Part II: A Merger and a Payoff Worth Millions. Who knew what, when? The clock is ticking while the SEC continues to sit on a mountain of evidence.

Daniel Laikin is currently serving prison time.

Part II: Stock Manipulation Leads to Prison Sentence for Durham Buddy

The fact that Carl Brizzi also accumulated what appear to be a million shares of an alleged boiler room stock, Red Rock Pictures, is also causing observers to jump to reasonable conclusions and raise more questions.  Daniel Laikin, brother to the CEO of Brightpoint, was charged with illegally manipulating the stock, which casts a darker shadow on an already murky set of circumstances.

As reported in Part One of this series, Laikin is currently serving prison time for his attempts to illegally pump up the price of stock in National Lampoon, where he and Tim Durham stood to make millions of dollars in profit had the manipulation attempts been successful. 

The original charges were for the National Lampoon and Red Rock Pictures schemes; however, the charges stemming from the Red Rock involvement were dropped in return for Laikin's guilty plea on National Lampoon.

"On December 15, 2008, the grand jury returned an indictment charging defendant
Daniel Laikin with conspiracy and securities fraud, in violation of 18 U.S.C. §371, 15 U.S.C.
§§ 78j(b) and 78ff, and 17 C.F.R. § 240.10b-5, for his role in a scheme to illegally manipulate
the stock price of National Lampoon, Inc. (“National Lampoon”). The defendant has agreed to
plead guilty pursuant to plea agreement with the government and is scheduled for a change of
plea hearing on November 23, 2009 at 12:00 p.m.," read a portion of the official record submitted by U.S. Attorney Michael Levy.

A Merger and a Potential Payoff Worth Millions

According to inside sources, when Bell Atlantic merged with GTE and the company became known as Verizon, some of the accounting records reportedly did not merge correctly, leaving millions of dollars owed by Cellstar to the former Bell Atlantic and carried forward, still owing, to the newly formed Verizon.    Cellstar had a contract to deliver their phones in the cut-throat cell phone marketplace where Nokia giant was distributed by Brightpoint, a Cellstar competitor.

Verizon officials were allegedly unaware of the fact that millions of dollars reportedly owed to them remained in Cellstar's accounting system.

According to an inside source, they also didn't know that a concerned Cellstar auditor reportedly warned company executives that the money legally belonged to Verizon and later resigned when company officials did not heed his warnings to pay the money to its rightful owner.  

Since the money was never reportedly transferred to its rightful owner, the statute of limitations for Verizon to make a claim for it was ticking away, leaving others to potentially reap the benefits of the multi-million dollar windfall. 

Who else knew about the money, and did the sudden interest in Cellstar, the company that was sitting on a secret golden goose egg, have anything to do with inside information that few people reportedly knew about? 

Did Tim Durham or Carl Brizzi know about the uncollected money that was never paid to Verizon? If so, it would make sense why Brizzi still reportedly holds the stock since Cellstar was supposed to be in dissolution and distributing remaining funds to shareholders. 

And why did Brightpoint, after its due diligence, significantly reduce its purchase price of Cellstar from its original offer and leave these millions of dollars of cash at Cellstar?

After Brightpoint reportedly revised its final purchase terms of Cellstar, significantly reducing the cash paid to Cellstar, Durham solicited Cellstar shareholders to vote for him to run the board so he could “maximize” shareholder distributions in the dissolution of the company. 

When the plan of liquidation was announced, Cellstar had anticipated net proceeds to shareholders of $2.91-$3.25/share. 

Instead, after Durham was elected in 2007, only two dividends were issued -- $1.50/share that had already been announced and a second dividend for .60/share, for a total of $2.10 a share.  Shareholders were then reportedly told that outstanding liabilities had to be paid and no more distributions could be assured.

Insiders are speculating whether or not Durham could have possibly known that the statute of limitations for Verizon to collect this debt had expired by summer 2008; otherwise, he would have likely never transferred cash from Cellstar some are speculating, which was allegedly now carried on the balance sheet as a "liability" under the accounts payable section (with no reference to Verizon or any vendor), over to Fair Finance, which thanks to Greg Andrews of the Indianapolis Business Journal, has led to the public disclosure of what appears to be a large Ponzi scheme.

After all, if an actual "liability" had existed as was reflected on the Cellstar balance sheet, why didn't Durham just direct that the bill be paid in accordance with the plan of dissolution and wind down of Cellstar?  It's an issue that certainly should be investigated by the SEC.

Durham’s only other stock success appears to have been his spectacular timing of accumulating Brightpoint shares, which reportedly went from 35 cents to $40 twice in a short two year period, returning an astounding 8,000%, which is almost unheard of in the stock market industry. 

Critics have speculated that the stock may have been artificially pumped up to make it appear that the company was doing better than it actually was in reality, which would be illegal. And Ohio Department of Securities disclosures show Durham submitted a document on the eve of the FBI raid reflecting a co-mingled account in Durham's name containing 210,000 shares of Brightpoint stock belonging to Daniel Laikin, the brother of Brightpoint CEO Robert Laikin.  Daniel, who like Carl Brizzi, was not listed as part of the "investor group" as required in Durham's 13D disclosure. 

