Fraud and Lawsuits and Investing and Banking & Finance and Securities fraud and Tim Durham and Law

Fair Finance trustee sues Durham relatives

January 17, 2011

Fair Finance Co.’s bankruptcy trustee has sued Tim Durham's sister and her husband, charging they defaulted on a loan from the company and now owe $1.2 million.

The case, filed Friday against Jeffrey and Dana Osler, is the latest in what is expected to be a string of loan-collection lawsuits brought by the trustee against friends and business associates of Durham, the embattled Indianapolis businessman who served as Fair's CEO.

Trustee Brian Bash said in the complaint that Fair was “utterly looted through insider loans,” leaving it unable to repay more than 5,000 Ohio residents who purchased unsecured investment certificates. The company owes the investors more than $200 million.

The insider lending spree began shortly after Durham and fellow Indianapolis businessman Jim Cochran purchased the Akron, Ohio-based finance company in 2002. The pair and businesses they controlled were the largest borrowers, pulling out tens of millions of dollars they never repaid.

Another big borrower was Carmel businessman Dan Laikin. The trustee sued Laikin last April, saying he used his position as a Fair director to borrow more than $19 million he failed to repay.

Friday’s suit suggests Bash doesn’t intend to let the comparatively smaller borrowers off the hook, even though the amounts at issue barely put a dent in Fair’s massive debts.

Jeffrey Osler was the general manager of Hilton Head National Golf Club before becoming an executive vice president and board member of Obsidian Enterprises Inc., Durham’s Indianapolis-based buyout company, in the early 1990s. Osler also served as an officer and director of a number of other Durham companies and maintained their financial records, according to Bash’s suit.

The suit says Osler took out his first loan in 2002, a line of credit for up to $200,000. Over the next three years, he regularly amended the loan, increasing the credit line and extending the maturity dates.

The final modifications extended the maturity date to 2008 and increased the credit line to $500,000. Even so, as of the end of 2010, the principal had swelled to $911,067. Bash also is seeking $297,000 in unpaid interest and $5,519 in late fees.

Osler’s wife also is a defendant in the suit because in 2005 she guaranteed the debt, the trustee’s complaint says.

Neither could be located for comment Monday morning. The couple is estranged. Dana filed for legal separation from Jeffrey last June in Marion County. She converted the case into a divorce proceeding in late 2010.

Kelly Burgan, an attorney for trustee Bash, said his legal team may file a handful of suits against other loan recipients in coming weeks. She declined to say who might be targeted.

Records filed with securities regulators list outstanding loans to other Obsidian insiders, including Scott McKain, a professional speaker who served as the company’s vice chairman. According to the records, another borrower with unpaid loans was local restaurateur Henri Najem, who owns Bella Vita restaurants on Geist Reservior and at Circle Centre mall. Some people on the loan lists—including McKain—have denied they received loans and say the records are wrong.

The trustee’s investigation into the collapse of Fair Finance is separate from an ongoing criminal probe overseen by the U.S. Attorney’s Office in Indianapolis.

Durham acknowledges owing large sums to Fair, but has denied criminal conduct. His attorneys say in court filings that Fair Finance provided prospective purchasers of Fair's investment certificates offering circulars that disclosed insider loans and other risks.

However, investigators are trying to build a case that Durham duped investors. In a court filing late last year, the U.S. Attorney’s Office in Indianapolis alleged Durham was operating a Ponzi scheme, using money from the sale of new investment certificates to pay off prior purchasers.
 

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