Federal criminal investigators learned as early as February 2009 that something went terribly awry for thousands of investors in Fair Finance Co. in Akron.
That month, Dan Laikin, the former head of comedy movie maker National Lampoon Inc. and a longtime friend and business partner of Fair Finance co-owner Timothy Durham, was facing criminal charges of his own. Laikin, who had recently resigned as a Fair Finance board member, was charged with manipulating the stock price of National Lampoon, perhaps best known for the movie Animal House.
In talking with the FBI that February and also in March, Laikin offered up Fair Finance and Durham in an attempt for a more lenient sentence, a just-filed bankruptcy court record in Akron shows.
Laikin, through his defense counsel, told the FBI in February that year Fair Finance was a “ ‘Ponzi scheme’ and there would not be enough money for Fair Finance to repay its defrauded investors” and that “Durham had unlawfully used Fair Finance as a vehicle to fund [Durham’s] ‘lavish lifestyle,’ ” the bankruptcy court document shows. Months later, on Nov. 24, 2009, the FBI raided Fair Finance’s Akron-area offices. The longtime consumer loan and accounts receivables company, founded in 1934, never reopened and was forced into bankruptcy where the case continues today.
That information and more is included in an Oct. 24 ruling from Bankruptcy Judge Marilyn Shea-Stonum in Akron. Shea-Stonum’s ruling says that Laikin owes the Fair Finance estate nearly $33 million. Fair Finance Trustee Brian Bash sued Laikin in 2010 seeking repayment of the money, which represents loans and interest Laikin received for years from Fair Finance but never repaid. Shea-Stonum’s ruling will be reviewed in U.S. District Court.
Durham and co-owner James Cochran, both Indianapolis businessmen who bought Fair Finance in 2002, were convicted and imprisoned last year for defrauding more than 5,000 Ohio residents out of more than $200 million. The residents bought uninsured investment certificates from Fair Finance. (Laikin, also from Indiana, was given a 45-month prison term in 2010 on the National Lampoon stock manipulation charges.)
Neither Bash nor other attorneys representing Fair Finance could be reached for comment Friday. It is not clear that Laikin has sufficient assets to repay the nearly $33 million. To date, creditors have not received any disbursements.
More records cited
The 42-page bankruptcy court document cites other records in the years-long and complicated financial fraud case.
The court document says Laikin, through counsel, told the FBI in February 2009 that more than $124 million of about $200 million raised through a Fair Finance offering (through the sale of investment certificates to the Ohio public) “had been loaned to Durham and related parties of Durham without adequate disclosure, including disclosure of the risks relating to such loans.” The document said Laikin, through his counsel, accused Durham of intentionally violating part of the Securities Act of 1933.
A month later, in March 2009, Laikin in another interview with the FBI and others explained Fair Finance’s operations. The document said “Laikin informed the government that ‘Fair Finance has paid for Durham’s extravagant lifestyle and luxury cars, which is contrary to representations made to Fair Finance investors who believe that Fair Finance is using its cash to purchase consumer receivable loans.’ ” The court document also showed that Laikin in March 2009 said:
• “Durham had repeatedly spoken with him about Fair Finance’s liquidity crisis over the past six months.”
• “Durham was concerned that Fair Finance did not have enough cash to make redemptions on maturing debt and that such redemptions were being paid by Durham himself. For example, an Ohio church sought to redeem a $250,000 note from Fair Finance but could not because Fair Finance did not have enough cash to repay the note. Durham negotiated payment of the note over a period of time rather than at the maturity date to avoid default.”
• “Durham was using new investor money in Fair Finance and assets from [Dallas company] CLST Holdings to pay redemptions.”
Fair Finance trustee Bash, through his Cleveland law firm, Baker Hostetler, issued a release saying that Shea-Stonum’s ruling “culminates years of litigation” involving Laikin.
“The trustee was able to demonstrate that Laikin, along with Timothy Durham, was a knowing participant in the Fair Finance fraud scheme,” the statement said. “The total amount of the order is $32,958,018 plus attorneys fees to be determined at a later date following review of the decision by District Court.”
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org.