Investors in failed Church Extension poised to recoup 70 percent

Here’s some potentially heartening news for investors in Tim Durham’s Fair Finance Co. who fear they’ve
lost their nest eggs: Not every case where investigators allege a multimillion-dollar investment fraud has a nightmarish ending.

The news is relatively good for investors in the failed Church Extension of the Church of God Inc., an affiliate
of the Anderson-based Church of God that’s been under the oversight of a court-appointed conservator since 2002.

Attorneys and professionals liquidating its assets already have recovered nearly 68 percent of the $82 million owed
investors, and hope to boost the recovery to 70 percent and wrap up the effort this year.

“That sounds
to me like a pretty phenomenal return,” said Jim Knauer, an Indianapolis attorney who is not involved with the liquidation
effort but has extensive experience handling similar cases.

“If you get 70 percent, or anything close to
getting all your principal back, that is way out of the ordinary,” he added.

The Securities and Exchange
Commission sued Church Extension and top executives Perry Grubbs and Louis Jackson seven years ago, charging they duped investors
by telling them the bulk of their money would go toward loans to build and renovate churches.

In fact, the SEC
charged, Church Extension used tens of millions of dollars to repay earlier investors and fund speculative real estate acquisitions—from
assisted-living centers and apartment complexes to a Florida refrigerated warehouse and an Anderson strip mall.

Many of the investments were flops, and as financial problems escalated, Grubbs and Jackson masterminded a scheme to mask
the woes with inflated appraisals, according to investigators.

The collapse of the not-for-profit came as a shock
to investors, many of them elderly Church of God members, who had purchased ostensibly low-risk notes paying interest rates
slightly better than certificates of deposit.

They’ve received occasional distributions since the liquidation
process began in 2003. Some have died during the wait.

But attorneys who handle this kind of case say it could
have been a lot worse. For one thing, the not-for-profit began selling off its far-flung real estate holdings before the economy
slid into recession and property values tanked.

And then there’s the fact Church Extension had real properties
to sell. Often, Knauer said, investment frauds leave those left to clean up the mess with lots of debts but few hard assets.

Elliott Levin, an attorney representing the Church Extension board appointed to carry out the liquidation, credited
a strong team of experienced professionals for the favorable result. Members included Jeff Marwil, a Chicago attorney who
served as conservator, Barry Bentley of the restructuring firm Hamernik, and Bruce Jacobson of the accounting firm Katz Sapper
& Miller.

The team received millions of dollars for their efforts, but they also had some big successes along
the way. Negligence litigation against former officers and directors, for instance, yielded a $5.1 million settlement.

Grubbs and Jackson, the former Church Extension executives, maintained they did no wrong. But a federal jury disagreed
in 2004 and found the pair guilty of civil securities fraud.

The next year, Judge David Hamilton ordered Grubbs
and Jackson to pay a total of nearly $300,000 in penalties. But his written ruling also included sympathetic comments, and
he drew a sharp distinction between this case and typical instances of securities fraud.

“Neither defendant
was motivated by a desire for personal financial gain,” Hamilton wrote. “Both are frugal. Neither is greedy. Neither
used the note sales for his own personal enrichment.”

Fair suits pile up

Investors in Fair Finance, in contrast, fear Durham is the classic perpetrator of securities fraud—someone
who used their money in part to fund an outsized lifestyle.

Durham, 47, has denied doing anything wrong, and
hasn’t been charged with a crime. However, in a November court filing, the U.S. Attorney’s Office in Indianapolis
alleged he was operating a Ponzi scheme, using the sale of new investment certificates to repay prior purchasers. The FBI
and SEC are in the midst of investigations, and attorneys for investors have filed at least three civil lawsuits.

Fair investors—all from Ohio—purchased $200 million of the company’s certificates. The articles they’ve
unearthed scouring the Internet for background on Durham don’t spawn sympathy.

Until lately, Durham wore
his materialism as a badge of honor. He was quick to show off his 30,000-square-foot Geist mansion, his fleet of 70 cars,
and his yacht.

In one article, he said he wanted to die the richest man in the world. In another, he said, “Does
anyone not consider himself a materialist? Who doesn’t want stuff? This country is founded on the idea of people wanting
stuff.”

Tom Hargett, a Fishers attorney who helped file one of the investor lawsuits, said, “Undoubtedly,
these people are going to be very, very upset if they come to conclude Mr. Durham and his companies took their money and squandered
it.”•