Friends In High Places

It never hurts to have friends in high places. Check out the video Tim Durham's son ran in his race for Park Tudor class president in which he gets help from Marion Co. Prosecutor Carl Brizzi, Ludacris and Barack Obama. Really classy stuff here. Birds of a feather flock together. Mayor Ballard may dispute Brizzi's claim that Durham's son single-handedly brought down crime in Indianapolis.

Feds Drop Forfeiture Case Against Durham Less Than One Week After Filing Case

In a bizarre twist in the investigation of Indianapolis business tycoon Tim Durham, the federal government is dropping a forfeiture case it filed just last week accusing him of running a classic Ponzi scheme, telling reporters Durham isn't a risk. WRTV reports:

Federal prosecutors have dropped their effort to seize the assets of Indianapolis businessman Tim Durham.

The U.S. Attorney's Office on Monday withdrew the request to take control of Durham's assets, including his 36,000-square-foot home along Geist Reservoir.

The request was made because investigators don't think Durham is a risk. Federal investigators said Durham ran an investment scheme using one of his companies, Ohio-based Fair Financial.

Investigators had originally sought to seize Durham's assets in Indiana and California in a 10-page civil complaint filed last week.

The complaint accuses Durham and his associates at Akron, Ohio-based Fair Financial of telling investors their money would be invested in low-risk, high-yield short-term consumer debt.

The IBJ's Greg Andrew has this on acting U.S. Attorney Tim Morrison's decision to drop the case:

Tim Morrison, the U.S. attorney for the Southern District of Indiana, said his office had filed the case Nov. 24 to ensure Durham’s assets would not disappear. “Having [received] appropriate assurance they are not being dissipated, that litigation stopped,” said Morrison, who declined to say who provided that assurance.

The short-lived case provided the first public disclosure about the case investigators are trying to build against Durham, 47, the co-owner of Akron. Ohio-based Fair Finance Co. FBI agents on Nov. 24 executed search warrants and seized records and computer equipment at Durham’s office in Chase Tower in Indianapolis and at Fair’s Akron offices, but a bureau spokeswoman would not say what agents were after.

Inquiring minds want to know who intervened with Morrison to reverse the government's action? Interestingly, no attorney filed an appearance on behalf of Durham or his companies before Morrison filed his notice of dismissal today. A federal judge must still rule on the dismissal. The case has been assigned to Judge David Hamilton, who has been in the process of transferring all of his cases to other judges in order to assume his new seat on the 7th Circuit Court of Appeals.

Meanwhile, the Akron Beacon Journal reports that Fair Finance's Ohio offices failed to reopen today. Worried investors gathered outside the Akron office determined to get answers about the status of their money.

Sherfick Enters Plea Agreement In Perry Township Constable Corruption Case

A former Perry Township deputy constable, Michael Sherfick, has entered a guilty plea in federal court on bribery charges arising out of the discovery by the FBI that badges and parking placards were being sold by the office of Perry Township Constable Roy Houchins. Fox 59 News' Russ McQuaid speculates that plea agreement could lead to additional charges in the case. (See video above). "Sherfick will plead guilty to one count of conspiracy and admit to accepting more than $30,000 in bribes to provide deputy constable badges, identification cards and parking placards to local business people, McQuaid reports. "A two-year-long Fox 59 News investigation has revealed that Sherfick played a significant role as a political fundraiser for republican Constable Roy Houchins and was well aquainted with campaign fundraising operations throughout Marion County," McQuaid says. Keep an eye on possible links in this case back to the Marion County Prosecutor's Office. See this earlier report by McQuaid from February, 2008. Anyone else see the irony here? There's been so much Democratic corruption in Marion County over the past several years that Carl Brizzi's office swept under the rug. Now that the feds are finally moving on local corruption, the targets are Republicans.

Damien Center's Financial Struggles

The Star's Chris Sikich has a story today on the Damien Center and its struggle to raise money in a tight economy. The organization recently hired Tom Bartenbach to serve as interim executive director for the HIV/AIDS service agency, a hiring that really turned heads of some people who remember his stint as executive director of AIDServe Indiana nearly a decade ago, which went bankrupt. Sikich describes Bartenbach without reference to his past service with that agency:

Bartenbach operated an Internet cafe for the past eight years in Seattle before moving back to his hometown of Indianapolis earlier this year to be closer to family. He took the reins at the Damien Center in August.

Before working with the disease, he was known locally for founding and operating Bartenbach grocery stores in Indianapolis from 1984 to 1993.

He sold the stores as national grocery chains began coming to the city. At the same time, as a gay man, he said many of his friends were dying from AIDS. He got involved with a group that delivered food to the homes of people with HIV/AIDS. From there, he began working with other such groups.

"The number of people that I have met over the years that have died . . . it seemed like we were going to a funeral weekly," Bartenbach said. "I went through a period early in life you expect to go through in old age."
He said the disease has changed from his early days of service, no longer mostly restricted to gay men. Now, it's spread to minority groups such as blacks and Latinos.

Fortunately, medical treatments have advanced.

