Indicted Indianapolis financier Timothy Durham didn’t appear to know he was in big trouble until Nov. 24, 2009, the day the FBI conducted high-profile raids of his office atop Chase Tower downtown and Fair Finance Co.’s Akron, Ohio, headquarters.
But court documents filed in Durham’s criminal case reveal the FBI had been investigating Durham since March 2009, when his friend Dan Laikin, a Fair Finance board member, offered up incriminating information on Durham in hopes of securing a lighter sentence for himself in an unrelated case.
That’s according to affidavits that FBI Special Agent Dennis Halliden signed in November 2009 in support of the government’s requests to set up wiretaps and conduct the raids.
That March 2009 meeting marked the opening of the criminal inquiry, according to a summary of one of the affidavits included in an order issued last month by Judge Jane Magnus-Stinson. The affidavits themselves are under seal, but portions have been excerpted in recent months by attorneys and Magnus-Stinson, who is overseeing the fraud case against Durham and two business associates that’s scheduled for trial next month.
According to the affidavits, Laikin told the FBI in the March 2009 meeting that “Timothy Durham has been running a Ponzi scheme via Fair Finance” and that “Fair Finance funds have paid for Durham’s extravagant lifestyle and luxury cars.”
Two years later, prosecutors lowered the boom, charging Durham masterminded a scheme to raid Fair coffers to fund millions of dollars in personal expenses and to prop up other failing businesses he controlled.
Authorities charged that, after buying Fair in 2002, Durham pulled out money with such abandon that he left it without the means to repay Ohio investors who purchased the company’s high-yield investment certificates. More than 5,200 investors are owed $230 million.
Recent court filings clarify that Laikin—an Indianapolis businessman who served as CEO of Los Angeles-based National Lampoon Inc.—actually had not used the term “Ponzi scheme” when he met with the FBI in March 2009. But his attorney had when he proposed the meeting. The affidavit says that, during the meeting, Laikin refused to cooperate further unless the government agreed to a reduced sentence, which it declined to provide.
Eighteen months later, a federal judge in Philadelphia sentenced Laikin to nearly four years in prison for orchestrating an ultimately unsuccessful scheme to pump up the slumbering stock price of National Lampoon.
The wiretap affidavit says that between the March 2009 meeting with Laikin and the raids, the FBI interviewed Laikin’s brother, Brightpoint Inc. CEO Bob Laikin, who said “he fully [expected] to pick up the newspaper one morning and see … Durham … indicted for running a Ponzi scheme.” Bob Laikin was not involved in either Fair or National Lampoon.
During the same span, the FBI lined up two confidential informants who were able to provide reliable information but had never personally discussed criminal activity with Durham, court records say.
The Securities and Exchange Commission was conducting its own civil investigation during this period, court records say, relying in part on a cooperating Fair Finance investor who had been unable to get his money out when the investment came due.
Coincidentally, IBJ in the spring of 2009 also had begun scrutinizing Durham’s dealings with Fair. An article the newspaper published one month before the raids questioned whether the heavy withdrawals—which Durham characterized as insider loans—left Fair insolvent.
Dan Laikin himself was a big recipient of Fair Finance loans, according to a lawsuit the company’s bankruptcy trustee filed against him two years ago.
Durham and Laikin go back a long way. Both were part of an Indianapolis contingent that scarfed up National Lampoon shares more than a decade ago. And after Laikin’s arrest, Durham succeeded him as CEO.
It’s not clear how friendly they are now.
In an August 2011 deposition, Laikin said Durham had visited him earlier that year at the U.S. Penitentiary in Lompoc, Calif., where he is serving his sentence. Among other things, the two talked about continuing efforts to bolster National Lampoon.
But Laikin didn’t sound so keen on Durham in his deposition. He said Durham had appointed him to the board without asking him. Laikin said he’d never been asked to attend a board meeting and knew little about the company’s inner workings.
He’s contending that Fair financial statements showing he owes the company more than $20 million are wrong. And in his deposition, he put little faith in any of Fair’s recordkeeping under Durham.
Asked whether he had any reason to question Fair records listing him as joining the board in June 2006, Laikin said: “I have multimillions of reasons … because I don’t have any confidence in a majority of documents I am seeing that originated with Tim.”•