Ex-National Lampoon CEO found guilty of fraud

Timothy S. Durham, the former chief executive officer of National Lampoon Inc., was convicted of defrauding investors in a company he partly controlled.

A federal jury in Indianapolis deliberated for less than a day before reaching a verdict yesterday in a trial that began June 8. Durham was found guilty of all 10 counts of wire fraud and one count of securities fraud, each punishable by as long as 20 years in prison, and one count of conspiring to commit those crimes.

Durham, the CEO of Indianapolis-based buyout firm Obsidian Enterprises Inc. and a Republican Party fundraiser, was indicted with two other men last year and accused of defrauding 5,000 investors in a $200 million scheme involving the sale of interest-bearing notes by Akron, Ohio-based Fair Finance Co.

“No matter who you are, no matter how much money you have, no matter how powerful your friends are, in a free society, no one is above the law,” Indianapolis U.S. Attorney Joseph Hogsett said in a statement issued after the jury’s verdict.

Durham maintained he was innocent. His attorney, John Tompkins, argued his client was trying to prop up a failing business.

Tompkins declined to talk to reporters after the verdict.

Durham resigned from National Lampoon in January. The Los Angeles-based media company wasn’t named in the government’s charging documents.

Other Defendants

Also charged were former Fair Finance Chairman James F. Cochran and ex-Chief Financial Officer Rick D. Snow. Jurors found Cochran guilty of eight charges and convicted Snow on five of the counts.

All three men were found guilty of wire fraud as well as the lone securities fraud count and the charge of conspiring to commit each of those crimes.

Hogsett said the defendants are being held in federal custody pending a June 25 detention hearing.

“Durham was the master,” Assistant U.S. Attorney Winfield Ong said in his June 19 closing argument. “Cochran was the sales guy. Snow was the finance guy.”

Durham used a company that he and Cochran controlled as a “slush fund,” into which they diverted $85 million derived from Fair Finance, Ong said at the time.

Tompkins, the defense attorney, called prosecutors’ fraud claim a “false premise” in his closing arguments. Durham tried to sustain Fair Finance by putting $28 million of his own money into it, the lawyer said.

Fair Finance

Durham and Cochran acquired Fair Finance through a holding company in 2002. Operating in Ohio since 1934, Fair Finance provided liquidity to businesses by buying their accounts receivable at a discount. The company raised money by selling interest-bearing certificates to investors, according to the indictment.

By February 2005, Fair Finance had shifted from providing commercial financing to making loans to its principals, their associates and Obsidian and other entities they controlled, according to the indictment.

“Durham, Cochran and Snow then deceived investors by making and causing others to make false and misleading statements about Fair’s financial condition and about the manner in which they were using Fair investor money,” according to the charging document.

Garage Remodel

Durham allegedly spent $250,000 in Fair Finance capital to remodel his garage and another $150,000 at a casino, according to the indictment. Cochran was accused of spending $50,000 on country club fees.

Fair Finance closed after a November 2009 raid by U.S. Federal Bureau of Investigation agents. In February 2010, creditors forced the business into involuntary bankruptcy in Akron.

“The jury did its job,” said Cochran’s attorney, William Dazey, after the verdict. Asked if he would appeal, the lawyer replied, “you can always expect appeals in federal criminal cases like this.”

Jeffrey Baldwin, who represented Snow, couldn’t immediately be located for comment.

–Bloomberg News–