Democratic mayoral candidate Brian Williams is an idea machine. His columns for the Indianapolis Business Journal are all extremely thoughtful, as are his campaign website "letters." The website also has a few good “internet commercials.” (Yes, I did think his campaign slogan “braves ideas” was awfully close to Andre Carson’s “bold leadership,” but, hey, how many original campaign phrases are left?!?)
Brian may dispute this, but most people I talk with say he does not have deep grassroots support in the Democratic Party. But he fits a prototype of a Democrat who can win in an Indianapolis that is, respectfully, dominated by the wealthy, be they individual (think Simon, DeHaan, McAllister) or institutional (think Eli Lilly & Barnes & Thornburg).
Brian fits the potent “Peterson” model as a guy who came up Democrat but turned wizard in a largely Republican-dominated field, such as real estate development, finance, or mergers & acquisitions. This type of candidate can gain the support of, or at least negate the influence of, small “r” Republicans by virtue of the shared joy of capital formation.
A guy like Williams, running against a mayor that many Republicans can’t stand, could theoretically raise a lot of “cross-over” money, hop over “party insiders” and avoid slating, get on TV, and win a primary and general election. Just as Peterson did, Williams could say, “Hey, I’m a Democrat, but you have nothing to fear, Republicans.” (Of course, this might terrify Democrats. You decide).
Then came Tim Durham.
Durham’s legal troubles have been nauseatingly chronicled, and some pundits proclaimed Williams’ campaign was over. It will definitely be a tricky needle to thread for Williams.
Nothing damages an entire party like a good scandal, in particular one that has Playboy bunnies, fancy cars, and a yacht (think Lonely Island and T-Pain's “I’m on a Boat”). Accordingly, Democrats will work the phrase “Tim Durham” into everything, even when Carl Brizzi steps down.
Marion County Democratic Chair Ed Treacy on Christmas? “Democrats believe that Christmas is about giving…not about taking money in a ponzi scheme like Tim Durham, the Marion County Republican Party’s biggest donor.”
Ed Treacy on grilled cheese? “Democrats believe grilled cheese is pure Americana, a fusion of delicious ingredients for an even better taste, not a ripping apart of investor’s hearts and wallets, leaving a bad taste in their mouths, which is what GOP b.f.f. Tim Durham did.”
This one is actually true. Democratic prosecutor front-runner Terry Curry sent an e-mail to supporters today saying our contributions can “send a strong message to both the Republican Party and to their powerful friends that the Marion County criminal justice system is not for sale.” (Get ‘em, Terry!)
Can we dispute it would be logically challenging to churn the Durham angle in 2010 then hand the reins to a guy in 2011 who is “connected” with Durham? The answer lies in the nature of the connection and whether the voting public is indiscriminate.
Having reviewed a stack of legal documents, this is what I’m pretty sure I know. In 2000 or shortly thereafter, Brian became a member of Obsidian Capital Corporation, LLC (“OCC”). However, the operating agreement designated Williams, who only had a 5% share, as a Class B member, which meant he had no ability to control the management of the company any more than a minority shareholder can tell Bill Gates what to do at Microsoft. Williams also apparently signed the Obsidian Capital Partners, LLP operating agreement on behalf of an entity known as the 77th Street Partners. (In other words, if I'm reading the handwriting correctly, Williams was “down with OCP”). But, again, Williams had no managerial control.
As Williams pointed out in an interview with Amos Brown, in 2005, he and several other investors recognized that Durham was moving away from the stated mission he had given to Williams, which was the purchase and resale of manufacturing and distribution companies. According to Williams, he “started to extract himself, or tried to extract himself” from the relationship.
It’s unclear what specific steps Williams took, however, until December of 2007, when Williams and numerous other investors (who I’ll collectively call “the investors”) demanded through their counsel, John Taylor, that Durham “cash out” their interests.
A flurry of correspondence ensued. One e-mail from Taylor, dated March 12, 2009, states that the investors “do not regret” the investment they made, but they just wanted out. As an aside, nobody can attribute this alleged lack of regret to Williams, as it’s most likely legal puffery employed to make Durham a more amenable buyer.
In response, Durham’s counsel, John Egloff of Riley, Bennett, & Egloff (a big Mayor Ballard donor, by the way) asserted that neither Williams nor the other investors had any contractual basis to request a “buy out.” Nonetheless, Durham stated he would agree to an appraisal of the companies for the purpose of facilitating a purchase at fair market value.
