IBJNews

BREAKING: Durham, two other executives indicted for fraud

Back to TopCommentsE-mailPrintBookmark and Share

Beleaguered local businessman Tim Durham and two other executives tied to bankrupt Fair Finance Co. are facing a federal indictment on felony charges of wire fraud, securities fraud and conspiracy to commit wire fraud and securities fraud.

The 23-page grand jury indictment, unsealed Wednesday, alleges that Durham and business partner James F. Cochran worked with former Fair Chief Financial Officer Rick D. Snow to devise and execute a scheme to defraud investors in the Akron, Ohio-based company.

The Securities and Exchange Commission also filed a separate complaint against the men in federal court alleging they orchestrated a $230 million fraud involving at least 5,200 investors.

Between February 2005 and November 2009, Durham and Cochran directed Fair to loan money to themselves and other insiders, the federal indictment says, "which caused a steady and substantial deterioration in Fair's financial condition." The three men then allegedly  deceived and defrauded investors through misleading statements about the company's finances.

Durham's Indianapolis-based Obsidian Enterprises and DC Investments—co-owned with Cochran—were the primary beneficiaries of the loans, according to the indictment. Those businesses in turn loaned money to a "variety of struggling businesses and start-up ventures," including a car magazine, restaurants, a surgery center, a race car team and a luxury bus leasing business. Many of those borrowers failed, the indictment says.

Durham, now 48, and Cochran, now 55, also "used a significant portion of the proceeds of these loans to maintain their lifestyles and to pay for personal expenses."

In November 2010, FBI agents raided Obsidian's offices in Indianapolis and Fair's Akron headquarters.

The previous month, IBJ ran an investigative story highlighting the related-party loans and questioning whether Ohio regulators had been derelict in repeatedly approving the sale of additional investment certificates.

The company filed for Chapter 7 bankruptcy protection in early 2010.

In a TV interview last year, Durham suggested Fair failed in November 2009 because it couldn’t withstand the bad publicity caused by a surprise FBI raid of its offices that month.

But e-mails filed in Fair’s Chapter 7 bankruptcy case last month strongly suggest company insiders knew years before Fair collapsed that it was in dire straits.

Fair’s bankruptcy trustee, Brian Bash, alleges Durham “utterly looted” the business through related-party loans to himself, business associates and Indianapolis-based Obsidian Enterprises Inc., his holding company for a collection of transportation and manufacturing firms.

Durham and Cochran bought the then-68-year-old business for $23 million in 2002, using almost entirely borrowed money.

They immediately began doling out related-party loans, adding to the debt load, while scaling back what had been Fair’s profit-making business—buying customer-finance contracts from fitness clubs, time-share developers and other firms that offered customers extended-payment plans.

Last month, Fair Finance Co.’s bankruptcy trustee filed a lawsuit alleging that Durham perpetrated fraud of “shocking proportions,” draining huge sums from the firm for years to mask that his business empire had collapsed.

Snow, 47, has been chief financial officer of Fair Finance since 2002, according to the SEC complaint. The Fishers resident was appointed CFO of Obsidian in 2003, and in 2009 was named interim CFO of National Lampoon, which Durham also controlled.

This story will be updated.

ADVERTISEMENT

  • whose an idiot?
    From what the article said, the charges being brought up are federal charges. From what I read online about the Department of Corrections, non violent crimes usually do allow placment of the criminal in a lower security prison...but that changes when there is significant time to do. The more time you have to do, the less likely you will get a lower security prison. Bernie isn't in a White Collar or a minimum security prison....and being that this is the largest security fraud Indiana has prosecuted, I doubt these men will have the ability to get a sentence short enough to be sentanced to a low level prison.
  • White collar prison?
    what prison in Indiana is a "white collar" prison?
  • Greed Got Durham
    The first time I heard about Obsidian was in the IBJ. In the article, Durham stated that his goal was to be the wealthiest man in the world. When "it" is all about his own riches, why would anyone doubt he would steal to achieve his goal?
  • Ironic?
    Maybe Durham will get the cell right next to Marcus Schrenker!
    • Smash
      Maybe I am being too kind hearted, but I'm willing to bet they didn't buy Fair intending to turn it into a Ponzi scheme. They may have bought it as a source of cash flow for their other businesses, but once they saw how easy it was to pocket that cash, greed got the best of them.

      But then again, maybe they are just slimeball crooks who were looking to make a fast buck and weren't smart enough to see the long term consequences. Either way, looke like they are getting their due.
    • Take Brizzi too
      Now if only they would get his buddy and former board member, Brizzi, too.
    • Similarities
      In some respects these people are like suicide bombers.They are not dummies. Surely they knew they could not get away with this fraud,that their would be ruined,that they would be disgraced and that they would do a lot of time in prison. And yet, they did it,as did Madoff. Someone please tell me why. Innocent until proven guilty is not an answer for these people or Charlie White, our current Sec'y of State.
    • Finally is right
      Didn't think they were actually ever going to hold this crook responsible. Obviously was a complicated mess that took the Feds this long to put a case together.
    • finally
      Took long enough, but hopefully they all become guests of the federal prison system for a number of years.

    Post a comment to this story

    COMMENTS POLICY
    We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
     
    You are legally responsible for what you post and your anonymity is not guaranteed.
     
    Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
     
    No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
     
    We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
     

    Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

    Sponsored by
    ADVERTISEMENT

    facebook - twitter on Facebook & Twitter

    Follow on TwitterFollow IBJ on Facebook:
    Follow on TwitterFollow IBJ's Tweets on these topics:
     
    Subscribe to IBJ
    ADVERTISEMENT