The Securities and Exchange Commission is investigating a Dallas-based company in connection with the ongoing federal probe into whether Akron-based Fair Finance Co. is a Ponzi scheme that defrauded Ohio investors.
The Dallas company, CLST Holdings Inc., is also affiliated with Indiana businessman Tim Durham, co-owner of Fair Finance that has headquarters on East Market Street.
The Akron offices of Fair Finance remained closed today, although a lawyer for Durham told a newspaper in Wooster that the investment and loan firm hopes to reopen by next Monday.
The Ohio Attorney General's Office said today that the agency has not received notification of any legal action against Fair Finance Co.
Spokeswoman Holly Hollingsworth said the AG's office does not confirm or deny investigations into such matters ''until or unless they reach some point of legal action, and we do not have any legal action specific to this company to advise you of.''
Dallas-based CLST disclosed in an SEC filing today that it received a subpoena on Nov. 24 seeking ''a variety of documents'' related to transactions with Fair Finance. Durham is named as the chairman of CLST.
CLST is described as the former CellStar Corp., a cell phone distributor. For most of 2008, it had ''no significant operations'' with the majority of efforts associated with winding down remaining entities and other activities, the company reported.
The company filing said it is in the business of buying consumer receivables and as of the end of February had two permanent employees and one temporary employee.
Neither Durham, his attorney nor representatives of CLST could be reached for comment today.
The SEC subpoena is dated the same day that the FBI raided the Akron headquarters of Fair Finance and related offices in Indiana. The U.S. Attorney for the southern district in Indiana has alleged in court documents that Fair Finance, which also does business as Fair Financial, is a Ponzi scheme that has defrauded Ohio investors for years.
Fair Finance, founded in Akron in 1934, describes itself as a business that in part buys and manages accounts receivable from other companies. Durham bought the business in 2002 from the Fair family. Fair Finance's advertisements promised investors interest rates as high as 9 percent — well above typical bank rates —but those investment certificates are not federally insured.
An Indiana lawyer representing Durham on Monday told the Daily Record newspaper in Wooster that his client has done nothing wrong and hoped to reopen Fair Finance's offices by next Monday.
It is ''logistical issues, not asset issues that are tough to crack,'' the attorney, John Tompkins, told the paper. If the offices do not open by next Monday, that is not a sign that the assets are gone, he told the paper.
The SEC filing for Dallas-based CLST noted that ''each of our directors, Timothy S. Durham, Robert Kaiser, and David Tornek have also received a subpoena from the SEC with the subject notation 'In Re Fair Finance.' Mr. Kaiser is also our Chief Executive Officer.
''The subpoena requires us to produce a variety of documents relating to our portfolio transactions, including transactions with Fair, and also seeks documents relating to several individuals, including our directors, Mr. Durham, Robert Kaiser, and David Tornek,'' the document said.
The filing said the company and directors ''expect to cooperate with the SEC in their investigation. We are currently unable to predict what the outcome of the investigation will be.''
The SEC subpoena asks for the officers to give testimony and demands voluminous amounts of information, including:
• ''All e-mail, including attachments, instant messages and BlackBerry PIN messages sent and received by you, or anyone currently or formerly employed by you.''
• ''All personal and business contact lists, including, but not limited to, address books, Rolodexes, and e-mail contact lists maintained or organized by, or for, you, whether in paper or electronic form.
• ''All business plans, financial reports, forecast reports, revenue reports, marketing reports, financial projections, sales projections, cash flow analyses and other financial forecasts prepared by, or on behalf of, you. This production shall include, without limitation, all preliminary data and source material which were in any way utilized in the preparation of any responsive document.''
• Numerous documents related to financial statements and transactions involving the company, directors and affiliates.
The SEC said it is seeking information regarding:
• Fair Finance Co., Fair Facility I LLC, Fair Financial Services and related businesses.
• Fortress Credit Co. LLC and related businesses.
• Summit Consumer Receivables Fund LP and related entities.
• FCC Investment Trust I, FCC Finance LLC, Drawbridge Special Opportunities Fund LP, CLST Finance, CLST Asset I LLC, CLST Asset III LLC, Fortress, SSPE Investment Trust I, SSPE LLC, Summit and Fair Finance.
• The resignation of investment analyst Manoj Rajegowda as a director of CLST after being highly critical of how executives conducted business.
• The payment of $3.6 million to Robert A. Kaiser in 2007.
• The election of the board of directors in 2007.
Other SEC documents filed today also showed that CLST is involved in a proxy fight with a New York-based hedge fund, Red Oak Partners, that is unhappy with how the business has been run.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org. Beacon Journal staff writer Ed Meyer contributed to this story.