This is a story that needs to be told. It is yet again another story of a businessman screwing the public to make himself richer. It is the story of thousands of people who thought their financial situation was safe, only to learn the sad truth. But most importantly, it is yet another reason why we need the powers of the government to prevent the people of Main Street from the evils of the people on Wall Street.
Tip and Rec!!!
In 1934, a company started in Akron, Ohio to provide car and truck loans to customers who needed them. It was hugely successful. Over the years, it expanded its offerings into certificates of investments and loans of all sorts. When Akron's economy declined in the 1970s, the company switched its business model to focus on managing accounts receivable for other businesses. The company was fairly conservative, setting a limit of $50,000 on any certificate. It was also well run, with the total value of outstanding investement certificates never exceeding 50 million dollars. The company was called Fair Finance.
In 2002, the owner of Fair Finance, Don Fair, decided to sell the company, as he was in his late 70s and no heir wanted to run the company. He sold it to a wealthy Indiana businessman named Timothy Durham. Durham was the head of a large holding company named Obsidian, which at the time owned a truck manufacturer and a rubber reclaiming plant, among other businesses. Durham was also interested in taking control of a struggling company named J2 Communications, who owned the rights to the National Lampoon trademark, including the magazine and series of movies. Unfortunately, the recession of 2000 had taken a toll, and Obsidian Enterprises was not performing up to standards. On January 7, 2002, Durham's new Ohio corporation, Fair Holdings, officially purchased Fair Finance.
The trouble began the next day, when Fair Holdings immediately made a loan to Obsidian in the amount of $570,000. By sheer coincidence, one of Obsidian's holdings, Champion Trailers, owed that same amount to Bank One. Fifteen days after the acquisition, Fair Holdings made another loan to Obsidian subsidiary DW Leasing in the amount of $500,000. Obsidian's own corporate earnings shows it lost 4.4 million dollars for the 2001 fiscal year. But this did not stop Timothy Durham. In May 2002, he and a friend gained control of J2 Communications and the National Lampoon name. However, J2's books showed it needed monthly expenses of $480,000 to stay afloat. Quite naturally, Fair Holdings provided the cash. By October 31, 2003, Obsidian Enterprises owed Fair Holding $14.2 million dollars, with the amount continuing to grow. And unknowing Akron taxpayers and investors were the ones left to pick up the tab.
Coming tomorrow: Part 2, 2003-2005 and Timothy Durham's obscene personal spending.