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Fair Finance investors likely to recover little money

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Investors in the bankrupt Fair Finance Co. are likely to recoup just a small amount of the money they lost despite the indictment Wednesday of Timothy S. Durham and two other executives tied to the firm.

A 23-page grand jury indictment alleges that Durham, 48, and business partner James F. Cochran, 55, worked with former Fair Chief Financial Officer Rick D. Snow, 47, to devise and execute a scheme to defraud investors in the Akron, Ohio-based company.

Altogether, authorities say Fair Finance owes 5,200 Ohio investors $230 million. Officials called it the largest corporate fraud case in Indiana history.

But unfortunately, investors subjected to fraud often receive mere pennies for every dollar invested, said Brad Skolnik, a securities lawyer and former state securities commissioner.

“Although Mr. Durham appeared to have a significant amount of wealth and they were able to sell his assets, the amounts recovered represent a tiny fraction of the massive amounts that were lost by investors in connection to this alleged fraud,” Skolnik said.

Indeed, bankruptcy trustee Brian Bash and his fellow attorneys at Baker & Hostetler in Cleveland only recovered about $1.4 million through the sale of Durham’s elaborate automobile and art collection.

In January, the Durham vehicles collectively fetched about $2.2 million, likely leaving about $1 million for the trustee after expenses and a bank lien are paid off, said Kelly Burgan, an attorney for Bash.

Durham’s Geist mansion, which fell into foreclosure in September, will not provide any funds for investors.

The trustee had hoped to use proceeds from the sale of the 10,700-square-foot home to repay some of the more than $200 million owed to investors. But the disclosure of the $3.5 million mortgage, which JPMorgan Chase assumed in 2008 when it took over the failed Washington Mutual Bank, suggests there is little or no equity in the home.

“That’s the frustration we face,” Burgan said. “[Their wealth was] squandered on things we can’t recover, like trips and gambling.”

According to the indictment, the men spent lavishly. Durham, for example, wired $250,000 in Fair money in 2007 to remodel his garage. He wired another $150,000 the following year to use at a casino. In addition, Cochran wired $50,000, also in 2008, to pay country club fees.

The trustee now is pursuing others who received loans from Fair Finance.

Attorneys early on sued Carmel businessman Dan Laikin, a former director of Akron, Ohio-based Fair, alleging he was among the largest recipients of the insider loans that “utterly looted” the business.

The suit says Laikin owes more than $19 million. And while the trustee may win, collecting on the debt is another matter. Laikin, former CEO of Los Angeles-based National Lampoon Inc., isn’t the ideal defendant. He lost millions when that company cratered, and right now he’s serving a 45-month prison sentence for trying to manipulate Lampoon’s stock price.

Burgan said the trustee has had some success in discussing settlements with at least one target of the lawsuits.

“It’s difficult, if not impossible, to predict what recoveries will be,” said Burgan, acknowledging it likely will be a “teeny-tiny fraction” of the $230 million.

Durham, Cochran and Snow all were arrested Wednesday at their homes—Durham in Los Angeles and Cochran and Snow in Indianapolis.

Cochran and Snow have been released on their own recognizance following a Wednesday initial hearing in Indianapolis before U.S. Magistrate Judge Kennard Foster.

Durham, meanwhile, was awaiting his initial hearing in Los Angeles on Thursday morning. All three men face felony charges of 10 counts of wire fraud, one count of securities fraud and one count of conspiracy to commit wire fraud and securities fraud.

Each faces a maximum of five years in prison for the conspiracy count, 20 years in prison for each wire fraud count and 20 years in prison for the securities fraud count. In addition, each could be fined $250,000 for each count upon which they are convicted.

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  • Hope for the best
    I'm not sure what will happen. I worked there until the fall of last year. Over the three years that I was employed at United the annual income decreased each year for the workers...imagine that! I hope the Obsidian represenative ( Todd Bontrager) is looked at as well. No doubt in my mind he knew what was going on and all we got was b.s. excuses as to why our pay continued to decrease. Now it makes a little more sense as to why a company would send a guy down to be president...when he had no clue as to what we were building or the industry in general...FRONT MAN!!!
  • Monday's hearing information
    Sources have indicated to us that Tim Durham will be facing his arraignment in Los Angeles on Monday, March 21, 2011 at 5:30 p.m. EST, before Judge Victor Kenton of the U.S. District Court for the Central District of California. His case number is 11-MJ565, and his prisoner number is #60452-112. At this time, the Judge will likely determine the amount of bail for Durham or if Durham is to be held with no bail.

    His court clerk is Roxanne Horan, fax # 213-894-1815

    The victims need to fax in statements they want Tim held with NO BAIL so he can't spend any more of their stolen money, and as an incentive for him to tell where whatever money is left is.
  • Punishment for Them
    Why jail.That will only cost the tax payers for their keep! I say strip them of everything and release them to live on the streets with the many homeless people our country has Let them get a taste of that life.They didnt have any problem stripping the many thousands of good honest people of their food,clothing,medicines and most of all their dignity! This would be my punishment for them.
  • bridge in brooklyn
    the only people who came out smelling like a rose were the owners who sold their business to durham ..now there is a story to tell
  • Other People's Money
    Lovin' this! He looked haggard, worn, fat and old in the 'cuffed and stuffed' photo. Maybe he actually DOES have a conscience about creating his fantasy life from other people's money...or maybe he's worried he will be prey to Bubba and Big Joe in lock-up. Well, TD, take comfort in the memories of a once-fab life that you never earned and never deserved to live. That should help ease the pain of a drab 6x10 cell for the next 5 to 50.
  • Candy From a baby
    Mr. Durham is quoted as saying "It was like taking candy from a baby" Now who's crying!
  • Fallout from this
    What will happen to the only still operating Obsidian company, United Trailers in Bristol, IN?

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