Politicians' Reply On Durham Contributions: The Money Is Spent

It looks like most Republicans have decided to take the view that they've already spent the money Tim Durham lavished on them so they feel they are under no obligation to return any contributions based on a story in today's Star by Heather Gillers. Gov. Daniels, who raised a record amount of money in his re-election campaign and who has received at least $200,000 from Durham, took that view. Marion Co. Prosecutor Carl Brizzi only plans to give up $3,500 he has received more recently from Durham. The $160,000 he earlier received from Durham was spent during his 2006 re-election campaign he says. The House Republican Campaign Committee has made no decision on the $59,580 it accepted from Durham. House Republican Leader Brian Bosma dodged questions about the $10,000 he personally accepted from Durham. The Indiana Republican Party says it has spent the $211,200 it got from Durham. There are exceptions. Sen. Mike Delph and Attorney General Greg Zoeller plan to set aside their contributions, awaiting the investigation of Durham to unfold. Marion Co. Sheriff candidate Tim Motsinger ended his campaign and says he is dissolving a $200,000 loan he got from Durham.

Not surprisingly, Marion Co. GOP Chairman Tom John takes a very dismissive view of the whole matter. He works for Ice Miller as a lobbyist where Durham once worked and devotes his energy to landing plum appointments for his new wife's family members and government contracts for her business. "Marion County Republican Central Committee Chairman Tom John said he had no concerns about Durham's leadership of GIRFCO, which he said entailed making calls to donors seeking support," Gillers writes. "He said neither the Marion County Republican Central Committee, which has received $16,200 from Durham since 2003, nor GIRFCO, which has received $25,000, plans to return the money." The truth is that the party is broke and has nothing to return.

There seems to be consensus that Brizzi faces the most difficult dilemma because of his personal and business ties to Durham. Gillers writes:

Brizzi not only received a large donation -- $160,000 -- when he ran for re-election in 2006, he also trusted Durham to be his campaign finance chairman, which entailed seeking contributions and hosting a fundraiser. Brizzi has received $3,500 in cash donations from Durham since.

Then there is his personal and business relationship with Durham.
Brizzi has called Durham "one of my best friends." Durham footed the bill -- $4,500 -- to take Brizzi to the 2007 Super Bowl in Miami.

Brizzi even appeared in a YouTube video plugging Durham's son's campaign for high school office -- joking that young Tim Durham is "single-handedly responsible for bringing down crime in Indianapolis." The video starts with the aspiring teen politician pretending to take a bribe from a friend.

Brizzi's business relationship includes his decision to serve on the board of Durham's company Fair Financial, which is under investigation, and his ownership of what Brizzi once reported was more than $10,000 worth of stock in another Durham company, CLST Holdings, which is under scrutiny by the Securities and Exchange Commission . . .

Henry Karlson, an emeritus professor at Indiana University School of Law-Indianapolis, agreed that Brizzi's relationship with Durham "could have a negative effect on his re-election if he wants to be re-elected. Particularly if he doesn't give (the money) back."

Some Republicans are asking whether Democrats, who were quick to urge Republicans to give up the money they received from Durham, should be doing the same with the money they've received from the ISTA, which has been accused of securities fraud in a lawsuit filed this past week by the Secretary of State's Securities Division and is being investigated by the FBI. The ISTA PAC pretty much bankrolled the successful political campaigns of State Reps. John Barnes, Mary Ann Sullivan and Ed DeLaney, for example. I would like nothing more than to see Democrats forced to give up the millions they have received from the ISTA, which dwarfs the contributions Durham gave to Republicans; however, I think there is a fundamental difference between the two. The ISTA contributions would appear to come from money its member teachers contribute to the statewide union organization and not from any fraud its financial arm may have committed on Indiana's school districts, which appears to amount to $24 million. If it turns out that any of those contributions were derived from its financial activities in administering health and long-term disability plans for school districts, then I would agree that those contributions should be given up.

The IBJ's Greg Andrews has a story today on the obvious. Tim Durham only appoints close friends to the boards of businesses he controls regardless of their business acumen. We already know about Marion Co. Prosecutor Carl Brizzi accepting a directorship with Fair Finance, from which he abruptly resigned after the IBJ began raising questions about the self-dealing loans Durham had the company make for his benefit. He put his buddy David Tornek, who co-owns the Touch restaurant in South Beach with Durham, on the board of CLST Holdings, which is now facing an SEC investigation. He put Dan Laikin on Fair Finance's board before he got nabbed by the SEC in a stock manipulation scheme at National Lampoon, another company controlled by Durham. Brizzi took his place on Fair Finance's board. When Brizzi left that board after a short time, Durham named his childhood friend and former WISH-TV reporter Scott McCain to take his place on the board. McCain also serves as an officer of Durham's Obsidian Enterprises. Durham helped out McCain and his wife financially when she suffered from ovarian cancer.

