Ex-National Lampoon CEO Loses Bid to Dismiss Fraud Charges

Timothy S. Durham, the former president and chief executive officer of National Lampoon Inc. (NLMP), lost a bid to dismiss a U.S. securities-fraud case, in which he claimed prosecutors violated wiretap laws and rules.

U.S. District Judge Jane Magnus-Stinson in Indianapolis today rejected Durham’s request to throw out the case. Durham was indicted last year for allegedly cheating 5,000 investors in a $200 million scheme involving the sale of interest-bearing notes issued by Akron, Ohio-based Fair Finance Co.

His trial is scheduled for June 8.

“The government’s evidence establishes that Mr. Durham’s suspicion of unauthorized wiretapping was unfounded,” the judge said in a seven-page ruling. “Mr. Durham has introduced no evidence to the contrary.”

Durham is CEO of the Indianapolis-based leveraged buyout firm Obsidian Enterprises Inc. and a Republican Party fundraiser. He resigned his National Lampoon post in January. That company isn’t mentioned in the indictment.

“We’re disappointed and respectfully disagree,” Durham’s attorney, John L. Tompkins of Indianapolis, said in a telephone interview reacting to the ruling.

Magnus-Stinson first heard arguments on the dismissal motion in February. Tompkins said he and his client used the intervening time to prepare for trial in the event the motion was denied.

Facing charges with Durham are former Fair Finance Chairman James F. Cochran and ex-Chief Financial Officer Rick Snow.

Wire Fraud

The three men face 10 counts of wire fraud and one count of securities fraud, all punishable by as long as 20 years in prison, and one count of conspiring to commit those crimes. The court last year entered automatic not guilty pleas for each defendant.

Durham and Cochran acquired Fair Finance through a holding company in 2002. Fair Finance, operating in Ohio since 1934, provided liquidity to businesses by purchasing their accounts receivable at a discount, according to the March 15 indictment.

Fair Finance raised money to do so by selling interest- bearing certificates to investors.

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

‘Deceived Investors’

“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.

Prosecutors said in court filing that Durham’s misconduct claims were “frivolous.”

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

The case is U.S. v. Durham, 11-cr-42, U.S. District Court, Southern District of Indiana (Indianapolis).

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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