Fair Finance, the Akron, Ohio, company co-owned by Indianapolis businessman Timothy S. Durham, faces a class action lawsuit that is seeking to rescind $200 million in investor purchases of Fair Finance securities. The lawsuit, which was filed Dec. 4 in Summit County, Ohio, by the law firms of Maddox Hargett & Caruso P.C. and David P. Meyer & Associates, LPA., is the first investor lawsuit filed following allegations last month by the U.S. Attorney’s Office that Fair Finance was operating as a Ponzi scheme.
In addition to Durham and Fair Finance, the Complaint names parent company Fair Holdings, Inc., DC Investments, LLC, Obsidian Enterprises, James F. Cochran, Daniel S. Laikin and other current and former directors of Fair Finance as defendants.
Among the allegations, the Complaint cites violations of the Ohio Securities Act and other breaches of legal duty tied to sales of investment certificates sold by Fair Finance, which allegedly caused millions of dollars in damages to the plaintiffs and class members, all of whom are residents of Ohio.
“These investors, many of whom are retired and on a fixed income, were tricked into buying investments based on representations that Fair Finance was in the same line of business that it had been in since 1934,” said David P. Meyer, co-counsel for the plaintiffs and an attorney with David P. Meyer & Associates, LPA. “The problem is that as soon as the new owners bought the company in 2002, they drastically changed that business.”
Fair Finance (which also goes by the name of Fair Financial) was founded in 1934 by car dealer Ray Fair to provide loans to customers during the Great Depression. In 1959, the business entered into other avenues, including second mortgages, small consumer loans, and financial investments.
The company was sold by the Fair family in 2002 to Durham.
On Nov. 24, the offices of Fair Financial, as well those of another Durham-owned business, Obsidian Enterprises in Indianapolis, were raided by the FBI, with federal agents taking numerous computers and files. As of Dec. 4, the offices of Fair Finance have remained closed.
The basis of the Dec. 4 Complaint focuses on millions of dollars in “insider loans” that allegedly have been made to various individuals and entities associated with Fair Finance’s co-owners, Durham and Cochran. The loans total $168 million and constitute almost 70% of Fair Financial’s assets.
In addition, the Complaint alleges misrepresentation and omission of facts concerning the investment certificates. According to Thomas Hargett, co-counsel for the plaintiffs and an attorney with Maddox Hargett & Caruso P.C., the written offering circulars used to sell the investment certificates failed to adequately inform prospective investors of the “unfettered” discretion Durham and other insiders had in loaning money to themselves and their related businesses. There also was no apparent oversight or disclosure of the substantial credit risks these loans posed to Fair Financial investors, the Complaint alleges.
Between May 2004 and May 2009, the Complaint alleges that more than 900 wire transfers totaling approximately $84 million had been directed to Fair Holdings by Fair Finance Company. This money was then allegedly wired to nearly 50 individuals and businesses over a five-year period, including:
- $6.9 million to U.S. Rubber Reclaiming (a subsidiary of Obsidian Enterprises);
- $5.3 million to Speedster Inc. (a classic car replica manufacturer owned by Timothy S. Durham);
- $1.8 million to Danzer Industries (former parent company of Obsidian Enterprises); and
- $1 million to Champion Trailer (former subsidiary Obsidian Enterprises).
A copy of the Complaint will be available at and InvestorClaims.com.