The FBI isn’t talking, but local and national news outlets have plenty to say about simultaneous raids that took place Nov. 24 on two Tim Durham companies – Indianapolis-based Obsidian Enterprises and Fair Financial in Akron, Ohio. At both locations, federal agents hauled away numerous boxes containing banking-related information and other documents.
The basis for the search warrants is still unknown, but many believe they stem to whether Fair Financial has the money to repay Ohio investors who purchased some $207 million in investment certificates – a question that initially sparked attention following an investigative story published in October by theIndianapolis Business Journal.
A follow-up IBJ story dated Nov. 28 says the latest situation involving Durham has some investors becoming increasingly concerned: “Many have been purchasing or rolling over investment certificates for years, enticed by lofty interest rates. Fair has been paying as much as 9% on 24-month notes,” the article said.
That amount – 9% – is three times what commercial banks pay on certificates of deposit with similar terms. CDs have a government guarantee – something Fair Financial investors most definitely do not.
The IBJ story cites one Fair investor, Harley Himes, 82, who said that he and his wife live off the monthly interest payments they receive from their Fair certificates.
“I was an investor back when the original owner owned it,” said Himes. “We didn’t have any problem with him. You kind of get used to a good thing. Then you find it is not such a good thing.”
The original owner of Fair Financial that Himes refers to was car dealer Ray Fair, who founded the business to provide loans to customers during the Great Depression. The company, which also does business as Fair Finance, stopped making vehicle loans in 1959 and began providing second mortgages, small consumer loans, and financial investments.
Durham bought the business from the Fair family in 2002.
One of the key issues now facing Durham may be the offering circulars that were provided to prospective Fair Financial investors and, specifically, whether that information contained any material misrepresentations or omissions.
The circulars themselves are more than 40 pages in length, difficult to understand and offer confusing information about insider loans and what constitutes as collateral for the loans.
“Are you telling enough about the entities receiving insider loans, and what kind of shape they are in?” asked Mark Maddox in the IBJ article. Maddox serves as an Indianapolis securities attorney with the law firm of Maddox Hargett & Carusuo P.C., which is considering representing investors in civil litigation against Fair Financial and Tim Durham.
Read the entire IBJ Nov. 28 story about Durham here.
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