Investors in Tim Durham’s Fair Finance Co. shoved the company into bankruptcy court Monday morning, a move intended
to reduce the risk assets will disappear while securities fraud probes continue.
Ohio attorneys David Mucklow and Michael Moran filed the involuntary Chapter 7 bankruptcy case in the U.S. Bankruptcy Court for the Northern District of Ohio on behalf of Fair Finance investors they represent. The filing seeks appointment of a trustee “to take possession of the property ... in order to protect and preserve the assets.”
This is the second time in recent days that Ohio attorneys have launched legal efforts to marshal assets of the Akron, Ohio, company. On Feb. 4, attorneys filed a motion in a class-action lawsuit asking an Ohio state court to appoint a receiver.
Mucklow told IBJ he believes bankruptcy is a better option because the federal bankruptcy court has jurisdiction over assets related to Fair and its co-owners—Durham and fellow Indianapolis businessman Jim Cochran—that are beyond state lines, while the state court does not.
Investors and attorneys have been frustrated for weeks that Tim Morrison, the U.S. attorney for the Southern District of Indiana, has not pursued legal action to lock down Fair’s assets and those of Cochran and Durham.
Morrison’s office on Nov. 24 filed a civil lawsuit alleging Durham operated Fair as a Ponzi scheme and seeking to seize his assets, including his Geist mansion. But the office dropped the case six days later. “Having received appropriate assurance [that assets] are not being dissipated, that litigation stopped,” Morrison said at the time. He has declined to elaborate.
His office filed the suit a month after IBJ reported that Durham and Cochran had used Fair almost like a personal bank since buying it in 2002. The story said that he, his associates and related firms rung up more than $168 million in insider loans—debt that might imperil Fair’s ability to repay Ohio investors who purchased $200 million of the company’s investment certificates.
Fair Finance has been closed since the FBI raided its offices Nov. 24.
Neither Durham nor Cochran has been charged with a crime. Both men have denied wrongdoing.