Brizzi Releases Statement In Response To Durham Ties

Marion County Prosecutor Carl Brizzi released a statement this afternoon in response to media inquiries about his relationship with Tim Durham. Brizzi admits he made a mistake in failing to do more due diligence before agreeing to serve on the board of Fair Finance, a Durham-owned company under investigation by the federal government for being operated like a Ponzi scheme. Brizzi says he joined the board in September and resigned in October after the IBJ began raising questions about a series of insider loans Durham made to himself from Fair Finance. Brizzi also acknowledges his purchase of stock in Cellstar, another company controlled by Durham, beginning in 2005, which he now says is worth about $7,500. That company's holding company, CLST Holdings, is under investigation by the SEC. Brizzi says he purchased the stock with the advice of friends and investment advisers. He does not indicate if Durham was one of those advisers who suggested he buy the stock. Brizzi says he has no other financial ties to Durham to disclose beyond the Fair Finance board matter and Cellstar. Here's the statement he released:

I hope this finds you well. The past several days have certainly been challenging for me. As a supporter, I wanted to reach out to you and address the issues that have recently been raised in the local media.

I've received dozens and dozens of media questions over the last two weeks and though I've tried to address them, I believe it is important that you hear from me in an unedited fashion.

The FBI is investigating an Ohio-based company called Fair Financial which is operated by Tim Durham. Tim is someone I have called a friend for several years. He has been a supporter and generous contributor to many political candidates, Party committees, and charitable organizations.

He has served on various boards and committees and he served as the Finance Chairman for my 2006 campaign. As Finance Chairman, he worked with other members of our finance team and solicited contributions, hosted a few events, and contributed financially. While his contributions were significant, I've raised over 4 million dollars from thousands of contributors since the beginning of my first campaign.

Over the course of the 4 years leading up to my re-election, Durham contributed nearly $140,000 and in-kinded event costs and transportation with a total valued at roughly $30,000. In the last 3 years, he has contributed $2500 and in-kinded event costs valued at roughly $17,000.

All of these details have been reported over the years in accordance with campaign finance laws. I also reported transportation in-kinds from Durham, which includes airfare to the 2007 Super Bowl, on my personal financial disclosure statements which are filed annually with the state.

This summer, Durham asked me if I wanted to fill a recent vacancy on the board of one of his companies, Ohio-based Fair Financial. I joined the board in September of 2009 and upon learning of an Indianapolis Business Journal article questioning the business practices of Fair Financial in late October, I communicated with Tim and indicated that I was no longer interested in serving on the board.

In the limited time I served on the board, I never attended a meeting and was never compensated for serving as a board member. I never borrowed money or received contributions from Fair Financial or Fair Holdings. Most importantly, I am unaware of any illegal business practices associated with Fair Financial or Fair Holdings.

Recent media reports also indicate that the Securities and Exchange Commission is investigating Durham's role in a company called CellStar or CLST Holdings. I began buying stock in Cellstar, a publicly-traded company, in 2005 after discussing the investment, as well as other companies, with friends and financial advisors as part of my overall investment planning.

I have no knowledge of the SEC investigation. I have disclosed my investment in this stock, in addition to others which have no connection to Durham, on my annual financial disclosure reports with the state. The current value of my stock in CLST Holdings is approximately $7,500.

Over the past 12-15 years, I've made a variety of investments in securities, rental properties, and businesses. To the best of my knowledge there are no other businesses, stocks, or investments in which Durham and I both have an interest.

As a public official, I am, understandably and appropriately, held to a higher standard - and any association or action is subject to greater scrutiny. As Prosecutor, I manage an office of approximately 400 full-time employees and an annual operating budget in excess of 28 million dollars. In hindsight, I should have conducted greater due diligence with regard to Fair Financial before agreeing to serve on the board.

It has been my honor to serve as the Marion County Prosecutor. Over the last seven years, with the hard work of a great team of attorneys and professionals, we have accomplished great results and brought justice for thousands of victims. I deeply regret any degree to which the recent events have been a distraction from the noble work and recent successes of our office.

