According to those latest filings, Fair Finance has made $177 million in insider loans, while the company's core profit-making business, customer-finance contracts, has declined in size to $24 million. Andrews notes the new filing shows that Fair Finance lost $1.78 million in 2008. The company's financial situation has grown worse since Ohio regulators held up approval of its new security offering since its two-year offering has matured. Andrews writes:
The figures are contained in a proposed offering circular Fair filed with Ohio’s Division of Securities Oct. 29. The company sought a new registration because an existing one from July 2007 was set to expire Nov. 24.A crash crunch has led Fair Finance to take a number of steps this past year that raise further concerns. It sold millions of dollars in consumer finance loans to another Durham-controlled company, CLST Holdings, which has also been the subject of litigation. A company line of credit offered by Fortress Credit Corp. has been reduced from $50 million to $35 million. The offering also indicates the company has been selling off better performing finance contracts to raise cash. Even more concerning, Fair acknowledges that it has delayed repayment of principal on maturing certificates up to 60 days because payments due to investors has exceeded 10 percent of its cash collections.
But instead of signing off on the new registration, Mark Heuerman, registration chief counsel, sent a letter to Fair’s attorney saying “the offering is impossible to review under our standards without further documentation.”
He asked for additional information on a range of topics, including documentation that would help him untangle the morass of insider loans.
“Please include sequential transactions on multiple levels where related parties engage in further transactions with related parties,” he said.
Ronald Kaffen, an Akron attorney representing Fair, characterized the back and forth as routine.
“That’s sort of standard procedure. You make a filing. You get comments back, and you respond to those comments,” Kaffen said.
The company submitted its responses Nov. 24, and the Division of Securities is reviewing them. In the meantime, because Fair’s prior registration has expired, it can’t sell additional investment certificates.
That could help limit losses if Fair were to fail, since new investor dollars won’t be coming in the door. But Klimek, the securities attorney, said he wonders if Fair can keep going without those infusions.
The proposed offering listed Marion County Prosecutor Carl Brizzi as part of Fair Finance's management when it was first filed. Brizzi has subsequently resigned from the company. Here's how the discussion of management describes Brizzi, whose name appeared directly below Durham's biography in the original proposed offering:
Mr. Carl Brizzi, Director, was elected Director in 2009. Mr. Brizzi is not affiliated in any other manner with Fair Financial. Mr. Brizzi is currently the Marion County Prosecutor, State of Indiana, elected in 2002, re-elected in 2006. Mr. Brizzi brought to the Prosecutor’s office his belief in victim-centered prosecution. He has been named a “40 Under 40” by the Indianapolis Business Journal, “Outstanding
Young Alumnus” by Valparaiso School of Law, and he was included from 2004 to 2009 in the Howey Political Report’s Top 50 Most Influential People in Indiana Politics. Mr. Brizzi is the father of four children.
Now there's a first. Someone actually mentions in their biography that they were listed on Howey's "Top 50 Most Influential People in Indiana Politics." As you can see by the proposed offering linked to on the IBJ's site, there have been numerous additions and deletions since the original offering was proposed.