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.  

If you’ve had investment dealings with Tim Durham or Fair Financial, we want to hear your story. Leave a message in the Comment Box below or via the Contact Us form.

Obsidian Enterprises and Fair Financial Services

Tim Durham is so rich he once stated during a CNBC interview that he often lost track of how many cars he actually owned. Durham runs Obsidian Enterprises and Fair Financial Services, which specialize in buying debt-ridden companies. On Nov. 24, Durham caught the attention of the FBI, which conducted dual raid on the Indianapolis and Akron, Ohio, offices of Obsidian and Fair Financial. 

The FBI did not give a reason for the raids or for questioning Durham in Los Angeles, but it’s believed the warrants have something to do with Fair Financial selling uninsured investment securities and allegedly being unable to repay investors nearly $200 million. The Indianapolis Business Journal published an investigative story on the subject last month.  

According to the IBJ article, Durham purchased Fair Financial in 2002, but has treated “it like a personal bank since.” Ohio securities filings show that Durham, partners and relative firms owe investors more than $168 million.  

On Nov. 25, Ohio Congressman John Boccieri issued a public statement calling for the federal government to seize the assets of Durham and Fair Financial as the FBI’s investigation proceeds. 

As reported Nov. 24 by Ohio.com, Akron resident Lou Laurich, 67, said he invested $8,000 with Fair Financial after reading ads that promised high interest rates on the company’s investment certificates.  

Fair Financial’s roots date back to 1934 when car dealer Ray Fair 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 evolved into providing second mortgages, small consumer loans, and financial investments.

The business was sold by the Fair family in 2002 to Durham. 

Meanwhile, legal questions continue to loom regarding another business where Durham has a vested interest: Los Angeles-based National Lampoon, Inc. The film company, which is best known for “Animal House” and the “Vacation” film series, has found itself in financial straits since last December, when the Securities and Exchange Commission (SEC) filed civil fraud charges against it and a grand jury indicted then-CEO Dan Laikin on charges of stock manipulation. 

Laikin pleaded guilty in September to conspiracy in exchange for prosecutors dropping a count of securities fraud. Durham, who was not implicated in the criminal case or named in the SEC’s civil lawsuit, currently serves as National Lampoon’s acting CEO. ? 

Obsidian Enterprises and Fair Financial

Tim Durham had all the toys and mansions that money could buy. Now he’s got even more on his plate: FBI raids on his two companies, Obsidian Enterprises and Fair Financial, and allegations of ties to ghost employment involving two New Castle police officers.  

FBI agents raided Durham’s offices in downtown Indianapolis and in northeast Ohio on Nov. 24. So far, investigators are giving few details about the reasons behind their interest in the millionaire, but a story last month in the Indianapolis Business Journal raised questions over whether Durham’s finance company had the funds to repay Ohio investors who bought nearly $200 million in investment certificates. The story went on to say that Durham used the company to fund other business interests. 

On Nov. 25, WTHR contacted one of Durham’s former business partners, Tim Porter, who apparently is cooperating with the FBI in its investigation of Durham. According to the story, Porter met Durham in May 2007 and the two became partners. Porter even lived in Durham’s mansion on Geist Reservoir at one time. The two later had a falling out over a business dispute. According to the WTHR story, Porter claims Durham has defrauded Ohio investors in Fair Financial for more $200 million. 

“It’s a mini Bernard Madoff. A mini Ponzi scheme. And when you stand back and look at it from the outside in, you can see what they’re doing,” said Porter in the story. ? ?Tim Durham’s rise to riches has been meteoric. Profiled on CNBC in a story called The Rise of the Super Rich, Durham had a passion for fast and collectible cars. He owned more than 70 vehicles, including Rolls-Royces, Ferraris, and Dusenbergs. He also frequently traveled via his own private jet and owned a $6 million to $7 million yacht in Florida.  The late Anna Nicole Smith once stayed at Durham’s 30,000-square-foot mansion near Geist Reservoir during the Indianapolis 500. 

In addition to FBI investigations of his two companies, Durham’s name is being linked to another scandal involving ghost employment. Last week, Lt. James Heffernan and Patrolman Matthew Patterson, along with Henry County Community Correction Director Doug Sheets were arrested on preliminarily charges of ghost employment, corrupt business influence and official misconduct. 

As reported Nov. 25 by WRTV news, Heffernan and Patterson worked part time for Henry County Community Corrections, with Heffernan serving as the assistant director of the facility. Both were hired by Sheets, a retired state police detective. 

John Tompkins, who is representing Durham, also is representing Heffernan and Patterson in their case. Durham is connected to the New Castle scandal because the off-duty officers often worked at his home. 

