National Lampoon will have to get in line with other victims who are owed millions of dollars after Indianapolis Ponzi scheme mastermind Tim Durham looted more than $208 million from investors in Ohio-based Fair Finance Co. Any recovery by the comedy conglomerate following a Monday court ruling is likely to be directed toward Fair Finance victims.
Federal Judge Richard L. Young rejected Durham’s “puzzling” argument from prison for reimbursement of loans and advances he made to National Lampoon Inc., the media company best known for its former humor magazine and the comedy movie classic "Animal House."
Young’s order also rejected Durham’s claims to company stock and fully granted National Lampoon’s motion for summary judgment. The assets of National Lampoon, which Durham owned before his scheme unraveled, remain at issue in the ongoing bankruptcy proceedings involving Fair Finance.
Before his fraud was discovered—which led to a 2012 conviction and sentence of 50 years in prison over the collapse of Fair Finance—Durham had been CEO of National Lampoon since late 2008. Fair Finance bankruptcy trustee Brian Bash sued National Lampoon in 2011, seeking to recover more than $9 million in allegedly fraudulent transfers Durham and others made to the company from Fair Finance and other investments.
National Lampoon agreed in 2015 to settle the trustee’s suit for $3 million, part of more than $136 million in judgments Bash has secured for in the bankruptcy case since Durham was imprisoned.
Durham was accused of embezzling from a settlement National Lampoon received in a compensation lawsuit regarding the “Vacation” series of films, likely National Lampoon’s most valuable assets. Warner Brothers settled claims over distribution, accounting methods and other disputes, agreeing to pay National Lampoon at least $2.7 million.
National Lampoon accused Durham of making an unauthorized transfer of $1 million from that settlement to Indianapolis attorney John Tompkins’ checking account at law firm Brown Tompkins Lory & Mastrian, which represented Durham in his criminal case. The firm also had been named in National Lampoon’s suit but has settled, Young noted. The judge also rejected Durham’s defense to the allegation that the transfer was embezzlement.
“Rather than argue the merits with citation to legal authority, Durham states that embezzlement connotes ‘secretive or clandestine actions.’ His actions, he argues, were not secretive nor clandestine because the alleged embezzlement occurred while he was CEO. Durham’s response is puzzling,” Young wrote in ruling for National Lampoon on its embezzlement count against Durham. “Indeed, it was his position as CEO which gave him the ability to control National Lampoon’s settlement proceeds and to authorize the disbursal of $1,000,000 into Mr. Tompkins’ law firm account.”
This conclusion led Young to rule in favor of National Lampoon on its related claims—breach of fiduciary trust, conversion, fraudulent conveyance and unjust enrichment.
Bash and attorneys representing National Lampoon did not immediately reply to messages seeking comment Wednesday.