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SEC probing Durham deal with Texas firm

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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.



 

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  • Natl Lampoon dismal numbers for the quarter
    $207,606 is total revenue for National Lampoon for the quarter, under Tim Durham's dismal leadership.

    Read carefully about how the disclosure states Laikin is no longer funding, but it doesn't deny that Durham continued to sink money into this loser investment that has never made a profit since Danny and Timmy took the helms.

    Funny, none of Tim's businesses seem to ever make money. Wait, that's not funny at all to those people in Ohio.

    http://biz.yahoo.com/e/091002/nlmp.pk10-q.html
  • Chicago newspaper has interesting pics of TD worth viewing
    http://www.chicagotribune.com/topic/sfl-rothstein-rosenfeldt-adler-pg,0,6191901.photogallery
  • Question for the Lawyers
    Here is a question for the lawyers. If Brizzi is found guilty of anything,especially lieing to the FBI could it come back on him for past convictions that he has has on the job? Could a lawyer get a criminal off because Brizzi was dirty?

    Could court cases be thrown out because of Brizzis actions?

    Just asken
  • How does one get to live the life of Tim?
    With investments like CLST, National Lampoon, and Obsidian when it was public. All stocks trade below $1. How does one live in a 30,000sq home with an investment record like that? If you want some interesting reading go to the SEC website and read the 10K report of Obsidian. He took it private in 2006. So the filings are still posted up to that point.
  • re
    Question of my own for Prosecutor Brizzi: What is the penalty for perjury in a securities derivative lawsuit? Judges don't like to be lied to.

    PS, How can you even go into court against that second suspect when you are allegedly a suspect yourself in a different issue?
  • CLST
    Dear Tim and Carl,

    It gets so confusing trying to keep who said what straight. For example Carl, you said that you just wanted to get some business experience which is why you agreed to be on Tim's board. Then gosh darn it I find out that you, Carl, owns stock in CLST! Now Carl, tell us all, did you have secret information that CLST wasn't really going to pay Verizon that cash on the balance sheet and the money was going to be distributed to shareholders so you bought the stock on what was then non-public information or the prior shareholders including Indiana-based Moorehead Communications would have never sold??

    Or, did you agree to the alternative, that Tim could use the money to bail out Fair Finance! Cuz that is what he was doing, right? Who in their right mind would use good, solid greenback cash, during a systemic credit market collapse, to purchase poor quality receivables that are already in default? I don't think you have to have any business experience to know that. I know 12 year old boys who knew the country was in collapse. You, Sir, have kids of your own, right? Like the one child whose gymnastics bills you got sued over for failure to pay in 2004?

    Since this letter is to both of you, this portion is for Tim. Tim, what kind of friend are you to do this to poor Carl? Before you, Carl was a loving husband, devoted Dad and decent public servant. Now he is a posterchild for public shame. He is standing up for you, but from you, all we get is deafening silence and a bunch of hooplah from one of your attorneys because another of yours allegedly managed to get the asset seizure called off. You, and I can't really address you as Sir because you are anything but, are no friend to do this to Carl. C'mon, if you can help your friend out financially, can't you just have one of those fancy press conferences like Carl did and speak out? You can do it, high pitched voice and all, you really can.
  • and so it goes
    Durham
  • A real man in the US Attorney's office
    A heck of a lot better than Tim Morrison.

    Remember, the victims of this situation are in Ohio.

    http://www.justice.gov/usao/ohn/news/21October2009.pdf

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