Again, I want to thank you for your past support. I appreciate you taking the time to read this message and I hope that it gives you a better understanding of the issues at hand. I will work with our team in the Prosecutor's office to focus on our mission and will continue to with work with our public safety partners to make our community safer.

FOLLOW UP ANALYSIS: The Cellstar stock purchase will continue to plague Brizzi. He says he began acquiring the stock in 2005, and it's current value is $7,500. Durham, Patrick O'Donnell, a retired CIO and board member of UBS Investment Bank of Chicago and Henri Najem, Jr., co-owner of the Bella Vita restaurant with Durham, filed a Schedule 13D with the SEC on February 23, 2006 announcing their acquisition of 1,279,000 shares for $1,066,461. At the time, this represented about 6% of the issued and outstanding shares of stock in CLST Holdings. The disclosure claimed Durham, O'Donnell and Najem had purchased the shares each out of their personal funds. Durham made the largest purchases, including 10,000 shares on February 14, 2006 at $2.47 per share and 20,000 shares on February 23, 2006 at $2.33 per share, which triggered the filing.

It is apparent that the trio's stock purchases began back in 2005, the same time Brizzi purchased his shares. At the time of the filing, Durham owned 782,500 shares, while O'Donnell owned 418,000 shares and Najem held 78,100 shares. Based on the value Brizzi nows claims for his CLST stock of $7,500, he would have to hold at least 75,000 shares. Given the timing of his purchase, a question is raised as to whether Brizzi should have been included in the Schedule 13D filing along with Durham, O'Donnell and Najem. Are we to believe he acted completely independently of their purchases? That seems to be what he is claiming in his statement above.

What we also know is that two dividends were paid to shareholders in 2007 in the amounts of $1.50 per share and $0.60 per share, or a total of $2.10. If Brizzi owned 75,000 shares at that time, he would have been paid a dividend of $157,500. In 2005, the stock traded for as low as $0.32 a share and as high as $4.54 a share. At the end of 2005, it was trading for about $2.00 a share. The timing of Brizzi's purchase could have altered the amount he paid for it considerably, but it is more than likely that he acquired the shares for a six-figure sum, perhaps in excess of his gross salary as county prosecutor.

I would point out that Brizzi and his wife divorced last year. Did she get any CLST stock as part of their property settlement agreement? If so, his original stock purchase could have been considerably higher than what it now appears to be. His prior economic interest disclosure statements show he only owned relatively small amounts of stock in two other companies. In the interest of full disclosure, Brizzi should release his brokerage statements detailing his stock purchases.

What Brizzi has already released will catch the eye of SEC investigators. I'm not sure full disclosure can exonerate him at this point. I just don't know how he expects anyone to believe that his purchase of CLST stock was not in tandem with his good friend's effort to gain control of CLST. Durham currently holds a 15% stake in CLST. According to a shareholder lawsuit, Durham and his control group have been accused of engaging in a series self-dealing actions since taking control of the company. That involved asset sales to Indianapolis-based Brightpoint and the purchase of receivables held by Durham's Fair Finance. The SEC is now investigating CLST, and the FBI is investigating Fair Finance for allegedly running a Ponzi scheme.

Last week, I called for Brizzi's resignation as an elected Republican committeeperson in Marion County. I stand by that. The more that comes out on Brizzi's financial relationship with Durham, the more damaging it will become. As the state's largest county, we need a full-time, fully engaged prosecutor who will not be bogged down answering questions of FBI and SEC investigators about transactions he engaged in with Durham.

UPDATE: In an interview with radio talk show host Abdul Hakim Shabazz, Brizzi claims he paid less than $10,000 for the CLST stock he acquired in 2005, which would have meant he purchased the stock during a period it traded low in 2005. In 2007, Brizzi would have earned about $157,500 in dividends on that stock if he held as many shares as he now claims to own in the company.