Judge halts dissolution of struggling Durham firm

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A judge has stepped in and blocked embattled Indianapolis businessman Tim Durham and other directors of Dallas-based CLST Holdings Inc. from dissolving the struggling company at the close of business on Friday.

New York-based Red Oak Partners, CLST’s largest shareholder, won the temporary restraining order from a Dallas County District Court judge on Wednesday. It had argued CLST hurriedly announced the liquidation plan on Feb. 9 in order to avoid having to hold an annual meeting next month.

The judge earlier this month ordered CLST to hold the meeting March 23, which would be its first since 2007. Two candidates backed by Red Oak are scheduled to run as dissidents for board seats at that meeting.

“Our view is they are desperate not to have us get inside and look at all the books and records,” said David Sandberg, a Red Oak portfolio manager who is one of the candidates.

In the proxy statement filed in preparation for the meeting, Red Oak wrote in bold letters, “We do not trust the current board.”

Durham serves as chairman of the company, which was known as CellStar and distributed cell phones before selling off those operations three years ago.

Durham won election soon after the asset sales, in part by pledging to dissolve the company quickly and give shareholders remaining cash. But about a year ago, CLST reversed course and began buying consumer finance contracts, including millions of dollars from Fair Finance Co., an Akron, Ohio, firm that Durham leads and co-owns.

The related-party purchases set off a storm of controversy and spurred CLST board member Manoj Rajegowda to resign in protest. A letter that Rajegowda's attorney sent the company said he "was not informed of this transaction and most strenuously objects to it."

CLST characterized the deals as good investment opportunities. But in a filing with Ohio securities regulators, Fair acknowledged it was financially strained and “felt it necessary to liquidate a large portion of its finance receivable portfolio.” At least some of the receivables CLST purchased soured, causing losses.

In December, CLST acknowledged in a regulatory filing that the U.S. Securities and Exchange Commission had launched an investigation of the financial dealings between it and Fair and had subpoenaed a mountain of information.

Durham, Fair’s CEO, also is ensnarled in a criminal probe of that company led by the U.S. Attorney’s Office in Indianapolis. In court papers filed in November, the office alleged Durham operated Fair as a Ponzi scheme, using money raised by selling investment certificates to Ohio residents to pay off earlier purchasers.

IBJ reported in October that Durham and other insiders have taken more than $168 million out of Fair in the form of insider loans. The story said the heavy borrowing raised questions about whether the company has the wherewithal to repay the Ohio investors, who are owed more than $200 million.

Red Oak officials say they support liquidating CLST, with whatever assets remain after expenses going to shareholders. But because the officials distrust CLST’s board, they want their nominees serving as board members first.

The temporary restraining order blocking dissolution will remain in place until March 10. On March 9, the Dallas judge will hold a hearing on whether to make the temporary injunction permanent.

CLST shares trade thinly on the "pink sheets" for about 9 cents each.

The stock has attracted several other Indianapolis investors in recent years, including Jim Cochran, co-owner of Fair Finance, and Carl Brizzi, Marion County’s prosecutor.


  • re
    Rumor has it Luda is convinced Durham is a victim and that it's lonely at the top of being the world's best businessman. No joke.

    In the interim for those who want the truth read the analysis section of fairfinanceinvestors.com, and pay specific attenion to the Dan Laikin loan section, and then ask yourself why Dans name is now missing from the DC Loans section and replaced with a $21.6M dollar writeoff. If this is a write off for Dan, guess what? The bankruptcy trustee is not going to be happy at all about that.

    Makes me wonder if this is why Laikin's sentencing was pushed back from this week to April 9th. Looks like all the crows are coming home to roost for the entire gang.


  • Ludacris was hot
    Ludacris was awsome on Letterman last night. How did he get involved with TD? I feel sorry for him. He has a great single out with a album to follow. "How low" check it out.
    • Simply Mistake
      Well these taxes would have been paid on time back in July if the FBI hadn't raided his offices and taken all of his checkbooks in November. Oh wait, nevermind..... But seriously, when do you think he realized the gig was up? It looks to me like about a year ago, early 2009, as that appears to be when payments stopped being made.
      • Cover story of Channel 8 tonight
        For someone who always wanted to be rich and famous...at least hes famous:

        • re
          This is sooooooooooo delightful watching the group of you race to the IBJ and other boards looking for clues about who knows what.

          You know what you did, you total pieces of garbage who prey on elderly people like my uncle. Wait until you guys get preyed upon in prison, hopefully it will be an Ohio state prison and very soon.

          I will make a prediction. Charges by June 1.
        • Somebody's grumpy
          Andy, Looks like you are onto something. The writer has yet to answer one of your questions, but instead, comes back with yet another oh so terrifying link that doesn't really prove a thing. Or, allegations that you are a...duh duh DUH!! An insider!! (Screams of terror everywhere!) Just because one isn't out to bring Durham down at all costs, doesn't mean he is an insider. Can you answer these questions without posting another link or begging him to shut up!?!
        • haha
        • re
          Please! Give it up.

          There are at least 239 articles and 61 blog posts on the Simons and/or their interests so Durham does not stand out as "special."

          Since you "insiders" insist on posting, let's make this simple. Answer these questions or forever shut up:

          1) Why did Durham do over $1.5 BILLION in offerings for investment certificates for a fledgling factoring company that is doing, as his own employee Robert Latham testified to at the bankruptcy hearing, "2 to 3M in receivables?"

          2) Why were no UCC filings for "loans" and/or "mortgages" recorded against Dan Laikin and others in the group? After all, Dan allegedly received over $20 Million of Fair Finance money.

          3) Why is it that Tim Durham's only two investing successes, outside of the Hearst Duesenberg which has obvious questions as to the integrity of the auction that sold it, are Brightpoint and his timely purchsae of Cellstar shortly before Brightpoint bought Cellstar?

        • Scoundrels everywhere
          Talk about scoundrels and scandalous behavior! Imagine if an author to a story would create an account just to comment on it and stir up the readers. I saw that happen today. There's a guy who writes EXACTLY like a reporter at IBJ posting on IBJ's threads and other sites. When he's called on it, he signs in as another user or storms off in a huff. He keeps saying he cares about what happens to the Durham investors but he's the biggest threat to their investments. Who ever he is, he wants to nail Durham so badly that he doesn't care if he destroys all of the confidence in Fair. He's posting on all these sites, citing what he's written on other sites. But, if you follow the threads, they all lead back to this one reporter who's personally angered with Durham. I wonder what it was he wanted Durham to do that he didn't? It mustn't have been legal or ethical because he could have sought help from the law of Durham owed him something. What kind of guy would hate Durham so much that he want libel Durham's family, bankrupt his businesses, and his investors, just to get Durham. Now that's just deliciously villainous!
        • Bernie Made-Off
          Bernie-- You taught you son too well. If every investment manager was like Durham, Bernie and Trump- every investor would loose their shirts, while these three scoundrels laugh all the way to the bank with their investors' money!
          • ....
            What kind of man would steal from the elderly to live like this?



          • Cellstar disclosure
            Cellstar actually compared the receivables favorably to US Treasuries. Remarkable.
          • Unbelievable
            Tim Durham is laughing all the way to the bank.

          • Profile
            I wonder if Tim is going to be the first person ever profiled by CNBC in both their "Inside the Life" and "American Greed" segments? Either way, it makes for good theatre. If it was not for the poor souls in Ohio, it would be high comedy.

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