Class Action Suit Filed Against Durham's Fair Finance

Investors wisely aren't waiting around for the government to take action to recover their investments in Tim Durham's Fair Finance Company for them. Attorneys for investors filed a lawsuit in Ohio to rescind approximately $200 million worth of certificates of investment Fair Finance sold to Ohio investors over the past couple of years. The IBJ's Greg Andrews reports:

The case, filed in Summit County, Ohio, appears to be the first investor lawsuit filed since the U.S. Attorney's Office alleged in court papers late last month that the business was operating as a Ponzi scheme, using the influx of money from new investors to pay off existing ones.

Attorneys with Maddox Hargett & Caruso of Fishers and David P. Meyer & Associates of Columbus allege that Fair Finance offering circulars provided to prospective investors contained material misrepresentations and omissions. They also charge that insiders breached their fiduciary duty to investors, and unjustly enriched themselves.

The suit alleges that Durham and co-owner Jim Cochran have used Fair like a personal bank since buying it in 2002, pulling tens of millions of dollars out in the form of related-party loans. Fair, which was founded in 1934 and historically made money by purchasing customer-finance contracts, obscured the fundamental change in its business in the offering circulars, the suit alleges. Fair Finance used "a tangled web of financial transactions to conceal the withdrawal of the funds ... for their own enrichment.," according to the suit.

"Upon buying the company, the two out-of-state owners promoted the same values and business models to deceive investors into investing tens of millions of dollars of their hard-earned life savings in the company even though the new owners had no intention of continuing to operate the business as the Fair family had for so many years."

Investors, who were required to be Ohio residents, purchased investment certificates, ranging in term from six months to two years, that paid interest rates substantially higher than those for certificates of deposit. But unlike CDs, the securities have no government guarantee if Fair fails to pay.

Look for more explosive details concerning Durham's Ponzi scheme to emerge in this weekend's edition of the IBJ. Also, I'm not sure what this was all about, but I found this news report on a robbery of a Cellstar warehouse back in September, 2007 in Coppell, Texas interesting:

Coppell police were searching for three men who broke into a cell phone warehouse early Wednesday and bound a security guard with duct tape.

The men wore ski masks as they approached the security guard sitting in his vehicle around 3 a.m. at Cellstar in the 600 block of Royal Lane. The men forced the security guard from his SUV, bound him with duct tape and placed him back in the vehicle, said Sharon Logan, a Coppell police spokeswoman.

The masked men then went into the warehouse, Ms. Logan said.

During that time the security guard freed himself and got out of the vehicle as the robbers were leaving the warehouse, she said. The robbers fired at least one shot before fleeing in a white sedan.

The security guard was not injured.

Police were investigating. Cellstar representatives declined to comment.

A lawsuit in Dallas, Texas I told you about earlier this year accused Durham and other business partners of engaging in various self-dealing activities after they took control of the parent holding company, CLST Holdings a couple of years ago. This week, we learned the SEC is investigating CLST Holdings and Durham.

SEC Issues Subpoena For Durham's CLST Holdings

A Form 8-K filing with the SEC by CLST Holdings, another company controlled by Tim Durham, has been subpoenaed by the SEC in connection with the investigation of Ohio-based Fair Finance, Inc., a Durham-owned company accused of running a Ponzi scheme by the federal government. The company and each of its directors have received subpoenas according to the filing. The filing reads. in part:

Also, on November 24, 2009, we received a subpoena from the Division of Enforcement of the Securities and Exchange Commission ("SEC") entitled "In Re Fair Finance." The subpoena requires us to produce a variety of documents relating to our portfolio transactions, including transactions with Fair, and also seeks documents relating to several individuals, including our directors, Mr. Durham, Robert Kaiser, and David Tornek. A copy of the subpoena is attached hereto as Exhibit 99.3.

Each of our directors, Timothy S. Durham, Robert Kaiser, and David Tornek have also received a subpoena from the SEC with the subject notation "In Re Fair Finance." Mr. Kaiser is also our Chief Executive Officer.

The Company and its directors expect to cooperate with the SEC in their investigation. We are currently unable to predict what the outcome of the investigation will be.

For more on CLST Holdings and its relation to Fair Finance, click here.