According to the WRTV story, Patterson was seen in possession of a Hummer SUV registered in Durham’s name. Meanwhile, court documents in the case indicate that Patterson’s GPS system showed that when he was at Durham’s Geist Reservoir mansion, he claimed on his time sheet that he was checking on people regarding a house arrest. 

If you’ve had dealings with Tim Durham and Obsidian Enterprises or Fair Financial, we want to hear your story. Leave a message in the Comment Box below or via the Contact Us form. We want to counsel you about your legal options.

Indianapolis financier Timothy S. Durham, owner of Obsidian Enterprises in Indianapolis and Fair Financial in Akron, Ohio, is the target of investigation by the FBI. On Nov. 24, federal agents raided Durham’s offices in downtown Indianapolis and Ohio, taking records and information related to his two companies.

Search warrants for the raids are sealed.

Durham , 47, is known as a leveraged buy-out and turn-around specialist. Last month, a story appearing in the Indianapolis Business Journal raised questions as to whether Durham’s business, Fair Financial, could repay Ohio investors who bought nearly $200 million in investment certificates. According to the IBJ story, Fair Financial has continued to raise money from investors, offering interest rates on 24-month notes as high as 9% – an amount that is more than triple what commercial banks offers for certificates of deposit. Unlike CDs, however, Fair’s securities have no government guarantee.  Many of the securities were sold to Ohio residents, who had only modest incomes.

Durham’s story sounds eerily familiar to that of disgraced financier R. Allen Stanford. In February, U.S. marshals raided Stanford Financial’s Houston headquarters, following charges by the Securities and Exchange Commission (SEC) that the bulk of Stanford’s business was an $8 billion Ponzi scheme. Stanford allegedly orchestrated his scam by selling bogus certificates of deposit to investors and promises of high interest rates.

And just like Stanford, Durham had taste for the good life. He’s known as a collector of pricey cars and traveling on private jets and yachts. He also owns a 30,000-square-foot home near Fortville.

If you invested money with either of Timothy Durham’s companies, Obsidian Enterprises or Fair Financial, please contact our lawyers. We want to advise you on your legal options.

Access International Advisors LLC’s LuxAlpha Sicav-American Selection Fund could mean hundreds of damages claims for UBS AG and Ernst & Young LLP if investors who lost millions of dollars in the Bernard Madoff-linked fund emerge victorious in their case. The story was first reported Nov. 25 by Bloomberg.

According to the article, individual and institutional investors who lost money through the LuxAlpha Sicav-American Selection Fund are suing UBS and Ernst & Young for “seriously neglecting” their supervisory duties of the fund. It’s now up to a Luxembourg court to decide whether investors have the right to bring direct claims against the fund’s custodian and auditor – UBS and Ernst & Young.

Hearings on the matter started today.

At one time, the LuxAlpha SicavAmerican Selection Fund had $1.4 billion in assets. Following Madoff’s arrest, the fund was dissolved.

UBS’s Luxembourg unit served as the custodian bank to the LuxAlpha Sicav-American Selection Fund. Custodians are responsible for oversight, as well as managing deposits and making payments to investors.

As for Ernst & Young, its role in LuxAlpha included auditing the fund’s annual accounts. In one complaint, a French investor claimed Ernst & Young is “co-responsible” for losses because it “didn’t follow the necessary obligatory controls and checks,” according to the Bloomberg article.

Tell us about your situation with LuxAlpha Sicav-American Selection Fund and Access International Advisors by leaving a message in the Comment Box below or via the Contact Us form. We want to counsel you on your legal options.

MetLife Securities and three affiliates – New England Securities Corp., Walnut Street Securities, and Tower Square Securities – are facing a fine of $1.2 million by the Financial Industry Regulatory Authority (FINRA) for failing to properly monitor and review their brokers’ email correspondence with the public. One of those brokers is Mark Salyer, who stole nearly $6 million from his customers through private securities transactions he initiated to raise capital for various real estate development companies.

In January 2009, the Securities and Exchange Commission (SEC) barred Mark Salyer from associating with any broker, dealer or investment adviser.

The $1.2 million fine also resolves allegations that MetLife supervisors failed to properly monitor brokers’ participation in outside business activities and private securities transactions.

According to FINRA, the failures allowed Salyer and another MetLife Securities broker to engage in undisclosed outside business activities and private securities transactions while working at MetLife Securities. Eventually, those failures cost MetLife Securities customers millions of dollars.

Investors who had accounts MetLife Securities and its three affiliates – New England Securities Corp., Walnut Street Securities, and Tower Square Securities are encouraged to contact us and tell us your story. Please leave a message in the Comment Box below or on the the Contact Us form.

