INDIANAPOLIS (WISH) - For the first time, court documents spell out details behind the dealings of Indianapolis businessman Timothy Durham alleging he used Fair Finance to run a Ponzi scheme.
In court documents obtained by 24-Hour News 8, Fair Finance trustee Brian Bash says, "This complaint details the inner workings of a fraud with shocking proportions and consequences."
It goes on to say, "The trustee will establish that Timothy Durham purchased Fair Finance Company so the he could loot it for the benefit of Obsidian and Diamond, entities Durham Controlled."
Long before the FBI raided the downtown offices of Tim Durham's Obsidian Enterprises in November of 2009, the company was broke. In fact, according to a lawsuit just filed, Durham bought Akron, Ohio-based Fair Finance to fund two failing Indianapolis-based businesses — Obsidian Enterprises and Diamond Investments.
According to the lawsuit filed by Brian Bash, the trustee of bankrupt Fair Finance, when Durham purchased Fair Finance, he said, "This will be like taking candy from a baby."
The lawsuit contends that Durham began looting Fair Finance at "a stupendous pace." It says that within two days of making the purchase Durham gave "a $3 million line of credit to Obsidian with no payments due for years."
The lawsuit also says, "insider and related-party loans as a whole grew to $30 million within 15 months and $40 million within two years." The lawsuit contends that Durham used "Fair to fund his other businesses and to finance his own speculation in stocks, primarily in Indianapolis-based Brightpoint."
The lawsuit contends that many of Durham's insiders knew the company was in trouble but he "exercised his will through subservient directors and key employees, often family members and close friends or business associates, who he kept indebted to him with generous pay packages and insider loans funded by Fair."
In fact, the lawsuit says that Durham admitted to Fair Finance's attorney in 2008 that "between 89 percent and 93 percent of new money brought in from investors was used to repay debts to other investors."
And that is the classic definition of a Ponzi scheme. The lawsuit contends that Durham knew Fair Finance was doomed and he could have liquidated the company and still made a significant recovery of money. Instead, he fired his auditors and operated as a Ponzi scheme, enabling him to loot every last penny. The lawsuit asks for monetary damages.
From Obsidian, it wants no less than nearly $30 million dollars and from Diamond no less than $9 million. But asking for the money and getting it are two different matters. As the lawsuit itself points out, almost none of the companies that Durham ran ever made a profit. And the little bit that was there is now gone. Durham has never been charged with a crime.
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