Sunday, November 28, 2010

Akron Beacon-Journal Series Puts Pieces To Durham Puzzle Together

The Akron Beacon-Journal has a great investigative journalism series it launched today looking into the demise of Fair Finance Company, the now-bankrupt company Indianapolis businessman Tim Durham plundered to bail out his losing business enterprises and to finance the lavish lifestyle he unabashedly flaunted over the past decade after acquiring the Ohio-based company. A lengthy introductory piece by Jim Mackinnon and Cheryl Powell, "Borrowed time finally runs out," retraces Durham's acquisition of the Akron-based company in great detail:

Fair Finance investors were stunned on Nov. 24 a year ago when the FBI raided the company's East Market Street headquarters and its corporate parent's offices in Indianapolis. The agents hauled away computers and boxes of files and Fair Finance, in business since the days of the Great Depression, never reopened.


For many, this was their introduction to Timothy S. Durham, a prominent Indianapolis buyout specialist who, along with business partner James F. Cochran, had purchased Fair Finance in 2002 from the Fair family.

Durham was well-known in Indiana as a successful, if highly leveraged, businessman and millionaire playboy. And he had a growing profile in Hollywood as the new chief executive of struggling entertainment company National Lampoon Inc., whose previous top executive — Dan Laikin, a friend and business partner — is now in federal prison after being convicted of manipulating the company's stock price.

Profiles of Durham in Indianapolis newspapers, magazines and public documents show he has been an aggressive businessman all his adult life.
Durham's real ticket to success, a fact not overlooked by these reporters, was marrying Joan SerVaas, daughter of wealthy industrialist and long-time Indianapolis City-County Council President Beurt SerVaas.
While practicing law, he was asked to review papers for Beurt SerVaas, an entrepreneur who made his money buying and selling businesses, most in the manufacturing industry, including rubber. Among his successful acquisitions were U.S. Rubber Reclaiming in Mississippi and an Indianapolis tire innertube plant once owned by Uniroyal.


SerVaas hired Durham in 1990 to run the Carpenter school bus company.

Durham married SerVaas' daughter, Joan, who was eight years older and had three children. Joan SerVaas Durham, a lawyer and businesswoman, runs Curtis Publishing, which owns the copyright to many Norman Rockwell paintings. News articles say Durham raised Joan's three children as his own; the couple also had a son together.

Over the next several years, Durham played a role in some of SerVaas' purchases and sales.

But in 1998, Durham parted ways with SerVaas and his daughter, and launched his own venture capital company with several friends.
Why Durham departed ways with SerVaas and his daughter is very instructive to what later became of Durham. One of the businesses SerVaas acquired while Durham worked with him was the Carpenter Bus Company of Mitchell, Indiana. SerVaas would later put Durham in charge of that business. When SerVaas decided to sell the bus company for a healthy profit to Spartan Motors, according to a source, he would discover that Durham had misappropriated the company's retirement funds for its employees. The source told me the mess Durham made of the retirement funds cost SerVaas many millions before he was able to successfully close on the sale of the business. Obviously feeling no shame, Durham moved on with his life and his way of doing business.

Fair Finance co-owner James Cochran, who worked with Durham in the school bus business, joined the venture. About eight years older than Durham, Cochran received his bachelor's degree in business administration from Southwest University and had a career in sales, credit analysis and leasing.


By setting up Obsidian Enterprises and raising $10 million, they purchased U.S. Rubber Reclaiming from SerVaas, then the small, publicly traded Danzer Co., a Maryland truck-body manufacturer.

Danzer's name was changed to Obsidian in 2001. Obsidian, revamped as a holding company for several of Durham's businesses, was now a publicly traded company that had to report earnings, or, in this case, mounting losses.

Meanwhile, Durham and Cochran were taking an interest in another friend, Dan Laikin, who had set off to take control of the company that owned the rights to National Lampoon, a struggling Los Angeles entertainment company.

They saw National Lampoon as undervalued, but their timing was not good. The prosperous decade that began in the early 1990s was about to end.

Durham and Cochran needed cash, and found it at a respected, family-owned company with what was arguably a license to print money: Fair Finance.


A business broker in Cleveland brought them all together, according to Don Fair, son of the Fair Finance founder and the owner at the time.

Don Fair needed to sell the business, he told the Beacon Journal earlier this year. He was in his 70s with no family member interested in succeeding him. Talks with Durham and Cochran started in 2000, Fair recalled, with an agreement reached in late 2001 and the deal closing in January 2002.

Fair Finance, which did business as Fair Financial, had a solid business model, Fair said. The company managed accounts receivable for other businesses and provided consumer loans. To provide the necessary capital, the company sold high-interest investment certificates to Ohio residents.

After the sale, Fair said he largely stayed away from the business, although he held a note for almost $4 million that would be paid about five years later.

At first, Fair said, it looked like Fair Finance was operating as it always had. But as the years passed and he looked again at the investment certificate circulars, he grew concerned.

