Comedic film producer National Lampoon Inc. paid for convicted Ponzi schemer Tim Durham’s legal defense, a court document alleges—a revelation that may strengthen an Ohio trustee's $9 million lawsuit against the company.
Durham, the former CEO of National Lampoon, was sentenced in November to 50 years in federal prison on securities fraud and other convictions in the collapse of Akron, Ohio-based Fair Finance Co. He also was ordered to pay $202.8 million in restitution to thousands of victims.
Earlier this month, a federal judge deemed Durham penniless and awarded the former Indianapolis businessman free counsel to appeal his sentence.
Fair Finance bankruptcy trustee Brian Bash, charged with recovering funds for Fair investors, alleged in the Friday court filing that National Lampoon funded Durham’s defense. The discovery "has significantly changed the posture of the case," he said, and prompted him to request a delay in the court case against National Lampoon. The court granted a continuance until December.
“The trustee recently discovered that National Lampoon possesses a significant volume of data and documents that National Lampoon previously contended were missing,” Bash said in court documents.
When reached by phone Wednesday morning, Durham’s trial lawyer, John Tompkins, said "I don’t think it’s accurate that Lampoon funded his defense. Beyond that, I don’t have anything to say."
Durham, who served as CEO of Fair before its collapse in 2009, was CEO at National Lampoon from 2008 until stepping down in January 2012. Bash is suing the Los Angeles-based company and is seeking to recover $9 million that Durham provided it over the past decade.
The suit filed in U.S. District Court for the Central District of California alleges that Durham funneled the money from Fair over the years to cover the ailing National Lampoon’s losses.
Bash said in the court document that National Lampoon’s lawyers have been cooperative with respect to the additional discovery and intend to explore alternatives to a trial to resolve the claims.
A federal jury in June found Durham guilty on all 12 counts stemming from the collapse of Fair. Prosecutors charged that Durham looted the company to fund a lavish lifestyle and support other failing businesses he owned.
Fair co-owner Jim Cochran, who was convicted on eight of 12 counts, received a 25-year sentence, and Rick Snow, the chief financial officer, received 10 years.
Money for the scheme came from 5,000 Ohio investors who purchased unsecured notes from Fair boasting interest rates as high as 9 percent.
Bash has been trying to recover money for the investors for nearly three years, but so far has been unable to make a distribution.
Bash sued Fair for more than $150 million and wrested a proposed $3.55 million settlement from former owner Donald Fair.
If a federal judge approves the settlement with Donald Fair, the pool of funds set to be disbursed to investors will grow from $1.8 million to nearly $5.4 million.
All of IBJ's coverage of Tim Durham and Fair Finance can be found here.