Where Will All This Lead?

These are only a few of the details that led an attentive whistleblower to evidence of an alleged Ponzi scheme that is currently the subject of an FBI investigation, but who knew it would have been the catalyst in uncovering information that led to new allegations?   

Tim Durham appears to be living a life of luxury.

Tim Durham, the man who appears to be living a life of luxury at the expense of Fair Finance investors, has yet to be charged while the victims of his alleged Ponzi scheme are still waiting for justice to prevail.

And the SEC, despite multiple sources providing information regarding trades involving allegations of insider trading, is literally almost out of time to file this case despite what appears to be overwhelmingly spectacular "luck" by Durham and Brizzi on their timing and massive bets on Cellstar.

Complaints to the SEC can be filed at this link.

Time is Running Out for Potential SEC Charges to be Filed in Alleged Securities Fraud Case with Indiana Connections. Does Carl Brizzi Have Anything to Worry About?

Hey, Securities Exchange Commission!  The statute of limitations is about to run out.  Do you hear the clock ticking?

So, how did a civil servant, raising four kids, with a wife running a home daycare, (who had already been  sued for failing to pay his kid’s gymnastics bill - See Exhibit 1 below), have enough cash to purchase a big hunk of stock in an obscure Dallas-based company (Cellstar) just before Indianapolis-based Brightpoint bought its assets? 

Wow!  How did Carl Brizzi learn about Cellstar and why won’t he release his financial records to help clear the air?
 
Observers of this ongoing saga have other questions as well, such as:

Where did Carl Brizzi get the money to purchase Cellstar stock?

Some of us just aren't buying Carl's flimsy and unbelievable explanations, including Chris Worden, attorney and political blogger.  Worden exposed Brizzi's shaky defenses last year in this cleverly-written piece entitled, "Carlito Brizzi's Way?  Forget the Unforgettable.  Lawyer the Rest."

Who gets to keep the millions of dollars left behind in the Cellstar shell?

There's a very interesting behind-the-scenes story to tell about millions in unclaimed cash that few people knew about.  Could that have anything to do with any of the stock purchases?  I wish we knew the answer to that loaded question.

 Is there a connection between Brizzi, Durham, and Daniel Laikin, a brother to Brightpoint’s CEO and a convicted felon, who is currently serving prison time for securities fraud?

Tim Durham has been the subject of an FBI investigation.

We'll take a look at some of the facts in a two-part series.  All of the information that will be published in this series has already been forwarded to the SEC by concerned citizens and whistleblowers; however, some of the details of this story have never been told to the public before now.  In a collaborative effort, this is the first installment of more to come.

The clock is ticking on the statute of limitations for bringing charges against wrongdoers in an alleged insider trading scheme that eventually resulted in the on-going investigation of an alleged ponzi scheme involving Tim Durham and the now defunct Fair Finance Company.  

Onlookers are wondering if the Securities Exchange Commission will act in time to bring relief to its alleged victims, or will they look the other way because of the political connections of those being accused of wrongdoing?

Someone from the SEC has recently been reading blog posts at Welcome to My Tea Party related to this subject, so we can only hope that any behind-the-scenes activity will result in justice being doled out to those who may deserve a hefty dose of it, but time is quickly running out.  

The SEC reportedly has until February 22, 2011 to file charges, or else the alleged perpetrators may not be held accountable for any misdeeds that may have been committed, and more importantly, the public trust will have been broken beyond repair.  Will SEC officials remain true to their duty, or will they shirk the responsibility they have been entrusted with? 

The SEC website touts the fact that the federal agency is responsible for enforcing "violations of insider trading, market manipulation, fraud regarding a securities offering, and failure to report or disclose certain material information or fraud by a broker or investment adviser."

"Where wrongdoing is alleged, the SEC can bring a civil suit seeking monetary penalties, disgorgement of illegal profits, orders prohibiting future violations or orders barring individuals from holding certain corporate positions," read a statement from the site.   

Critics are hoping that actions will speak louder than these hollow words.

Where Did Carl Brizzi Get Money to Make Stock Purchases and Why Won’t He Produce Financial Records?

Carl Brizzi has explaining to do.

The SEC has been supplied with plenty of evidence and information, including the fact that former Marion County Prosecutor Carl Brizzi, also a close friend of Tim Durham, allegedly owned over 100,000 shares of Cellstar stock, even though his divorce decree does not reflect the material wealth it would have taken to make a lucrative stock purchase of this magnitude.

Tim Durham, the subject of an ongoing FBI investigation, filed a form 13D with the SEC on February 23, 2006, stating that he acquired Cellstar Corporation, along with certain other individuals identified as part of his "investment group."

When a person or group of persons acquires beneficial ownership of more than 5% of a voting class of a company's equity securities registered under Section 12 of the Securaties Exchange Act of 1934, they are required to file a Schedule 13D with the SEC, and this report is required to be filed within ten days after the purchase.

