Bankruptcy and Investment Losses and Fraud and Investing and Banking & Finance and Tim Durham and Law

Durham victims wait and wait, as quest for cash continues

July 5, 2014

The bankruptcy trustee who has been trying to scrape together money for victims of Indianapolis financier Tim Durham’s Ponzi scheme just struck two lawsuit settlements that underscore the daunting obstacles he faces.

The first, with Indianapolis restaurateur and Durham pal Henri Najem, is for a mere $20,000, with another $50,000 due if Najem succeeds in selling his sole remaining eatery, Bella Vita Ristorante on Geist Reservoir. Fair Finance’s bankruptcy trustee, Brian Bash, had sought to recover more than $525,000 from Najem and affiliated companies but concluded he had a “limited financial ability to pay.”

The other, with former Fair Finance Chief Financial Officer Rick Snow, sounds better on paper. Snow, who’s serving a 10-year sentence for his role in the fraud, consented to a judgment of $1.7 million, the full amount Bash sought to recover.

But gaining a judgment and collecting are different things. The settlement notes darkly, “Mr. Snow makes no representation to the trustee that he is able to pay the aforementioned settlement amount. To the contrary, Mr. Snow represents that he is unable to do so.”

Such are the realities Bash faces four years after he began trying to recover money for the more than 5,000 mom-and-pop Ohioans who bought more than $200 million in unsecured investment certificates from the Durham-owned Fair Finance Co. in Akron, Ohio.

The trustee and federal prosecutors charged that Durham—who’s now serving a 50-year prison sentence in Kentucky—looted the business, using tens of millions of dollars to support his opulent lifestyle, win over friends and prop up failing businesses.

Many of the dozens of lawsuits Bash has filed, including those against Najem and Snow, seek to reverse what he contends were improper transfers from Fair’s once-flush coffers. The problem is that many of the recipients “squandered” their money long ago and now have little to offer up, Bash says in court filings.

One recent setback involved Tim Durham’s Geist mansion, on which JPMorgan Chase held a $3.5 million mortgage. Fair Finance was third in line behind second-mortgage holder Shelby County Bank, which was owed $1.7 million. To boost Fair’s chances of recovery, Bash negotiated to assume Shelby County’s position. But the home, which was marketed for years at $5.5 million, recently sold for just $2.25 million, leaving nothing for Fair’s creditors.

Such episodes help explain why, despite Bash’s legal onslaught, the trustee is holding only about $4 million in cash, which isn’t even enough to pay what his legal team has earned in fees. The investors, meanwhile, have not received anything.

In a filing this spring, Bash wrote, “While I do not intend to give up, there is no guarantee there will be a return for creditors in the near future.”

The best hope lies with a handful of high-dollar lawsuits, including a case seeking $72 million from Fair lender Fortress Credit Corp., which is accused of turning a blind eye to Durham’s fraud because it held collateral protecting it from losses. Other cases with potentially sizable recoveries include suits against former Fair director Dan Laikin and National Lampoon, where Laikin was CEO.

The passage of time is working against the investors, many of whom are in their retirement years. A 71-year-old woman in Dalton, Ohio, wrote one of the judges handling Fair cases in May, saying she and her husband were living simply without cell phones or computers while she prayed daily they would receive back part of their $80,000 investment.

The judge responded that court rules did not allow her to respond to the letter, but she counseled the writer to consult a bankruptcy attorney.

Marsh’s place in scanning history

A momentous milestone in the history of retailing just passed—and locally based Marsh Supermarkets Inc. was at the center of it.

Forty years ago, on June 26, 1974, the head of R&D at Marsh made the first-ever purchase using a UPC bar code. The 10-pack of Juicy Fruit gum rang up for 67 cents at the Marsh store in Troy, Ohio, near where a team of companies developed the technology.

“It’s hard to believe that a single event in Troy, Ohio, could launch a technological revolution that touches businesses of all kinds around the world,” Marsh CEO Tom O’Boyle said in a prepared statement.

That’s not to say Marsh customers were immediately enamored. Some didn’t trust the system. In the early days, the grocery provided grease pencils so customers could write down prices as they shopped and compare them to the scanned prices at the checkout stand.•

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