Former Stifel, Nicolaus & Co. and AXA Advisors broker Kenneth Neely pleaded guilty on Nov. 4 to fraud charges connected to operating a Ponzi scheme in which clients from two brokerages – Stifel, Nicolaus & Co. and AXA Advisors – were lured into investing money in Neely’s St. Louis Investment Club and a non-existent real estate investment trust. Neely allegedly enticed investors – some of whom were church members, family and friends – in Missouri, California and Maryland with promises of “no risk” and profitable rates of return.

According to  to a cease and desist order filed by Missouri Secretary of State Robin Carnahan’s Office, Neely began raising money for his scam while working for Stifel, Nicolaus & Co. and AXA Advisors. The scheme, which began in January 2002 and continued until 2009, was kept afloat by Neely allegedly using some of the funds raised from new investors to pay investment returns to other investors. This is the hallmark of a Ponzi scheme.

Stifel Nicolaus and AXA Advisors were not named as respondents in Carnahan’s cease and desist order.

Carnahan’s office initially launched its investigation into Neely after receiving information from one of his former employers, AXA Advisors. On July 29, 2009, Neely was barred by the Financial Industry Regulatory Authority (FINRA) from operating as a broker.

Neely, 56, faces a maximum penalty of 20 years in prison and/or fines up to $250,000, as well as mandatory restitution to his victims, according to the St. Louis Federal Bureau of Investigation. Sentencing is set for January 29, 2010.

Investors who had accounts with Stifel, Nicolaus & Co. or AXA Advisors are encouraged to contact us and tell us your story. You may have a viable claim to recover your losses. Please leave a message in the Comment Box below or on the the Contact Usform.

The Financial Industry Regulatory Authority (FINRA) has won approval from the Securities and Exchange Commission (SEC) to expand its BrokerCheck Service and make the disciplinary records of brokers permanently available online to the public.

Previously, a broker’s record generally became unavailable two years after he or she left the securities industry. FINRA estimates there are more than 15,000 individuals who have exited the securities industry after being the subject of a final regulatory action and whose disciplinary history is not currently available via BrokerCheck.

Disclosure records for former brokers will be available on BrokerCheck beginning Nov. 30.

“This is an important step for investors and for investor protection,” said FINRA Chairman and CEO Richard Ketchum. “Individuals previously barred by FINRA and other regulators have surfaced in a number of recent frauds in other parts of the financial industry that cost unsuspecting investors millions of dollars. It has never been more critical for investors to research the backgrounds of the financial professionals they deal with than it is today.”

In approving the BrokerCheck expansion, the SEC said “it is possible that a (former broker) could become a financial planner or work in another related field where his securities record would help members of the public decide if they should accept his financial advice or rely on his advice or expertise.”

In 2008, individuals used BrokerCheck to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck.

Various independent broker-dealers that sold Medical Capital securities to investors are the subject of ongoing investigations, as well as class-action lawsuits and arbitration claims filed with the Financial Industry Regulatory Authority (FINRA). The cases themselves focus on the sales practices and due diligence of the broker/dealers that marketed and sold private securities known as Medical Capital Notes.

On July 16, 2009, the Securities and Exchange Commission (SEC) filed fraud charges against Medical Capital Holdings in connection to the sale of $77 million of private securities. On that same day, FINRA issued a “sweep notice” to obtain information from an undisclosed number of broker/dealers about sales of Medical Capital securities.

The SEC’s complaint alleges that Medical Capital and others defrauded investors by misappropriating about $18.5 million of investor funds and misrepresenting to investors that no prior offerings had defaulted or were late in making payments of principal and/or interest.

Based in Tustin, California, Medical Capital purchases accounts receivables of medical providers and then packages them as private investments. Over a six-year period, the firm raised approximately $2.2 billion from 20,000 investors through offerings of notes in Medical Provider Funding Corp. VI and earlier offerings made by five other wholly owned special-purpose corporations (SPCs). Those SPCs include Medical Provider Funding Corp. I, II, III, IV and V.

Today, all five SPCs are in default after failing to make interest and principal payments to investors.

On Sept. 18, 2009, a class action lawsuit – Case No: SACV 09-1084 – was filed in California on behalf of investors who purchased securities issued by Medical Provider Financial Corp. III, Medical Provider Financial Corp. IV, Medical Provider Funding Corp. V and/or Medical Provider Funding Corp. VI. In the complaint, broker/dealers Cullum & Burks Securities, Securities America, Ameriprise Financial and CapWest Securities are named as defendants. Among the allegations cited, the firms are accused of failing to properly investigate the securities and the track record of Medical Capital and its related entities

Currently, Maddox Hargett & Caruso P.C. is investigating potential claims to recover investor losses against various broker/dealers that sold Medical Capital securities. If you have questions about your Medical Capital investments, please contact us by leaving a message in the Comment Box below or on the Contact Us form.