A few months after Durahm's purchase(s) of millions of shares of Dallas-based Cellstar, an obscure penny stock, Indianapolis-based Brightpoint, whose CEO Robert Laikin is the brother of Tim's business partner, Daniel Laikin, now in prison for an illegal stock scheme to inflate the price of stock in National Lampoon, announced an agreement to acquire substantially all the assets of Cellstar.

Brizzi's personal and professional connections with the embattled financier have raised questions about his own involvement in the scandals. 

Brizzi claims it's all a bunch of "rumor and innuendo," but the facts suggest otherwise to some who have been paying attention to details.  They believe that every stone should be overturned before they're willing to exonerate Brizzi of any wrongdoing in the court of public opinion. 

Carl Brizzi allegedly listed ownership of what appears to equate to no less than 150,000 shares of Cellstar; however, his name was nowhere to be found on the 13d Beneficial Ownership Report that his very close friend and benefactor Tim Durham filed with the SEC.  

When did Brizzi actually purchase the Cellstar stock, and where did he get the money to do it?  What happened to the $2.10 per share total cash dividend Brizzi received for each share of Cellstar he owned? Those are fair questions to ask considering the fact that Brizzi reportedly now has $500,000 deposited in a campaign fund war chest when just a few months ago he claimed it was empty.

  

Campaign money may not have been used to purchase the stock, but it's hard to believe Brizzi could afford to become a high roller in the stock market when he had already been sued in 2004 by Carmel Gymnastics for an outstanding bill in the amount of $134 and when his own 2009 divorce records show he had total investment accounts as follows:

Stockyard Checking, $8,380

CJB Management $11, 223

Wachovia (non IRA) $17,271

UBS $16,450

Carl was ordered to split the above accounts with his former wife and transfer an amount equal to half the value of his SEP IRA, in the amount $23, 696 to her.

On a side note, it is ironic that under section 4.2 of the divorce decree, Carl fails to list the building in Elkhart, Indiana, for which he allegedly acquired a 50% interest, and one that has an alleged market value in excess of $2M. He does, however, disclose in section 4.4--get this-- a partnership with Venture Investments. Venture is the same name used by Brizzi friend, John Bales, for his real estate firm.

Brizzi issued a statement via his blog that he started buying Cellstar "on the advice of his financial consultant" in 2005.  Why won’t Brizzi name the financial consultant?

On the same day that he published a statement that referred to it as a "minor holding," he failed to mention that he had accumulated what appears to be no less than 150,000 shares, for which he received two dividends of $1.50 and .60, for a total of $315,000 as a distribution, based on the assumption that his remaining 75,000 shares were his 50% division of the holding in his divorce. 

A logical conclusion would be that he owned half the stock at the time of his divorce.  Until Brizzi can prove otherwise, observers are forced to speculate with the information that is readily available, which includes the fact that he failed to list in his 2005 Campaign Finance Disclosure that he owned any Cellstar shares in 2005 as of the filing date, and instead, did not list Cellstar as a holding in 2006.  In the 2006 campaign disclosure, Brizzi did not list the number of shares, but instead simply stated that he owned Cellstar shares.

In addition, Brizzi was asked by the Indianapolis Star to produce his brokerage and bank account records, reflecting exactly what amounts and the timing of when he purchased the stock, but he refused.  Brizzi was also asked to produce his proof of funds of how he paid for the stock, or if it was obtained for him and paid for by someone else, and he has consistently refused to do so.   

It would seem likely that a beleaguered prosecutor, whose BFF was accused of a financial crime, would offer such evidence that he had nothing to hide.  Those with nothing to hide, hide nothing, but not Brizzi.  He has refused and avoided producing any such records, and now he is pursuing the idea of starting a public relations business that would rehabilitate tarnished images?  Some are secretly musing whether or not it's some sort of sick joke. 

Is it logical to believe that a civil servant with a wife running a home daycare at the time, and four minor children, who was getting sued for failing to pay the gymnastics bill, would suddenly have enough cash to timely accumulate a massive position in an obscure Dallas-based company (Cellstar) just before Indianapolis-based Brightpoint bought their assets? 

 If Brizzi wants to clear up any misunderstandings, shouldn't he agree to produce canceled checks for the purchase of the Cellstar stock?  Or did someone else purchase Cellstar stock on Brizzi's behalf?  If Brizzi is unwilling or unable to produce the records, wouldn't it make sense for the SEC to subpoena the financial records to clear up any mystery or misunderstanding surrounding a transaction that has been a subject of controversy?

And where did Brizzi get the tip to buy Cellstar stock?   Was there any insider trading involved? Prior to Brizzi's  spectacular "bet" on a massive position in Cellstar, his entire stock purchase history was minimal--300 shares of ESS, an engineering stock, and 400 shares of Owens Illinois, the two stocks having a combined market value at the time of less than $15,000. A background look at the facts has led to more important questions that deserve honest answers.

See Exhibit 1 below.  Click on to enlarge.

Exhibit 1

Up Next:  Part II:  Stock Manipulation Leads to Prison Sentence for Durham Buddy, but Does the Trail Stop with Daniel Laikin?