Thousands of Ohio residents scammed out of more than $200 million in the Fair Finance Co. scandal should get at least half of the money brought into the bankrupt company estate, the bankruptcy judge overseeing the process in Akron said Tuesday.
But the victims may not get money anytime soon.
In the meantime, the numerous lawyers and other professionals involved in recovering funds in the complicated case will be paid the bulk of the $5.7 million currently sitting in the estate’s money market fund, according to a ruling from U.S. Bankruptcy Court Judge Marilyn Shea-Stonum.
The money will partially reimburse fees and out-of-pocket expenses — lawyers and other professionals have filed bills approaching $9 million — dating to 2011 in what is now a nearly 3-year-old civil and criminal case. That may leave between $700,000 and $800,000 left in the estate’s account, according to preliminary calculations.
Fair Finance Trustee Brian Bash said he and his team at Cleveland law firm Baker Hostetler continue to actively chase down money that flowed out of Fair Finance. He and others appeared in court for the regular monthly status hearing and to seek court approval for compensation and expense reimbursements. The bulk of the approved distribution will go to Baker Hostetler.
“Claimants in the case can very reasonably ask, will this case be administered solely for the professionals?” Shea-Stonum said.
Bash said no.
“We are throwing tremendous resources at this,” he said. “I think we have significant claims here.”
Shea-Stonum said she is continuing with a rule started by her predecessor in U.S. Bankruptcy Court in Akron, Harold White, who insisted that half of whatever money is ultimately recovered for an estate goes to the claimants.
“We’re aware of that,” Bash said.
The judge also noted that an interim distribution to victims would amount to pennies on the dollar.
Neither the judge nor Bash indicated when the victims may get any of their money back.
Bash told the court that he may be able to collect just $1.5 million out of approximately $43 million in judgments in lesser profile lawsuits he has filed.
Bash declined to say whether he will appeal a U.S. District Court ruling that dismissed a $950 million lawsuit against Textron Financial, a Rhode Island firm that provided millions of dollars in financing to Fair Finance’s Indianapolis-based owners, Timothy Durham and James Cochran.
The ruling allowed Bash to continue with a $72 million lawsuit against Fortress Credit, which succeeded Textron Financial as a significant source of money to Fair Finance.
Bash is also suing other entities, including comedy movie maker National Lampoon that at one point was run by Durham.
Bash said he and his team continue to try to trace where millions of dollars flowed from Fair Finance.
Durham, Cochran and Rick Snow, Fair Finance’s former chief financial officer, are scheduled to be sentenced to prison on Nov. 30 in U.S. District Court in Indianapolis. The three were found guilty in June of defrauding about 5,300 Northeast Ohio residents who purchased about $208 million in uninsured investment certificates from Fair Finance. The three men could get life in prison.
The sentencing will be just a couple days after the three-year anniversary of FBI raids on Fair Finance offices in Akron.
The longtime niche financing business, started in 1934 and which bought and processed accounts receivables, never reopened and was forced into bankruptcy in February 2010. Durham and Cochran bought Fair Finance in 2002 from Don Fair, son of the founder. Federal investigators and Bash said that Durham and Cochran ran Fair Finance as a Ponzi scheme to fund a lavish lifestyle of mansions, yachts, expensive cars and more.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org.