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Would-be buyer: Durham double-dipped on Duesenberg deal

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Beleaguered local businessman Tim Durham struck a deal to sell a vintage Duesenberg for $1 million before auctioning off the same vehicle for $2.9 million, according to the small-town Michigan mayor who said he agreed to buy it.

Dowagiac Mayor Donald Lyons issued a formal statement this week, more than two weeks after being named a defendant in a civil lawsuit alleging that he and others committed fraud by manipulating the price of the car at auction.

The plaintiff, James F. Scott of Charlottesville, Va., agreed to buy the car for $2.9 million at a Sept. 3 auction in Auburn. He alleges that the other bidder—Mark Hyman, owner of Hyman Limited Classic Cars in St. Louis—made offers in consultation with Lyons, and that they “were stakeholders and/or owners of the automobile.”

“By bidding up the price of the automobile to $2.9 million, without disclosing to the plaintiff that they were the owners of or had a material financial interest in the proceeds of the sale, the sellers intentionally, artificially and surreptitiously inflated the price for the automobile,” the lawsuit alleges.

Lyons said that assertion is simply not true.

“We never owned the vehicle. We never made a bid with the intent of driving up the price,” his statement read. “We bid at the auction because we wanted to buy the vehicle.”

In fact, he said, with Hyman’s help he struck a deal with Durham’s Indianapolis-based Diamond Auto Sales prior to the auction, agreeing to pay $1 million for the vehicle built for publishing scion William Randolph Hearst. The car is listed as a 1929 model in Lyons' statement, but the civil lawsuit calls it a 1930 model.

But it already was slated to be part of the Auburn Cord Duesenberg Museum’s annual Labor Day auction, so Lyons agreed to allow the sale to be finalized there—assuming he was the high bidder.

“Nobody expected that anyone would bid much more than $1 million for the vehicle,” according to Lyons’ statement. “We thought we were being nice and doing a favor to the museum to agree to do it this way.”

But with Scott bidding by phone, the price “quickly approached and surpassed $2 million,” Lyons said. Hyman, who bid on Lyons’ behalf, stopped at $2.8 million. Scott submitted the high bid of $2.9 million—a price Car Collector magazine called “amazing, particularly in these notoriously difficult times.”

After the auction, Lyons said he and Hyman talked with Durham, who agreed to allow the two men to share the proceeds of the sale if Diamond Auto received the original $1 million purchase price from Lyons within a week.

Scott’s lawsuit said the auction house disbursed the full $2.9 million he transferred to pay for the purchase. Lyons said he paid Diamond Auto and shared the profit with Hyman, giving a portion to the museum. But Scott never received title to the vehicle.

Lyons said he didn’t know until a few weeks ago that Diamond Auto had failed to provide the title. The auto dealer’s bank apparently has a lien on the car, Lyons said in his statement, and will not release it until Diamond Auto settles the debt. The bank, Webster Business Credit Corp., also is named as a defendant in Scott’s complaint.

“It is a complicated set of events,” said Lyons, chairman of Michigan home products maker Lyons Industries Inc. “But … what is important to understand is that I never owned the vehicle. It passed directly from the owner to Mr. Scott. I wasn’t a seller. I was a would-be buyer.”

Scott’s lawsuit is pending in U.S. District Court in Fort Wayne. Lyons said he has offered to set aside his proceeds of the sale, “so that the court can determine who is legally entitled to the money.”

Durham has not responded to phone calls or e-mail messages regarding the lawsuit. Lyons told IBJ he has not had contact with Durham.

“Quite frankly, everything that’s going on right now is going through lawyers,” he said.

The Duesenberg lawsuit is the latest in a string of legal challenges confronting Durham, 47, who’s facing U.S. Department of Justice and Securities and Exchange Commission investigations over transactions he helped orchestrate at Akron, Ohio-based Fair Finance Co. and Dallas-based CLST Holdings Inc.

The U.S. Attorney’s Office in Indianapolis alleged in court papers last month that Durham operated Fair Finance as a Ponzi scheme, using the sale of new investment certificates to Ohio residents to repay prior purchasers.

He and other insiders have borrowed more than $168 million from Fair. The company, meanwhile, owes holders of investment certificates more than $200 million—a debt many purchasers fear the company can’t pay.
 

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  • Lyons for Indianapolis Mayor
    Maybe Lyons can come to Indy and run for Mayor and produce his bank statement that shows the cash he set aside to buy the Duesenberg, you know, since he was bidding up to $2.8M. Just sure that cash was sitting in a checking account somewhere and he wasn't shill bidding with his two buddies.
  • Good Mayor???
    Depending on the outcome and the evidence that comes out of this case. Should Mayor Lions continue the position of Major of the town of Dowagiac?
  • is this a lien
    What is the nature of the lien on the car? Is the car actually owned by Durham or simply leased?

    That would be nifty, a multi million dollar auction for a car not even owned.
  • lack of common sense
    None of this makes sense.

    Neither Lyons / Hyman or Scott used an escrow service for over $1 million in payments on a simple car title?

    Scott sent money to Lyons / Hyman although they never had title to the vehicle?

    I understand how the bid could be propped up through a straw purchaser. Seems a risky strategy but stranger things have been alleged.

    I don't understand why even common sense purchase arrangements were not followed, or given much consideration.
  • Re
    Um, because um, it's all a scam?

    Like Durham, who was bouncing Fair Finance dividend checks just three months ago, would just say, "okay, yeah, wire me $1M this week and you can keep the difference between the $1M you pay me and the $2.9M wired into the auction house...:

    But hey, man these guys have used these same excuses for the last eight years and Manless Morrison does nothing....
  • Re
    Um, because um, it's all a scam?

    Like Durham, who was bouncing Fair Finance dividend checks just three months ago, would just say, "okay, yeah, wire me $1M this week and you can keep the difference between the $1M you pay me and the $2.9M wired into the auction house...:

    But hey, man these guys have used these same excuses for the last eight years and Manless Morrison does nothing....
  • anopther con...
    ...in a string of them...this was obvioosly planned to make a quick hit on a car that would never have sold for $2.9 million if the criminal Lyons hadn't bid up the price thru his criminal partner Hyman! Sirprise, surprise...they're ALL a buncha crooks!!!
  • A little confused
    Can anyone tell us why Lyons would keep bidding the car over 1 million if Durham had already agreed to sell it to him for that price anyway?
    And why would durham give away 1.9 million to lyons for nothing?
    The excuse that Lyons had to transfer the funds within in a week to Durham seems strange as the Auction house would have paid out in that time normally anyway

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