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Ties to Durham haven't hurt McKain

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For the past decade, Indianapolis-based professional speaker Scott McKain has used his experience at Obsidian Enterprise Inc. as the centerpiece of his marketing pitch.

As his speaking.com bio puts it, “His original and uniquely perceptive insights into business not only currently provide the basis for his books and platform content, but also assisted in forming the foundation of a company that has grown from a small investment to $100 million in annual sales in a very short period.”

mckain-scott-mug McKain has heavyweight clients, including Cisco.

There’s only one problem, as recent filings by Fair Finance Co.’s bankruptcy trustee make clear: Obsidian, an Indianapolis-based holding company where McKain served as vice chairman, was a colossal failure. The company, which operated a handful of transportation and manufacturing firms, burned through tens of millions of dollars in loans from Akron, Ohio-based Fair, contributing to its demise in November 2009.

The 56-year-old McKain isn’t well-known locally but has a sterling client list. Earlier this year, he spoke at the winter dealer meeting in Orlando for Milwaukee-based Harley-Davidson Inc. And he’s on the speaker lineup for the Cisco Systems Inc. Partner Summit, which runs from Feb. 28 to March 3 in New Orleans.

His bio for that event reads: “Growing successful businesses and developing corporate leaders within his own $100 million-plus organization has been Scott McKain’s calling.”

Few people would describe Obsidian or its subsidiaries—from a rubber recycling firm to a celebrity-tour-bus operator—as successful. Way back in 2002, auditors were questioning whether Obsidian could survive through the next year. And the news only got worse from there. From 2001 through 2006, Obsidian racked up more than $30 million in losses.

A court filing by Fair’s bankruptcy trustee this month noted that one subsidiary—trailer-maker United Expressline—did muster a profit of $400,000 in 2002. “Upon information and belief, it was the last profit any Obsidian subsidiary generated,” the filing said.

Obsidian also never had sales topping $70 million, much less $100 million, public records show.

In a nearly hour-long phone interview, McKain said Obsidian CEO Tim Durham provided him the $100 million estimate back in 2002 to reflect Obsidian along with other Durham businesses that technically were under other holding companies.

McKain said he has tried to eliminate outdated bio information posted on numerous sites across the Internet but has found it difficult to do.

“It’s nothing I am running from,” McKain said of Obsidian’s problems.

Asked about the bio on Cisco’s website, he said it must have been compiled by the company, by a speaker’s bureau or a firm helping stage the event.

“I know we did not specifically send information to Cisco,” he said. “To make it sound like that is a contemporary situation would not be accurate. I will mention it to Cisco.”

The Cisco bio also says, “His understanding of real world business and his ability to fully engage his audience also enabled the development of Value Added Institute, a think tank with an extensive and diverse faculty.”

McKain serves as chairman of the institute, which he says is a training firm that hires personnel on an as-needed basis. Asked if it was accurate to call the faculty “extensive and diverse,” he said: “It would depend on your definition of extensive, but certainly diverse.”

David McCulloch, a Cisco public relations official, did not return calls.

Obsidian involvement

McKain has been a full-time professional speaker since 1981. He said that as vice chairman of Obsidian, he was a board member, not an in-the-trenches executive.

“I was unaware of the depths of what was going on,” McKain said. “It was certainly not a management, day-to-day, in-the-dirt involvement.”

But Obsidian is a common subject in his books. In “All Business is Show Business,” published in 2002, McKain wrote: “Obsidian Enterprises’ efforts have made me a millionaire—and Tim Durham a multi-millionaire. And it all starts with understanding today’s customers, potential customers, and colleagues better than the competition does.”

In “Collapse of Distinction,” published in 2009, he wrote: “I deeply admire my best friend, Tim Durham, founder and chairman of Obsidian Enterprises. Tim was crystal clear about what we were—and weren’t—going to invest in as we built our company.”

Though Obsidian went awry, McKain told IBJ, “I truly believe the principles I wrote about in all my books still apply. I don’t believe the philosophies and points I talked about were wrong. I believe them passionately today.”

It’s all about creating an experience for customers, not just a sale, McKain said.

“And that’s part of where Obsidian jumped the tracks,” he said. “In the early days, that is what we were focused on. When any company focuses on product and profit more than people, they find people don’t want to buy the product and profits erode.”

McKain said he had success as a public speaker, and had been inducted into the Professional Speakers Hall of Fame, before Durham founded Obsidian in 2001. He said he now commands about $20,000 for a one-hour keynote speech.

“To suggest I needed to inflate my business credentials to become a successful public speaker is just silly,” he said.

Mike Frank, a professional speaker based in Columbus, Ohio, called McKain “one of the top speakers in America, and he has been for many, many years.”

McKain would be a sought-after speaker even if his bio said nothing about Obsidian or a $100 million company, said Chuck Gallagher, a South Carolina-based ex-con who turned his life around and now speaks in business ethics.

“People are not hiring Scott because he is Jack Welch. They are hiring Scott because he is a damn good speaker,” said Gallagher, who built his speaking career after serving a prison sentence for orchestrating a Ponzi scheme. “He delivers a message people want to hear.”

But Gallagher added: “The lesson for Scott is, you may want to refine that [bio], because it isn’t necessary to get hired.”

Financial squeeze

These days, McKain is experiencing financial difficulty—as are many of the businesspeople involved with Durham’s now-collapsed business empire.

In the months after Fair folded, lenders filed to foreclose on Geist homes owned by Durham, Fair co-owner James Cochran and Jeff Osler, Durham’s brother-in-law, who served as an Obsidian executive vice president.

All were among recipients of loans from Fair, according to records filed with securities regulators, and also received salaries from his businesses.

McKain said he wasn’t on the company till. He said his problems stem from a collapse of the professional speaking industry during the financial crisis, and from expensive cancer treatments for his wife, Sheri, who died in 2005. JP Morgan Chase filed to foreclose on his Fishers home last spring; McKain said he’s since worked out a trial mortgage modification. He and his current wife also are facing tax liens.

“It’s pretty easy to understand what happened in the meeting industry. I had almost a million dollars in contracts cancel overnight,” he said. “I didn’t have any reserves because of what I spent on my late wife’s illness.”

McKain said he does not believe he received money from Durham’s companies after 2005. That was when he stopped attending board meetings and thus stopped receiving directors’ fees, he said. By then, he said, he also had stopped earning fees for speaking on behalf of Durham companies.

The fact that his financial struggles hit just as Durham’s businesses collapsed “is a horrible coincidence,” McKain said.•

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