Even More Trouble For Brizzi

The IBJ and Indianapolis Star both have new reports this weekend on another Durham company in which Marion Co. Prosecutor Carl Brizzi owned stock. The company in question is Red Rock Pictures Holdings, a production company in which Durham and other associates acquired an interest in recent years and which later loaned millions to National Lampoon, Inc., another Durham-controlled company. The stock ownership was revealed on a federal financial disclosure form Brizzi filed earlier this year when he formed a campaign committee for a potential bid for the congressional seat currently held by U.S. Rep. Dan Burton (R). Brizzi did not respond to questions from the Star's Ted Evanoff and John Russell:

It is not known whether Brizzi currently holds shares in Red Rock. If he does, the disclosure would contradict a statement he made earlier this week, when he said he had no further financial ties to Durham, beyond those already reported in news stories.

Brizzi, who did not respond to several requests for comment Friday, has acknowledged he was appointed to the board of a Durham company recently raided by the FBI and bought stock in another Durham-related business whose records have been subpoenaed by the Securities and Exchange Commission.

Brizzi disclosed the Red Rock investment in a campaign filing when he was considering running for Congress in the district represented by Rep. Dan Burton. Brizzi pulled out of the race after Burton said he planned to run for a 15th term.

On the disclosure form, Brizzi listed the value of his stock in Red Rock at $1 to $1,000. Shares in Red Rock are nearly worthless, trading for less than a penny each. It was not clear when Brizzi bought the stock, how much he paid or how many shares he still holds.

Also unclear is how Brizzi came to buy stock in the little-known company. No analysts follow the stock or offer recommendations on it. The company has been struggling to make ends meet.

In the quarter that ended in May, the company lost $4.2 million and disclosed it has experienced losses from operations since its inception in 2004 that raise substantial doubt about its ability to continue as a going concern.

The stock ownership in Red Rock becomes more troubling when you discover that Dan Laikin of National Lampoon, who recently pleaded guilty to federal charges that he manipulated National Lampoon's stock while serving as its CEO, is in the mix. Durham took the helm of National Lampoon after Laikin stepped down. The Star notes that Red Rock loaned at least $1 million to Laikin. National Lampoon bought a 14% stake in Red Rock and shared a chief financial officer, Lorraine Evanoff, for awhile. Evanoff stepped down after Laikin was charged with stock manipulation. Red Rock is currently run by television marketer Reno Rolle.

In previous interviews, Brizzi has claimed to reporters that Fair Finance and his stock ownership in CLST Holdings, another Durham-controlled company under investigation by the SEC, are the only business ties he had to Durham. Brizzi later hedged his answer in an interview with WTHR's Chris Proffitt when asked if Durham had personally loaned money to him. The new discovery of his stock in Red Rock further complicates his Durham problem. A pattern of Brizzi investments following Durham's is emerging. There have been Internet-posted rumors in the past that Red Rock was a "pump and dump" target by some investors. That's a form of stock fraud where stock investors buy a company's stock artificially cheap, generate excitement to pump its price and then dump it for a quick profit. Gee, didn't that happen with Brightpoint's stock a few years back?

The IBJ's Greg Andrews notes the growing problem Brizzi's ties to Durham are causing him. Andrews first broke the news that Brizzi had agreed to serve on Fair Finance's board of directors but thought better of that decision after Andrews began his news reporting of the company. Brizzi declined an interview for Andrews' story, but he did respond to questions by e-mail. In that correspondence, Brizzi told Andrews he thought he had sold the Red Rock stock that he had listed on his federal financial disclosure statement:

Brizzi declined IBJ’s requests for an interview about his investments. In an e-mail exchange, he initially said he did not think he owned stock in Red Rock. When presented with the disclosure, he said he thought he had sold it since the filing.

It’s not clear what led Brizzi to either Red Rock or CLST. In a letter to supporters he posted on his Facebook page Dec. 7, Brizzi said he began buying CLST in 2005 “after discussing the investment, as well as other companies, with friends and financial advisers as part of my overall investment planning.”

In that letter, Brizzi said, “To the best of my knowledge, there are no other businesses, stocks, or investments in which Durham and I both have an interest.” He stood by that statement after being presented with the Red Rock disclosure but didn’t respond to further inquiries.

The number of shares Brizzi owned in Red Rock wasn’t clear. Stock in the struggling business trades for less than a penny, leaving even large holdings nearly worthless. The filing listed the value of his stake at between zero and $1,000.

Andrews also picks up on the pattern of Brizzi buying stock in companies that Durham has become a major investor:

Details of Brizzi’s CLST investment also are sketchy. His purchases began the same year a Durham-led investment group began scarfing up shares of the firm. SEC filings don’t list Brizzi as part of that group.

In his letter to supporters, Brizzi said his current CLST stake is worth about $7,500, based on the stock price of about 10 cents a share. That indicates he owns about 75,000 shares. Purchasing that quantity in 2005 would have cost $24,000 at the stock’s low for the year and $340,500 at the stock’s high. Yet in his WXNT interview, Brizzi said he spent less than $10,000 to buy the shares.

When Brizzi acquired his stake, the company was known as CellStar Corp. and was in the cell-phone distribution business. It later sold off those operations to locally based Brightpoint Inc. and other firms and distributed $2.10 per share in cash dividends to stockholders.

CLST was in wind-down mode until about a year ago, when it suddenly began purchasing customer-finance receivables, including some from Fair Finance. Fair filings with Ohio securities regulators show that, at the time, Fair was strained for cash and was seeking money to repay purchasers of its investment certificates.

Brizzi’s disclosure statements dating to 2001 never have listed ownership of more than five individual stocks in a single year, though the federal filing from this year shows him owning more than a half dozen mutual funds, each with between $1,000 and $15,000 in assets.

Brizzi earns $125,000 a year as prosecutor and doesn’t have extensive assets. The federal filing shows he owes between $100,000 and $250,000 on a loan he took out to buy ownership interests in the local restaurant Harry & Izzy’s. The filing shows he still is paying off student loans.

Papers filed in connection with his divorce, which was finalized in February, showed he and his wife had three residences, but with first and second mortgages on all of them.•

The more reporters dig for information, the more troubling the questions about Brizzi's financial relationship with Durham become.