The documents included disclosures about Fair Finance's loans, and suggested the company had changed from a consumer lender to a commercial lender. And where he had limited families to buying no more than $50,000 in certificates, the maximum had grown to $200,000.

This tale in many ways starts just 24 hours after Durham and Cochran finished their purchase of Fair Finance on Jan. 7, 2002. That's the date when their newly formed Ohio corporation, Fair Holdings, officially acquired Fair Finance.

Fair Holdings, in turn, was owned by Indiana-based DC Investments, another Durham and Cochran business.

The pending sale had been noted in Fair Finance's investment circular filed with the state in October 2001. A Dec. 21, 2001, circular noted the ownership changes, with Don Fair listed as ''chairman emeritus,'' Cochran as chairman and Durham as chief executive.

The circular also said ''new management contemplates there will be no significant change to the company's business plan or business procedures, however, there can be no guarantee that prior business procedures will continue to be followed by new management.''
The story goes on to detail how Fair Finance became a cash cow to bail out all of Obsdian's losing businesses and to serve as a source of funding for Durham's lavish lifestyle. In a separate story, an Ohio lawyer representing Durham assures us there was no fraud involved.

Dennis Concilla of the firm Carlile Patchen & Murphy in Columbus blamed the demise of Fair Finance on the economy and the federal government's intrusion into Fair's daily business.


''I haven't seen anything that leads me to believe there was fraud,'' Concilla said.

The bankruptcy trustee has not been able to prove wrongdoing, Concilla said.

''Yes, there were some personal loans that went to Durham, Cochran and others,'' Concilla said. ''The bulk of the money went to finance companies that made up the bulk of Obsidian Enterprises.''

When the federal government forced Fair Finance to close, the various Durham companies lost value and couldn't pay their obligations, Concilla said.

Durham has tried to cooperate with investigators since the Fair closing, as evidenced by his voluntary delivery of his motor vehicle and art collections for auction, Concilla said.

The civil litigation probably will take years to resolve, he said.
If Durham and his business partners committed no fraud, they sure have hired a bevy of very expensive lawyers to defend them against charges Durham seemed to confidently predict would not be brought against him in a recent interview with WTHR's Ann Marie Tiernon. Durham recently hired high profile Florida criminal defense attorney Roy Black to represent him according to the IBJ's Greg Andrews. Black first earned fame when he successfully defended William Kennedy Smith against charges he raped a woman after a night on the town drinking with his uncle, Sen. Edward Kennedy, and his cousin, Patrick Kennedy. Black later married one of the jurors who acquitted his client. Previously, Andrews reports Barnes & Thornburg's Larry Mackey had been providing legal assistance to Durham. Mackey is the former federal prosecutor who successfully prosecuted Oklahoma City bomber Timothy McVeigh in the government's whitewashed account of how that terrorist bombing went down.

Andrews wondered in his story where Durham is getting the money to hire someone like Black since he claims he is broke. Andrews learns Durham is getting help from friends, including his former father-in-law, Beurt SerVaas. Andrew's writes, "One of the people apparently helping is retired Indianapolis businessman and former City-County Council President Beurt SerVaas, the 91-year-old father of Durham’s ex-wife, Joan SerVaas." “I think he asked Dad for a loan. Dad might have lent him money,” Joan SerVaas told IBJ. She added: “If he gets through all this, he might be able to pay it back.”

Yep, it looks like SerVaas is still acting as Durham's enabler. SerVaas is one interesting character. He worked as an OSS officer during World War II as a close associate of Reagan CIA Director William Casey and has boasted of his continued CIA ties long after his spy dies supposedly ended. He served on the executive board of the veterans of the OSS (predecessor to the CIA), which some claim ran the agency for many years behind the scenes. SerVaas once owned Indianapolis-based International Investigators, a private investigator firm that was staffed with former CIA and FBI agents. In Dick Cady's Deadline: Indianapolis, he details how the spy firm received bugging equipment from the Indianapolis Police Department that it used to illegally wiretap foes of former Marion Co. GOP Chairman Keith Bulen, including former Indiana Sen. Vance Hartke.

6 comments:

Hoosier in the Heartland said...

Beurt SerVaas is elderly; perhaps dementia clouds his judgment?

With Joanie, it's easier: Durham was a smooth-talking player back when they courted.

Now, there's just no excuse for the world of hurt he's caused her and her family.

Advance Indiana said...

SerVaas didn't seem to be suffering from dementia when he spoke to the City-County Council about a year ago. His health is noticeably failing, but his mind still appeared pretty sharp.

Hoosier in the Heartland said...

BS graduated from Shortridge in 1937, making his birthdate somewhere around 1920.

So, he's 'round about 90 years old now.

Too old to battle a devious man like Durham!

Advance Indiana said...

I don't expect him to battle Durham. I just don't want him to finance his legal defense. He's not worthy.

Ellen said...

It's probably hard for grandpa to admit that the father of his fourth grandson by Joan is a crook. Especially since he anointed him as his probable successor decades ago.
Now he's too old to change course.

Marycatherine Barton said...

Who knows what tricks Tim learned from Beurt! Oops, hope I don't get shadowed.