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BEHIND THE NEWS: Texas investment put Durham in middle of Brightpoint deal

March 26, 2007

I n d i a n a p o l i s businessman Tim Durham long has been dogged by speculation he had inside information when he scooped up shares five years ago in thenfoundering Brightpoint Inc.-a bet he figures made him more than $30 million when the company roared back.

Here we go again.

A new Securities and Exchange Commission filing shows that a Durham-led investment group was buying shares in Texas-based Cellstar Corp. in February 2006 just as Plainfield-based Brightpoint Inc. submitted a secret, non-binding proposal to buy the company.

"Nobody believes it, but I was completely unaware of all that," Durham said last week.

Indianapolis is a major city, but sometimes it sure seems like a small town, where everyone's business is intertwined.

Consider the connections in this case: Brightpoint CEO Bob Laikin's brother, Dan, is a business associate of Durham's. Both are part of a group that controls Los Angeles-based National Lampoon Inc., where Durham serves on the board and Dan Laikin is CEO.

Durham hears the whispers.

"Everybody always thinks that because I know Dan, Bobby tells me everything he's doing," Durham said. "It's quite the opposite. Because I know Dan, he doesn't tell me anything he's doing."

Bob Laikin said it's awkward for him, too.

First off, he said he doesn't provide inside information to certain investors-which, he noted, is a serious crime. He said that when the company has news, "the public all finds out at the same time."

Bob Laikin said it didn't help that when Durham was a big Brightpoint shareholder, he frequently contributed to Internet message boards, weighing in on the company's prospects.

In cases where Durham makes the right call "by luck or by skill, I'm in a no-win situation because people will always assume he was tipped off," Bob Laikin said.

Here's the nitty-gritty of what happened with Cellstar, which, like Brightpoint, distributes wireless phones.

Brightpoint on Feb. 21 of last year submitted its nonbinding offer to buy Cellstar for $2.50 to $3 a share, a premium of at least 30 cents a share to where the stock traded at the time.

Two days later, the Durham group filed papers with the SEC disclosing for the first time it was a major Cellstar shareholder. It had amassed a 6-percent stake, surpassing the 5-percent threshold for public disclosure.

When Brightpoint officials saw the filing, "we initially were concerned" word might have leaked out, Laikin said. "But when we read the filing and saw he had acquired [most of the shares] months earlier, our concern wasn't as great."

Indeed, the SEC filing shows that the Durham group had purchased just a tiny portion of its 1.3 million shares within the prior 60 days.

Durham said he'd begun scooping up Cellstar shares in early 2005. While he viewed the Texas company as a takeover candidate, he said he was not privy to the Brightpoint discussions.

The disclosure of the Durham stake caused Cellstar shares to spike, so much so that the next month Brightpoint pulled its proposal, saying it would resume discussions after the company reported its next quarterly results.

During that span, SEC filings show, the Durham group was acquiring more shares. By early March, the Durham group owned 8 percent.

All the behind-the-scenes machinations are coming to light now because Cellstar finally worked out a deal in December to sell the bulk of its business-its U.S. and Latin American operations-to Brightpoint for $88 million.

Details on the negotiations are contained in a proxy statement sent to Cellstar shareholders in advance of March 28 shareholder votes on that deal and a separate, $20 million divestiture of its Mexican operations.

Ultimately, life might be simpler for Laikin if Durham quit crossing paths with him. But such issues come with the territory when you run a public company, Laikin said.

"Tim is a businessman," he said. "He can invest his money wherever he wants."

And so far, Durham's group is faring well on its Cellstar bet. Based on the current stock price, the 9.7-percent stake his group now holds is worth $5.2 million, double what it paid, filings show.
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