Ohio securities regulators have asked for a mountain of additional information from Tim Durham’s Fair Finance Co. that they say they would have to evaluate before deciding whether to allow the company to resume the sale of investment certificates.
In a sharply worded letter sent to the company’s attorney late Thursday, the Ohio Department of Commerce’s Division of Securities called the hundreds of pages of paperwork the company submitted Nov. 24 “incomplete and inadequate.”
Fair provided the documents just hours before FBI agents that afternoon executed search warrants and seized Fair-related records at Durham’s Indianapolis office and at Fair’s headquarters in Akron, Ohio.
The company’s prior registration, granted in July 2008, expired that same afternoon, forcing it to suspend sales of investment certificates. Fair on Oct. 29 first sought the new registration, which would allow it to sell $250 million in additional investment certificates, but the Division of Securities responded that “the offering is impossible to review without further documentation.”
In a late October investigative story, IBJ questioned whether Fair, which purchases customer-finance contracts from retailers and other firms, had the financial wherewithal to repay the more than $200 million it owes purchasers of existing investment certificates. The company sold the certificates—which range from six months to two years and carry interest rates substantially higher than CDs—only to Ohio residents.
The IBJ story reported that, since Durham bought Fair Finance from Donald Fair in 2002, he 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.
Many of the concerns raised in Thursday’s six-page letter, written by the division’s Mark Heuerman, involve the processes the company used to approve, document and assess the risks associated with related-party loans.
For example, Heuerman wrote, “The Chief Executive Officer, Tim Durham, appears to have unfettered discretion to amend a loan to Fair and related parties without involvement or approval by other parties, officers, directors or employees of the affected entities party to the loan.”
Other issues raised by Heuerman: