The bankruptcy trustee for Fair Finance Co. thinks he has a better handle on where a couple hundred million dollars of the now-defunct Akron company's money went.
That wasn't good news for the more than 5,000 people who bought Fair Finance investment certificates in recent years.
A forensic accounting of Fair Finance's books shows co-owner Timothy Durham loaned most of the money he got from Fair Finance to himself, friends and failed businesses, trustee Brian Bash told creditors Monday afternoon.
Durham, in turn, spent millions on himself, including $2.8 million on gambling and at resorts, $3.3 million for interior decorating, $14 million on real estate, millions on cars and artwork — even $578,000 on a home theater, Bash said. Durham also made about $1 million in contributions, largely to Indiana politicians, with money from Fair Finance, Bash said.
So far, it appears Durham borrowed $54 million from Fair Finance, he said.
''Are we getting the picture?'' he asked an audience of about 200 predominantly older people in the main ballroom at the Akron City Centre Hotel in downtown Akron. Bash called the informational meeting to update creditors on Fair Fi
nance proceedings. A previous meeting in May attracted an overflow crowd of more than 800 people.
How much, if any, of the money is available and can be returned to Fair Finance's creditors, who include investment certificate holders, remains to be seen, Bash said.
''It appears there was very little hope of repayment,'' Bash said. Some of the politicians may repay the money they got from Durham, he and his counsel, Kelly Burgan, said. Bash and Burgan are Cleveland-based lawyers.
''We have to find out where the money went. It's a trail. It's an investigation,'' Burgan said.
Bash said he shares information with federal and Ohio enforcement officials who he believes are conducting their own significant investigations into Fair Finance. No one has been arrested or charged to date.
Court records show federal officials suspected Fair Finance was being run as a Ponzi scheme by Indiana businessmen Durham and James Cochran, who bought the long-standing Akron accounts receivables and consumer loan business in 2002. The company sold uninsured investment certificates that paid high interest rates to Ohio residents.
Of $326 million brought into Fair Finance since 2002, $162 million was redeemed to investment certificate holders, Bash said. The remaining $150 million went to Fair Finance's parent companies and related business entities and out from there, he said.
Bash said $11 million went to California businessman Dan Laikin, former head of comedy movie maker National Lampoon Inc. who is awaiting sentencing on federal securities fraud charges. Durham succeeded Laikin as Lampoon chief executive.
Many of the companies that received loans from Fair Finance were insolvent at the time they got the loans, Bash said.
Bash said Durham has turned over about 30 valuable automobiles and artwork that includes pieces by Picasso, Renoir and Peter Max. While Durham voluntarily returned some vehicles, the FBI recently seized as many as 27 of his cars. which included a Rolls Royce, Lotus, Lamborghini, Bentley and other pricey models.
Auction in the works
The art and vehicles will be auctioned off in a process designed to get maximum value, Bash and Burgan said.
''We're not selling things like this is a fire sale,'' Burgan said.
Durham's real-estate holdings might not net much, if anything, for Fair Finance creditors, Bash and Burgan said. Most of the properties have significant mortgages and the value has likely dropped, they said. Plus, other creditors have priority over Fair Finance investment certificate holders for anything left over if the real estate is liquidated, they said.
Bash said he cannot estimate at this point how much, if anything, Fair Finance certificate holders might get back. Most of the people live in the Greater Akron area.
One man in the audience told Bash he lost his life savings, ''35 years of work as a police officer,'' that he invested with Fair Finance. The man said his mother, who also had her life savings with Fair Finance, died as a result of what has happened to the company after FBI raids.
Bash said a look at Fair Finance's financial records shows the company was on the verge of failure when the FBI raided its offices on Nov. 24.
''I'm not very hopeful,'' said Nancy Gladieux, a North Canton resident and investment certificate holder. ''It doesn't seem the assets will be there. I guess I'm frustrated like everybody else.''
Husband and wife Shirley and Debbie Hensley of Portage Lakes said they probably lost about $100,000 in their Fair Finance investment.
''We learned nothing positive, nothing positive that will help us at all,'' said Shirley Hensley, 73, who retired as a supervisor at Babcock & Wilcox Co. in Barberton.
''We are OK. We don't dwell on it. It's something we took a chance on. We've resigned ourselves we've lost all our money.''
Forms due Oct. 8
Bash told the audience that to get any money back at all, creditors must fill out an official ''proof of claim'' form and send it out in time to have it received at the proper California address no later than Oct. 8. The claims forms have been mailed out to all creditors, he said.
People should just do their best to fill out the form as soon as possible and well ahead of the October deadline, Bash said. The information can be corrected later if the form is not filled out properly the first time, he and Burgan said.
''It's not do or die,'' Bash said. ''You just fill it out and get it in. That's your biggest issue.''
The purpose of the form is for creditors to tell the trustee how much they think Fair Finance owes them, Burgan said.
''Tell us the best way you can,'' she said. ''What we want you to tell us on the form is what you think is owed to you.''
Investment certificate holders may need to attach copies, not originals, of Fair Finance documents, she and Bash said.
''Do not send me original documents,'' Bash said.
Bash's presentation will be placed on the official Fair Finance trustee Web site, http://www.FairFinanceTrustee.com.
Jim Mackinnon can be reached at 330-996-3544 or email@example.com.