The Fair Finance estate will be getting $35 million, making it more likely that long-awaiting creditors will receive their first interim payments this year.
On Thursday, the U.S. bankruptcy judge in Cleveland overseeing the years-long Akron and Indiana financial-scandal case approved a proposed settlement between the trustee and New York-based Fortress Credit Corp.
The parties reached the $35 million settlement in April and announced it in a May court filing, saying it needed final court approval.
The settlement is the largest sum brought into the estate. Trustee Brian Bash said in court records that he hopes to make an interim distribution to thousands of unsecured creditors by the end of the year.
So far, investors have not been repaid any of the money they had put into Fair Finance through the purchase of uninsured investment certificates. The $35 million amounts to about 17 cents on the dollar in the $205 million scandal.
Lawyers involved in the case said they could not comment until the settlement order — while it was granted — was entered into the record. There is no admission of liability, according to court documents.
Fortress ignored warning signs in providing financing to Fair Finance and its Indiana-based owners, which Bash argued enabled the owners to conduct a Ponzi scheme that bilked more than 5,000 Ohio investors.
The owners of Fair Finance, Indianapolis businessmen Tim Durham and James Cochran, along with company executive Rick Snow, are now in federal prison.
Millions more dollars are expected to end up in the Fair Finance estate eventually. On May 29, Bash and comedy movie maker National Lampoon reached a tentative agreement, again subject to court approval, that would have National Lampoon pay $3 million.
On a related matter, the trustee expects a substantial update to his Fair Finance website, www.kccllc.net/fairfinance, soon to bring investors up to date on numerous issues.
Those matters include acknowledging that creditors have been receiving letters from claims traders offering to buy out creditors’ financial interests in the case.
The trustee will not be able to advise people on what to do; he will neither endorse nor discredit any of the claims traders, a spokeswoman said.
Investors will be advised to review the contracts carefully to understand risks and obligations so they can make informed decisions how to proceed. In some cases, investors would be liable to pay money and legal fees to the claims traders if actual distributions fall short.
Claims trading is a common practice in bankruptcy proceedings, the spokeswoman said.
Fair Finance, which made money in part by processing accounts receivables for other businesses, started as a family-owned business in 1934 in Akron.
The Fair family sold the company to Durham and Cochran in 2002. FBI raids in late November 2009 closed its offices, and the company was forced into bankruptcy in February 2010.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ. His stories can be found at www.ohio.com/writers/jim-mackinnon.