Dan Laikin agrees to settle Fair Finance suits for $3.5M

Dan Laikin has agreed to a $3.5 million settlement with Fair Finance Co.’s bankruptcy trustee, a deal that extricates the Indianapolis businessman from three lawsuits that could have dragged on for years.

Under the deal filed in bankruptcy court in Ohio on Tuesday, Trustee Brian Bash would receive the $1.2 million in proceeds from the prior sale of Laikin’s Hollywood mansion, plus $2.2 million Laikin has agreed to pay outright and $129,000 from an insurance policy.

The recovery is among the largest that Bash has secured since filing dozens of lawsuits over the last five years aimed at recovering money for more than 5,000 Ohio residents who lost more than $200 million when the Tim Durham-led company collapsed in 2009. The legal onslaught has yielded millions in fees, but the investors have yet to receive anything.

The settlement amount is a small fraction of the $33 million judgment that an Ohio bankruptcy judge recommended in 2013 but that another judge tossed aside last summer on the grounds Laikin had not received a fair trial. The first judge had ruled Laikin owed more than $19 million in principal and more than $13 million in interest under a line of credit from Fair he never repaid.

Laikin, 52, was a board member of Akron, Ohio-based Fair, which was owned and run by his close friend Durham. A federal jury in 2012 found Durham drained tens of millions from the company to fund failing businesses and a lavish lifestyle. He now is serving a 50-year prison sentence in Kentucky.

The Laikin settlement, which requires court approval, would resolve a lawsuit over Laikin’s line of credit, as well as a conspiracy and breach-of-fiduciary-duty lawsuit against directors and a suit over Fair’s officers-and-directors insurance coverage.

A court filing by Bash said settling the cases makes sense because further legal wrangling would deplete Laikin’s assets, and a review of his finances suggests “it is highly doubtful that Laikin would be able to fund and pay any judgment greater than the settlement payment amount.”

Laikin, a former CEO of Los Angeles-based National Lampoon, at one time had two Southern California mansions, one formerly owned by Cher, but in recent years had fallen on hard times. A federal judge in 2010 sent him to prison for orchestrating an ultimately unsuccessful scheme to pump up the slumbering stock price of National Lampoon. He was released in 2013.

Attorneys for Laikin contended in the line-of-credit lawsuit that he owed nothing because in 2002 he had transferred shares of National Lampoon and Indianapolis-based BrightPoint Inc. to Durham as collateral that was later sold for at least $16 million. Both men had bet on BrightPoint—led by Dan’s brother, Bob—in the early 2000s, before the cell phone distributor staged a turnaround that sent its stock soaring.

But Laikin’s attorneys were not able to make that case during trial as a result of sanctions issued by Judge Marilyn Shea-Stonum aimed at punishing him for abuses during the discovery process leading up to trial. Shea-Stonum took particular umbrage that Laikin’s BlackBerry and laptop, likely sources of a wealth of evidence, had mysteriously disappeared.

Last summer, Judge Patricia Gaughan concluded Shea-Stonum had gone too far and hamstrung Laikin’s defense. She ordered a new trial.

“Although defendant’s conduct is certainly sanctionable, there is simply no evidence (other than lost time and resources) that the discovery failures in this case caused such prejudice so as to warrant precluding the vast majority of defendant’s defenses at trial,” Gaughan wrote in her Aug. 1 ruling.

Bash has a handful of other high-dollar lawsuits still pending, including one seeking $72 million from Fair lender Fortress Credit Corp. The firm is accused of turning a blind eye to Durham’s fraud because it held collateral protecting it from losses.