Fair Finance Co.’s bankruptcy trustee this week sued National Lampoon Inc. seeking to recover millions of dollars that indicted financier Tim Durham provided the ailing Los Angeles-based comedy business over the past decade.
Durham, who served as CEO of Akron, Ohio-based Fair before its collapse two years ago, “fraudulently transferred at least $9 million of Fair’s money to National Lampoon," where he is a major investor, according to the suit filed in the U.S. District Court for the Central District of California.
“To disguise the origin of the transfers to National Lampoon, Durham typically funneled” the Fair funds through a variety of other companies he controlled, the suit alleges.
Durham has been on Lampoon’s board since 2002 and has been its CEO since 2008. The money went toward covering Lampoon’s losses, the suit alleges. The company lost $37 million from 2002 until it ceased filing financials with the Securities and Exchange Commission two years ago.
In his lawsuit, Fair Trustee Brian Bash acknowledges it’s unlikely National Lampoon would be able to fully repay the transfers. He asked the court to impose a permanent injunction barring the firm from selling assets without court approval and preventing the transfer of funds to insiders.
A federal grand jury in March indicted Durham and fellow Fair insiders Jim Cochran and Rick Snow on 12 felony counts.
Authorities say that after Durham bought Fair in 2002, he doled out related-party loans with abandon, leaving the company unable to repay Ohio residents who purchased unsecured investment certificates boasting interest rates as high as 9.5 percent. More than 5,200 investors are owed more than $230 million.
Durham, Cochran and Snow have denied wrongdoing.
Bash, the Fair bankruptcy trustee, alleges Durham “utterly looted” Fair, burning through millions of dollars to support a lavish lifestyle and insolvent businesses he controlled.
Bash said this month that he has recovered about $2 million since he began filing lawsuits and taking other steps to recover money for investors in early 2010. The investors have not yet received a distribution from the recovery.