Legal Issues and Fraud and Investing and Banking & Finance and Tim Durham and Law

Fair Finance investors fear money is disappearing

January 27, 2010

WOOSTER, Ohio—The throng of Fair Finance investors who gathered here Tuesday night to learn more about investigations into the Akron company fear their chances of recovering money is dwindling by the day.

Many of the more than 1,000 people who crowded into a college auditorium for the meeting believe Fair owner Tim Durham is frittering away the company’s assets as the weeks pass.

Investors applauded every time Rep. John Boccieri, the Ohio Democrat who organized the 90-minute meeting, said he was hellbent on getting the government to lock down whatever money remains.

“His assets and the assets of the company need to be frozen until we get to the bottom of this,” said Boccieri, whose district includes five of Fair’s eight offices. “I won’t stop until this happens.”

Investors gathered in hopes of learning more about FBI and U.S. Securities and Exchange Commission probes into the consumer-finance firm, which is owned by Durham and fellow Indianapolis businessman Jim Cochran.

They left frustrated after they heard little new. Representatives of the Ohio Department of Commerce’s Division of Securities said that by law they couldn’t even confirm the existence of investigations. And Boccieri said the FBI backed out of the meeting at the last minute out of fear public comments could compromise its inquiry.

Fair Finance has been shut down since Nov. 24, when FBI agents raided the company’s headquarters and Durham’s Indianapolis office. The same day, the U.S. Attorney’s Office in Indianapolis filed court papers alleging Fair was operating as a Ponzi scheme, raising ever more money from Ohio residents to pay off prior investors.

The raid occurred one month after IBJ reported in an investigative story that Durham and Cochran had used Fair almost like a personal bank since buying it in 2002, tapping it for tens of millions of dollars in insider loans.

The owners and related parties now have rung up more than $168 million in insider loans. IBJ reported the massive loans cast doubt on whether Fair has the financial wherewithal to repay Ohio residents who purchased $200 million of Fair’s investment certificates.

Investors said Tuesday night they fear little of their money is left, and whatever scraps remain might disappear while investigators continue their work.

“I’d be shocked to get my money back,” said 66-year-old Brady Cassidy of Wooster, who purchased $90,000 in certificates. “I think this is another Madoff deal,” referring to the New York financier who ran a multibillion-dollar Ponzi scheme.

Tim Morrison, the U.S. attorney in Indianapolis, filed a civil lawsuit Nov. 24 seeking to freeze Durham’s assets but dropped it six days later. He has declined to elaborate on that decision, beyond saying, “Having [received] appropriate assurance [assets] are not being dissipated, that litigation stopped.”

But Boccieri and investors fear money is disappearing anyway. The congressman first called for an asset freeze on Fair and its owners in December. He renewed the call this month after word spread that Cochran had posted an ad on Craigslist for an estate sale at his $3.5 million Naples, Fla., home. The sale occurred as scheduled, and Cochran unloaded everything from Bentley and Porsche automobiles to a 28-foot boat and a large potted plant.

Federal investigators have refused to discuss their investigation or speculate on when they will wrap up. Fair principals have denied doing anything improper, and they have not been charged with crimes.

Investors attending Tuesday’s meeting were eager for a quick resolution. The majority of attendees were elderly and had been counting on Fair investments to help carry them through their final years.

“I can’t understand why the FBI is taking so long,” said 74-year-old Beverly Isom of Wooster, who is owed more than $40,000.

But Doug Durshal, a Wooster attorney representing investors in a lawsuit against Fair, predicted a long slog lies ahead. He said investors won’t know how they’ll fare for a long time.

“Many months would be fast,” Durshal said after the meeting. “If it is resolved in a year or two, I’d be pleased.”

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