"When I first got into this, we had been assisting people to die in 36 months or less," he said. "Now, we're teaching them how to live for 36 years or longer."

The story completely misses what the Star reported on back on October 15, 2002 about the agency that Bartenbach had run. "Indiana's only statewide organization that provides financial help to people with HIV and AIDS has mismanaged hundreds of thousands of dollars, with devastating consequences for sick people," the Star wrote then. A federal audit eventually concluded that the Indiana State Department of Health owed the US government nearly $800,000 in funds that were inappropriately distributed to about a dozen groups by AIDServe Indiana. The auditors complained that they could not find proper documentation for an additional $5.3 million and recommended that the state and the US Department of Health and Human Services continue trying to find or rebuild the paperwork to show if the money was spent correctly. Should people wonder about Bartenbach now being put in charge of the Damien Center? You bet.

Durham Associates Faced Legal Problems In The Past

Several Indianapolis area business associates of Timothy Durham are no strangers to legal troubles. Fair Finance business partner James Cochran faced domestic battery charges in Hamilton County a couple of years ago. Durham's partner in a New Castle, Indiana restaurant, Henri Najem, was charged with check deception in Nevada last year. And business associate, Shannon Frantz, faced theft charges in Allen County, Indiana in 2001.

France, shown above in a photo with Durham, Marion Co. Prosecutor Carl Brizzi and the Manning men in the Bahamas following the Colts' Super Bowl win in Miami in 2007, was charged with felony theft on August 17, 2001 in Allen County when she resided in Fort Wayne. Frantz, who was represented by a public defender, was found guilty of the charge on November 12, 2002. She was sentenced to 90 days in jail and was placed in the Allen County Work Release program.

Durham's business partner in Fair Finance, James Cochran, faced charges of domestic battery and resisting law enforcement on June 16, 2007. A no contact order for Susan Cochran was later vacated at her request. The prosecutor dropped charges against Cochran last year after he agreed to a diversion sentencing program. Cochran was represented in those proceedings by Indianapolis criminal defense attorney, John Tompkins, the same attorney who is currently representing Durham in connection with the federal civil forfeiture action filed against him last week in federal district court in Indianapolis. Cochran is identified as a defendant in that action as well.

Last year, Henri Najem, Durham's partner in the New Castle Bella Vita restaurant was jailed on charges of check deception totalling $44,775 in Nevada. According to a news report from October 31, 2008, Najem was jailed in Henry County and awaited extradition to Nevada. The report claimed Najem had been accused of writing nine checks of $5,000 at one or more casinos to obtain "casino markers", a form of gambling credit. The New Castle restaurant property appears to be one of the named properties in the federal civil forfeiture action against Durham.

Durham and his companies are the defendants in numerous civil lawsuits that have been filed against in the past couple of years by past and current business associates. See this post detailing charges in one of those suits.

Feds File For Forfeiture Of Durham's Geist Mansion And Other Assets

ACCUSED OF RUNNING PONZI SCHEME
The federal government filed an action in the Southern District of Indiana on November 24 seeking to forfeit business tycoon Timothy Durham's Geist mansion in Hamilton County, his Hollywood residence and other assets. The federal action filed by acting U.S. Attorney Tim Morrison charges that Durham and others acquired the property in question as a result of federal wire fraud violations that reads an awful lot like a classic Ponzi scheme. The complaint reads:

Timothy S. Durham, and his companies and associates, have been involved in a scheme to defraud numerous persons of money by convincing those persons to buy "investment certificates" . . . from Fair Finance Co., an Ohio company, upon the representations that the money given to buy the investment certificates will be invested in low-risk, high yield, short term consumer debts, and the investors will receive high regular interest payments on their investments. In fact, that money was not invested in the types of investments represented to investors. Instead, the money provided by victims of the scheme was used to make interest and redemption payments to earlier victims of the scheme, thereby lulling the earlier victims into believing that their money was being responsibly (sic), and enticing new investors into the scheme in order to fund payments to the earlier investors.

The federal complaint alleges that Durham wired $84.2 million of Fair Finance's funds to a Fair Holdings account at First Indiana Bank. Durham, in turn, wired those funds to 50 individuals and businesses, including the following:

• U.S. Rubber Reclaiming (subsidiary of Obsidian)-$6.9 million
• Speedster, Inc. (Durham classic car company)-$5.3 million
• Danzer Industries (former parent company of Obsidian)-$1.8 million
• RM Auctions-$1.4 million
• Champion Trailer-$1 million
• Playa Del Racing (IndyCar racing team of Durham's)-$804,000
• Pyramid Coach (former subsidiary of Obsidian)-$730,000
• Evaco Acquisition Corp. d/b/a Superline Trailers-$690,000
• McDonald Investments-$495,000
• Car Collector Magazine-$277,000
• James Cochran-$30,000
• Tim Durham-$100,000

The federal complaint seeks the seizure and forfeiture of the following assets claimed to be the proceeds of various wire fraud offenses:

• Tim Durham's Geist mansion, 14353 East 113 Street, Fortville, Indiana
• Tim Durham's Hollywood residence, 1227 Sierra Alta Way, Los Angeles
• 301 South 1st Street, Lewisville, Indiana
• 1326 Broad Street, New Castle, Indiana
• Funds in two accounts at First Merit Bank in the name of Fair Holding
• Funds in nine accounts at J.P. Morgan Chase Bank in the name of D.C. Investments, Inc., Fair Finance, Obsidian Enterprises and Timothy Durham
• Funds in seven accounts at Key Bank in the name of Fair Finance or Fair Holdings
• One 2008 Bugatti Veyron

This latest disclosure doesn't say much for the investigative prowess of our local news media in Indianapolis. Once upon a time, reporters had sources at the federal and local courthouse who could be counted on to tip them off when a case of interest got filed in their court. An Advance Indiana reader e-mailed a link to the Pacer entry for the case in the federal district of Southern Indiana. When the FBI carried out its raid of Durham's offices in the Chase Tower five days ago, reporters were only left to speculate what was transpiring. If they had simply checked court filings at the federal court house one block away, they would have known what was taking place.
UPDATE: The paid media is playing catch up now. See stories now at the Indianapolis Star, the IBJ, Fox 59 News, WTHR and WISH-TV. Gee, I wonder who their source was.

IBJ Expose' On Fair Finance Likely Led To FBI Raid On Durham's Offices

It now seems likely that FBI agents were prompted to conduct a raid on the Indianapolis and Akron, Ohio offices of Tim Durham's Fair Finance and Obsidian Enterprises after the IBJ's Greg Andrews expose' on how Durham was essentially using the Ohio-based finance company as a personal bank account to fund his other business endeavors. Although the FBI won't publicly state the purpose of the raid, it urged people who had business dealings with the company to contact the federal law enforcement agency. The company, which had previously sold $207 million in investment certificates, filed a request to approve a new security offering of $250 million with Ohio securities regulators following Andrews' report on Fair Finance last month.

According to those latest filings, Fair Finance has made $177 million in insider loans, while the company's core profit-making business, customer-finance contracts, has declined in size to $24 million. Andrews notes the new filing shows that Fair Finance lost $1.78 million in 2008. The company's financial situation has grown worse since Ohio regulators held up approval of its new security offering since its two-year offering has matured. Andrews writes:

The figures are contained in a proposed offering circular Fair filed with Ohio’s Division of Securities Oct. 29. The company sought a new registration because an existing one from July 2007 was set to expire Nov. 24.

But instead of signing off on the new registration, Mark Heuerman, registration chief counsel, sent a letter to Fair’s attorney saying “the offering is impossible to review under our standards without further documentation.”

He asked for additional information on a range of topics, including documentation that would help him untangle the morass of insider loans.

“Please include sequential transactions on multiple levels where related parties engage in further transactions with related parties,” he said.

Ronald Kaffen, an Akron attorney representing Fair, characterized the back and forth as routine.

“That’s sort of standard procedure. You make a filing. You get comments back, and you respond to those comments,” Kaffen said.

The company submitted its responses Nov. 24, and the Division of Securities is reviewing them. In the meantime, because Fair’s prior registration has expired, it can’t sell additional investment certificates.

That could help limit losses if Fair were to fail, since new investor dollars won’t be coming in the door. But Klimek, the securities attorney, said he wonders if Fair can keep going without those infusions.

A crash crunch has led Fair Finance to take a number of steps this past year that raise further concerns. It sold millions of dollars in consumer finance loans to another Durham-controlled company, CLST Holdings, which has also been the subject of litigation. A company line of credit offered by Fortress Credit Corp. has been reduced from $50 million to $35 million. The offering also indicates the company has been selling off better performing finance contracts to raise cash. Even more concerning, Fair acknowledges that it has delayed repayment of principal on maturing certificates up to 60 days because payments due to investors has exceeded 10 percent of its cash collections.

The proposed offering listed Marion County Prosecutor Carl Brizzi as part of Fair Finance's management when it was first filed. Brizzi has subsequently resigned from the company. Here's how the discussion of management describes Brizzi, whose name appeared directly below Durham's biography in the original proposed offering:

Mr. Carl Brizzi, Director, was elected Director in 2009. Mr. Brizzi is not affiliated in any other manner with Fair Financial. Mr. Brizzi is currently the Marion County Prosecutor, State of Indiana, elected in 2002, re-elected in 2006. Mr. Brizzi brought to the Prosecutor’s office his belief in victim-centered prosecution. He has been named a “40 Under 40” by the Indianapolis Business Journal, “Outstanding
Young Alumnus” by Valparaiso School of Law, and he was included from 2004 to 2009 in the Howey Political Report’s Top 50 Most Influential People in Indiana Politics. Mr. Brizzi is the father of four children.

Now there's a first. Someone actually mentions in their biography that they were listed on Howey's "Top 50 Most Influential People in Indiana Politics." As you can see by the proposed offering linked to on the IBJ's site, there have been numerous additions and deletions since the original offering was proposed.