IBJNews

Durham enlisted directors with personal, financial ties

Back to TopE-mailPrintBookmark and Share
Greg Andrews

Marion County Prosecutor Carl Brizzi never seemed like an ideal fit to serve as a board member of a finance company.

“Math was never my strongest subject in school,” Brizzi said hours before FBI agents on Nov. 24 executed search warrants and seized records related to Ohio-based Fair Finance Co., a business led and co-owned by his pal, Tim Durham.

Durham

Brizzi, who said he accepted the Fair directorship in October because he wanted to learn more about finance, quit several weeks later, after learning IBJ was working on a story raising questions about its business practices.

But his short stint reflects a larger pattern in Durham’s business dealings. He’s filled board slots with friends and associates—not with truly independent businesspeople likely to stand in his way.

At least two other men who have served or are serving as ostensibly independent directors at Fair, for instance, have deep personal or financial ties to Durham.

And another company where Durham is a major investor and director, Dallas-based CLST Holdings Inc., this year brought aboard a longtime Durham associate after prior director Manoj Rajegowda quit to protest a controversial transaction.

In the deal, CLST, which was in the process of winding down after selling its cell-phone distribution operations, purchased consumer-finance receivables from Fair, providing the Ohio company badly needed cash.

A New York investment firm, Red Oak Partners, this year launched a proxy fight in hopes of winning CLST board seats on the grounds that insiders have “knowingly or recklessly violated their fiduciary duties.”

Red Oak has balked at several CLST moves, including the appointment of Rajegowda’s successor, David Tornek, a partner with Durham in Touch, a restaurant in Miami Beach, Fla. In a Securities and Exchange Commission filing, Red Oak says it does not believe Tornek will provide “objective, unbiased scrutiny,” given that he “has done business with Tim Durham for years, knows him personally and has been featured in news articles with him.”

Similar ties abound at Fair. Brizzi’s director slot previously was held by Dan Laikin, another Durham friend. The pair was part of a local group that nearly a decade ago teamed up to acquire control of National Lampoon Inc.

Durham stepped in as CEO of the Los Angeles company a year ago, after a grand jury indicted then-CEO Laikin on stock-manipulation charges. Laikin pleaded guilty to one felony count in September and is awaiting sentencing.

Laikin also was an investor and board member at Obsidian Enterprises Inc., Durham’s Indianapolis-based leveraged-buyout firm. Obsidian was one of the largest recipients of the related-party loans that have cast uncertainty over the viability of Fair, and Laikin himself borrowed millions from the company. Securities filings show he pledged his $10 million Malibu, Calif., home as collateral.

So it’s hard to think of Laikin as a watchdog. But that’s the role he was supposed to fill on the Fair board. Securities registrations listed him as an independent director charged with approving loans in which Durham and other company principals had a financial interest.

In all, related-party loans now exceed $168 million—by far the largest asset on Fair’s balance sheet. Repaying Fair’s investors, everyday Ohioans who purchased short-term investment certificates, hinges on insiders’ making good on their debts. Fair owes purchasers of investment certificates more than $200 million.

Investigators are swarming. In court documents, the U.S. Attorney’s Office in Indianapolis alleged Fair operated as a Ponzi scheme, using money from new investors to pay what it owed prior investors, thereby “lulling the earlier victims into believing that their money was being [handled] responsibly.” The SEC also is investigating and has subpoenaed a mountain of documents from CLST, including the deal that spurred Rajegdowda’s resignation.

With Brizzi out of the picture, Durham has turned to another old friend to help carry Fair through its difficult times. Filings with securities regulators show the new director is Scott McKain, a former WISH-TV Channel 8 reporter who now is a professional speaker and principal of the Value Added Institute, a think tank focused on building client loyalty.

But that’s not all. McKain, who could not be reached, also serves as vice chairman of Obsidian Enterprises. And he is forever grateful to Durham for providing money to help him and his wife deal with the financial devastation wrought by her battle with ovarian cancer.

“Had it not been for the support and generosity of my best friend, Tim Durham, I don’t know how we could have made it,” McKain wrote on his blog. “We lost all we had—but without Tim we would have been bankrupt and wondering where the next meal … was coming from.”•

 

 

ADVERTISEMENT

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
  1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

  2. I appreciated the article. I guess I have become so accustomed to making my "pit stops" at places where I can ALSO get gasoline and something hot to eat, that I hardly even notice public rest stops anymore. That said, I do concur with the rationale that our rest stops (if we are to have them at all) can and should be both fiscally-responsible AND designed to make a positive impression about our state.

  3. I don't know about the rest of you but I only stop at these places for one reason, and it's not to picnic. I move trucks for dealers and have been to rest areas in most all 48 lower states. Some of ours need upgrading no doubt. Many states rest areas are much worse than ours. In the rest area on I-70 just past Richmond truckers have to hike about a quarter of a mile. When I stop I;m generally in a bit of a hurry. Convenience,not beauty, is a primary concern.

  4. Community Hospital is the only system to not have layoffs? That is not true. Because I was one of the people who was laid off from East. And all of the LPN's have been laid off. Just because their layoffs were not announced or done all together does not mean people did not lose their jobs. They cherry-picked people from departments one by one. But you add them all up and it's several hundred. And East has had a dramatic drop I in patient beds from 800 to around 125. I know because I worked there for 30 years.

  5. I have obtained my 6 gallon badge for my donation of A Positive blood. I'm sorry to hear that my donation was nothing but a profit center for the Indiana Blood Center.

ADVERTISEMENT