A Texas company where Tim Durham is chairman acknowledged on Tuesday that the Securities and Exchange Commission is investigating financial dealings between it and Fair Finance Co., an Ohio-based firm where Durham is CEO.

The transactions between Dallas-based CLST Holdings Inc. and Fair were the subject of an IBJ article early this year that raised questions about conflicts of interest.

Publicly traded CLST revealed the SEC investigation in a filing with the commission. The filing said that the company, Durham, CEO Robert Kaiser and director David Tornek all received subpoenas.

The filing reveals for the first time that the SEC is conducting its own investigation of Durham’s business dealings and that the probe extends beyond Fair Finance, the consumer-finance firm Durham co-owns. The only previously public federal investigation was one being conducted by the U.S. Department of Justice.

CLST was a cell-phone distributor known as CellStar Corp. until about three years ago, when the company sold off its business units to several buyers, including locally based Brightpoint Inc. Soon thereafter, Durham won election to the board, in part by pledging to dissolve the company quickly and distribute remaining cash to shareholders.

But about a year ago, CLST reversed course and began buying consumer finance contracts, including about $3.6 million it acquired from Fair Finance.

That transaction outraged CLST board member Manoj Rajegowda, who resigned in protest. A letter Rajegowda's attorney sent the company said he "was not informed of this transaction and most strenuously objects to it."

CLST’s Kaiser in March defended the company’s new strategy of buying receivables, saying they might generate a handsome return. "With cash earning less than 1 percent, some of these other portfolios will prove to be more valuable than holding cash," he told IBJ at the time.

The company made no mention at the time that Fair was selling the receivables because it badly needed to raise cash to repay Ohioans who had purchased about $200 million in short-term investment certificates.

Fair acknowledged the financial strain in a document it filed about a month ago with the Ohio Department of Commerce's Division of Securities.

“At the beginning of 2009, management of Fair Finance Company was concerned about the effect that the country’s economic downturn may have upon Fair’s ability to obtain sufficient capital to pay interest to its investors and to repay investment certificates as they become due,” the document said.

The future of Fair has been uncertain since FBI agents on Nov. 24 executed search warrants and seized records and computer equipment at Fair and at the Indianapolis offices of Durham, 47, co-owner of the business. Fair was closed all last week for the Thanksgiving holiday and has not reopened.

The raid came one month after IBJ published an investigative story questioning whether Fair had the financial wherewithal to repay purchasers of the investment certificates.

The story reported that, since Durham bought Fair Finance from Donald Fair in 2002, Durham had used it almost like a personal bank to fund a range of business interests, some of them unsuccessful. The story noted that he and related parties owed Fair more than $168 million.

Court papers recently filed by the U.S. Attorney’s Office in Indianapolis show the government is trying to build a case that Durham operated 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.”

Fair has not been permitted to sell investment certificates since Nov. 24, when its previous securities registration expired. The Ohio Division of Securities has not acted on the company’s request for a new registration.

John Tompkins, an attorney for Durham, has said his client believes he had not done anything wrong.