lien on the car, Lyons said in his statement, and will not release it until Diamond Auto settles the debt. The bank, Webster Business Credit Corp., also is named as a defendant in Scott’s complaint.

“It is a complicated set of events,” said Lyons, chairman of Michigan home products maker Lyons Industries Inc. “But … what is important to understand is that I never owned the vehicle. It passed directly from the owner to Mr. Scott. I wasn’t a seller. I was a would-be buyer.”

Scott’s lawsuit is pending in U.S. District Court in Fort Wayne. Lyons said he has offered to set aside his proceeds of the sale, “so that the court can determine who is legally entitled to the money.”

Durham has not responded to phone calls or e-mail messages regarding the lawsuit. Lyons told IBJ he has not had contact with Durham.

“Quite frankly, everything that’s going on right now is going through lawyers,” he said.

The Duesenberg lawsuit is the latest in a string of legal challenges confronting Durham, 47, who’s facing U.S. Department of Justice and Securities and Exchange Commission investigations over transactions he helped orchestrate at Akron, Ohio-based Fair Finance Co. and Dallas-based CLST Holdings Inc.

The U.S. Attorney’s Office in Indianapolis alleged in court papers last month that Durham operated Fair Finance as a Ponzi scheme, using the sale of new investment certificates to Ohio residents to repay prior purchasers.

He and other insiders have borrowed more than $168 million from Fair. The company, meanwhile, owes holders of investment certificates more than $200 million—a debt many purchasers fear the company can’t pay.


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