Former Fair Finance Co. owner Don Fair has agreed to pay $3.55 million to settle a $150 million lawsuit filed against him by the bankrupt Akron company’s trustee.
Fair has until Dec. 31 to pay the money, according to the proposed settlement filed Thursday in U.S. Bankruptcy Court in Akron. The timing of the payment was negotiated and has tax consequences for Fair, court records say.
Rapper Ludacris also agreed to pay $75,000 to settle a civil lawsuit filed against him by Fair Finance Trustee Brian Bash, other court records filed this week show. Ludacris was among the people who received money from Fair Finance’s former Indiana owner, convicted fraudster Timothy Durham.
Bankruptcy Judge Marilyn Shea-Stonum will need to approve the agreements submitted by Bash.
Bash, in a statement on the trustee’s Fair Finance Website, said “I remain optimistic” that he will recover enough money to distribute funds to the thousands of people who lost more than $200 million buying uninsured investment certificates from Fair Finance. The more than $5 million recovered to date has gone to pay legal and related professional bills.
The Fair and Ludacris proposed civil financial settlements are the latest developments in the ongoing bankruptcy proceedings for Fair Finance and the related $200 million criminal fraud scheme involving more than 5,000 Ohio residents. Co-owner Durham, 50, was given what amounts to a life sentence in prison, 50 years, on Nov. 30 by U.S. District Court Judge Jane Magnus-Stinson in Indianapolis. The other co-owner, James Cochran, 57, was given a 25-year prison term while Rick Snow, 49, the former chief financial officer, was given a 10-year sentence. Indiana businessmen Durham and Cochran bought Fair Finance in 2002 from Fair; they were convicted of running it as a Ponzi-type scheme and used Fair Finance investment certificate money to pay for lavish lifestyles.
“Before Fair Finance Co. was sold to Tim Durham and James Cochran, it was operated as an honest business and was a legacy to the Fair family and the Akron community,” Bash wrote in a court memorandum. “The subsequent operation of the company as a fraud by Durham and Cochran, and the circumstances surrounding its collapse have taken a personal toll on Donald R. Fair. ... Accordingly, the trustee has considered the potential of difficult litigation with Mr. Fair, who is of advanced age and living in California.”
Fair is now in his late 80s; his father founded Fair Finance in 1934. Fair traveled to Indianapolis this summer to testify in the criminal trial against Durham, Cochran and Snow.
Fair’s attorney, Patrick Keating, said his client hopes that Fair Finance investors get back at least some of the money they invested in the business.
Making the $3.55 million payment will be “painful” to Fair, Keating said.
“This represents a substantial portion of what Don Fair was paid” in the four years prior to Fair Finance going into bankruptcy, Keating said. The settlement reflects what is called for under Ohio law and does not reflect any wrongdoing, he said.
“From Don’s perspective, he didn’t do anything wrong,” Keating said. “Don is glad it is over.”
Keating said he and the trustee were involved in lengthy negotiations.
“I think the mark of any good settlement is where both parties are disappointed,” Keating said. The trustee wanted to get more money while Fair wanted to pay less, he said.
Bash said he considered Fair’s personal circumstances in agreeing to the proposed settlement.
“The proposed compromise is reasonable and in the best interests of the estate and creditors,” Bash wrote.
Fair was paid nearly $3.2 million in July 2007 as a final balloon payment on the sale of the company, according to Bash’s civil lawsuit filed in February. The 59-page lawsuit sought to force Fair to return the millions he received for selling the consumer loan and accounts receivables business to Durham and Cochran.
Bash alleged in the lawsuit that “Fair’s actions and omissions were an unfortunate and substantial contributing factor to Durham’s multi-year fraudulent scheme and the millions of dollars of harm caused to the debtor [Fair Finance] and its creditors.”
Bash noted the three sentencings handed down on Nov. 30 in a statement on his Website. The statement reads in part:
“... I have received many emails asking what implications the sentencing will have on the recovery. My attorneys and I have been working to identify assets and claims and to collect money for investors since February of 2010.
“We have recovered and sold assets, including what was left of Durham’s automobile and art collection. We are also pursuing claims to recover from parties who received money.
“As I’ve indicated before, the main roadblock to recovering funds is that the loans made by Fair Finance and its related companies are worth far less than what Durham, Cochran, and Snow claimed. I have already obtained over $44 million in judgments, but many of them will not be paid in full.
“Many of the borrowers are out of business. Durham, Cochran, and Snow allowed other borrowers to mortgage all their assets to other creditors to the detriment of Fair Finance, so that I am last in line to recover.
“And in pending lawsuits, some borrowers dispute that they owe any money at all. But I still believe that the claims I am pursuing will result in valuable recoveries, and I remain optimistic that once the lawsuits are resolved, I will have funds to make a distribution to unsecured claimants.”
The statement and other information can be found at the trustee’s Fair Finance website, www.kccllc.net/fairfinance.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.