The Fair Finance Co. bankruptcy trustee has sued Carmel businessman Dan Laikin, saying he used his position as a Fair director to borrow more than $19 million from the company that he now must pay back.

The suit, filed late Friday in northern Ohio, is the first major legal move by Fair Trustee Brian Bash to untangle the morass of related-party loans that propelled the Akron, Ohio-based company into insolvency. By last year, the suit says, Fair “had been utterly looted through insider loans.”

The case represents another setback for Laikin, the former CEO of Los Angeles-based National Lampoon Inc., who pleaded guilty last fall to manipulating the stock price of that company and is awaiting sentencing.

Laikin, 48, is a longtime friend of Fair co-owner and CEO Tim Durham, an Indianapolis businessman who’s the target of criminal securities fraud probe. Laikin served as director of Fair Finance, a consumer-loan company, from 2006 to 2009.

During that time, the suit says, Laikin “used his insider status to obtain loans ... on commercially unreasonable terms and without formalities,” such as legally posting the assets he pledged as collateral. As a result, according to the suit, Laikin was able to use those assets as collateral to other creditors.

An attorney for Laikin could not be reached Tuesday. Trustee Bash, a partner in the Cleveland law firm Baker & Hostetler, was not available for comment.

Records filed with securities regulators show Durham used Fair like a personal bank after buying it in 2002, with money flowing to support an ostentatious lifestyle, friends and business associates, as well as other companies he owned.

Related-party loans now top $168 million and represent the primary asset available to pay Ohio residents who purchased more than $200 million in unsecured investment certificates from Fair. Fair in November halted payments on the certificates, which were supposed to pay interest rates as high as 9.5 percent.

Records show Fair Finance lent to its parent, Fair Holdings, which in turn lent to DC Investments, a holding company jointly owned by Durham and Indianapolis businessman Jim Cochran. DC Investments, known as DCI, then issued tens of millions of dollars in loans, many of them to insiders.

“Fair Holdings and DCI essentially used [Fair Finance] as a cash cow to personally enrich the owners and other insiders and affiliates,” the trustee’s lawsuit says. It notes that Fair Finance “generally did not collect regular payments on loans to its parent companies, not even interest,” and took no steps to seize collateral on insider loans.

The Laikin loans technically came from DCI, though the three firms “are so entangled that they are one and the same company,” the trustee says in court papers. He said he soon will be filing papers to fold Fair Holdings and DCI into Fair Finance’s bankruptcy case.

Even though that hasn’t happened yet, Bash said in court papers that he decided to move forward with the Laikin suit to assert Fair Finance’s security interest in a Los Angeles home that Laikin has listed for sale for $8.99 million.

Laikin, brother of Brightpoint Inc. CEO Bob Laikin, also posted stock held in one of Durham’s investment accounts as collateral, according to the suit. The bulk of that collateral is Brightpoint Inc. stock worth $1.7 million.

Durham, 47, has denied doing anything wrong. His attorneys say in court filings that Fair Finance provided prospective purchasers of Fair's investment certificates offering circulars that disclosed insider loans and other risks.

However, investigators are trying to build a case that Durham duped investors. In a court filing late last year, the U.S. Attorney’s Office in Indianapolis alleged Durham was operating a Ponzi scheme, using money from the sale of new investment certificates to pay off prior purchasers.