Three major lawsuits may determine when and how much money is recovered in the years-long Fair Finance Co. bankruptcy and financial scandal case, Fair’s trustee said.
Bankruptcy Judge Marilyn Shea-Stonum on Tuesday noted that default judgments — undefended claims — total more than a third of a billion dollars. Trustee Brian Bash’s challenge is how to capitalize on that, she said during a regular monthly status update hearing at U.S. Bankruptcy Court in downtown Akron.
Little from the default judgments has actually been collected — as of Sept. 18, a money market fund set up by the Fair Finance trustee held just over $6.5 million, according to the latest court documents.
“How do you plot the trajectory to say, we’ve done what we can do and this is what we can distribute?” Shea-Stonum asked Bash in the half-hour-long hearing. The hearing was conducted via teleconference in open court.
The outcome of upcoming litigation will determine the trajectory, Bash said.
Three ongoing lawsuits likely will define the nature and scope of money recovered in the case, Bash said.
The largest of three major outstanding lawsuits filed by Bash seeks more than $72 million from Fortress Credit Corp. The two parties have agreed to mediation, which will take place Tuesday and Oct. 2, with the legal process continuing into December.
Bash also is seeking $25 million from Dan Laikin, former head of comedy movie maker National Lampoon Inc., who was convicted of manipulating the company’s stock price. Laikin was a one-time Fair Finance board member and a confidante of Fair Finance co-owner, Indianapolis businessman Timothy Durham. Durham ran National Lampoon following Laikin’s removal.
Bash also is suing National Lampoon for $9 million, saying money was illegally funneled from Fair Finance to the movie company.
Bash has other active lawsuits, as well.
Bash, in his monthly report, also said he and his legal team are focusing collection efforts on the eight largest outstanding judgments totaling $184.1 million.
The trustee said “certain individuals” have approached him about purchasing assets that belong to either the Fair Finance estate or to former co-owner Durham.
“We may market these to others who are more entrepreneurial and have more of an appetite to pursue them,” Bash said.
The public status report, which is posted online at www.kccllc.net/fairfinance, highlights legal proceedings in the Fair Finance case.
So far, no money has been distributed to more than 5,000 Ohio creditors who lost more than $200 million by buying uninsured investment certificates in what turned out to be a Ponzi scheme by the Indiana-based owners of Fair Finance in Akron.
The end of November will mark four years since FBI raids on Fair Finance’s offices in Akron and other parts of nearby Northeast Ohio permanently shuttered the long-established accounts receivables and consumer credit business. Fair Finance, founded in 1934, was forced into bankruptcy in February 2010.
Fair Finance’s two owners, Durham and James Cochran, and former company executive Rick Snow were convicted last year in Indianapolis on federal charges of defrauding investors. Durham, 51, was sentenced to 50 years in prison; 57-year-old Cochran, 25 years; and 49-year-old Snow, 10 years.
The three men are appealing their convictions.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com