Don Fair, the man who ran Akron-based Fair Finance Co. for decades and then sold his family business in 2002 to two Indiana businessmen, is being sued for $150 million by the trustee of the now-bankrupt company.
Fair Finance Trustee Brian Bash alleges in a civil lawsuit that “Fair’s actions and omissions were an unfortunate and substantial contributing factor to [Fair Finance co-owner Timothy] Durham’s multi-year fraudulent scheme and the millions of dollars of harm caused to the debtor [Fair Finance] and its creditors.”
The lawsuit also seeks to get back money from a family trust that Fair set up with the proceeds of the 2002 sale.
Fair, who will be 86 in April, still lives in the Akron-area home he and his wife bought in the mid-1950s. Fair, who also owns property in California, could not be reached for comment.
The 59-page lawsuit filed this week in U.S. Bankruptcy Court in Akron seeks to force Fair to return the millions he received for selling the consumer loan and accounts receivables business to Durham and partner James Cochran. The suit also seeks the $1 million that Fair was paid under a five-year employment agreement that expired at the end of 2006, as well as punitive damages.
The suit alleges Fair Finance is entitled to $150 million from Fair for breach of contract, breach of fiduciary duty, aiding and abetting fraud and other charges.
The lawsuit said Durham and Cochran wanted Fair to remain on the payroll to avoid a “run on the bank” by people who were buying Fair Finance’s uninsured investment certificates.
The lawsuit shows an employment agreement between Fair and the new owners as well as a note Fair wrote for Fair Finance investors saying he was going to stay with the company as “Chairman Emeritus” for five years and that after the sale “everything will remain essentially the same” under the new ownership.
More than 5,000 Ohio residents purchased more than $200 million in investment certificates from Fair Finance. The company closed its doors shortly before FBI raids in November 2009.
Fair Finance was forced into bankruptcy in February 2010; Durham and Cochran are awaiting trial in Indianapolis on federal criminal charges related to how they ran the business. Bash alleges in civil lawsuits that Durham and Cochran operated Fair Finance as a Ponzi investment scheme.
In an interview in 2010 with the Beacon Journal, Fair said he was flabbergasted by the FBI raids that closed the company that had been founded by his father in 1934. Fair said that after he sold the company, he refrained from reading Fair Finance’s subsequent offering circulars, documents that provided detailed information on the business and investment certificates until years after the sale.
‘Quietly raised concerns’
Bash’s lawsuit alleges that Fair was more in the know than he had let on.
The lawsuit said that Fair, through legal counsel, “quietly raised concerns” to Durham and Cochran about growing insider loan debt in 2005 and 2006. The lawsuit shows that Bash has copies of emails between Fair’s counsel and Textron Financial, a Rhode Island company that financed the Durham/Cochran purchase. Bash is suing Textron for more than $900 million.
“Don Fair’s ongoing significant role with the debtor [Fair Finance] was an important aspect of post-sale offering circulars’ assurances to creditors that it was safe to continue giving money to Durham, and Don Fair knew it,” the lawsuit said.
The lawsuit notes that Don Fair resigned as Chairman Emeritus in November 2002 but that he did not return the money he received under the five-year employment contract. The suit said Fair continued to receive detailed information on Fair Finance’s financial statements on a regular basis through 2007.
Fair was paid nearly $3.2 million in July 2007 as a final balloon payment on the sale of the company, according to the lawsuit.
The trustee’s lawsuit also said that Fair disclosed in a television interview that he had “secretly confided in a few close friends about Durham’s fraudulent activity and advised those friends that ‘it wouldn’t be wise to invest in Fair Finance.’ ”
“Unfortunately, Don Fair deliberately chose not to give similar advice to the thousands of individual noteholders that were defrauded, even though he had previously assured them in his 2002 noteholder letter that he would be ‘around,’ ” the lawsuit said.
“Upon information and belief, the real reason Don Fair took no appropriate action at any time was to ensure that Don Fair, the Donald Fair Trust and the trust defendants continued to improperly receive substantial ongoing payments from the debtor [Fair Finance] and the debtor’s assets throughout 2002 to 2007,” the lawsuit said.
Jim Mackinnon can be reached at 330-996-3544 or email@example.com