For reasons unclear to me, the investors did not agree but instead gave Durham a deadline to make an offer in the range of 10x to 15x their initial investments. When Durham refused, Taylor seemed perplexed, and in a sales pitch I cannot ever imagine working (which I'll call "the Hyman Roth stategem") said essentially that the investors thought that Durham would want to share his largesse so people would know he made money for his partners. Clearly exasperated with Durham's incalcitrance, Taylor asks, “Is Tim just all washed up? Is that the underlying problem?”
Durham then turned the tables on the investors and on April 21, 2008, sued them in Marion County, claiming they were engaging in bad faith and arguably extortion by telling him to pay them inflated values to avoid litigation when they had no right legally to any “buy-out.” (Not to bore the non-lawyers, but under the operating agreement (a/k/a “the owners manual”) for Obsidian’s Capital Corp. LLC, only a vote of the majority of Class A members (Williams was Class B) could “terminate” the company, which would require it to pay all liabilities, sell all property, and distribute what’s left to the members. Without the ability to force the same, Williams had no way out, and the 3 other Class A members in addition to Durham were Durham associates).
Notably, in the counterclaim, Williams and the investors alleged that “Durham, Obsidian Capital, Obsidian Partners, Fair Finance, and Fair Holdings have been within the zone of insolvency or have been or are insolvent” and further, that Durham “has equity interests in over 50 companies.” Yes, you read that right. Fifty! In short, the investors suspected Durham was crashing in early 2008.
The next thing reflected in the Court file is a stipulation of dismissal, which is what parties do to say they don’t want to go forward because the case settled.
Then on January 9, 2009, the same group of investors filed separate suits against Durham in Hamilton County. The complaints said that Durham breached promissory notes held by the investors with a collective value of $313,130. Under the promissory notes, Durham was to pay three installments on 9-30-08, 12-31-08, and 3-31-09 to each investor. Durham made the September payments, but then failed to pay in December.
Initially, I thought these promissory notes were loans, which would have suggested that Williams and Durham was an ongoing concern. Williams clarified, however, that the notes were part of the Marion County settlement. This, of course, makes sense if you’re Durham. Instead of possibly having a judgment entered against you that people can see, you have a settlement on paper only.
The Hamilton County lawsuit concluded almost immediately with a settlement agreement, except this time the terms were more transparent. Durham was to make payments to all plaintiffs on the 15th of each month from February through June of 2009, with the greatest portion to be paid in the first month and lesser amounts each month thereafter.
This time Durham paid his debts on time, but this second settlement let him off with paying roughly 70 percent of the note values. For example, though his initial promissory note was for $43,510, Williams walked away with only $31,321 (paid out monthly in the amounts of $10,297, $5,320, $5,277, $5,234, and $5,194, respectively). 77th Street Partners’ initial promissory note was for $65,619, but it walked away with only $46,420 ($15,262, $7,885, $7,821, $7,758, and $7,694).
What kind of multi-millionaire needs six months to pay off a total of $219,000?
But back to Williams. What’s fair here? Williams’ situation is different than Brizzi's. When Williams got a whiff of something foul, he tried to get out, while Brizzi kept following Durham (and his stock picks) even when smoke surrounded him. Brizzi only stopped when the heat of public scrutiny sent him running off the board of Fair Finance.
Yes, Williams still touts his connection to Obsidian on his website, which might not seem the smartest politics at first blush. In fact, it almost reads as if Williams is taking credit for the name. It states:
Obsidian was a great name for a company that wanted to invest in manufacturing, service and distribution related companies. Entrepreneur Tim Durham warmed to the name and Brian invested in Obsidian Enterprises, a holding company with a diverse portfolio of businesses.
(The website for Gazelle TechVentures features the following description about their "advisor" Brian Williams: "Co-Founder of Obsidian Capital..." It's not clear if Williams can control what Gazelle writes, but they certainly exaggerate Williams' 5% interest to his detriment).
But all things Obsidian are catch-22's for Williams. If he tries to erase history, people will think he has something to hide. He does. But it’s only that he invested in Tim Durham, and he chose poorly. Does that make him unable to serve as Mayor? Is a person making a bad investment and losing his own money to an alleged ponzi schemer who hides information worse or better than a mayor making a bad investment despite available information and losing the public’s tax money?
Can we say Williams is any different than any of the savvy folk who got taken by Bernie Madoff? Can we expect Williams to read into Tim Durham’s soul in 2000 and foretell that he would be seduced by the money and power later? No, we can't.
But a lot of people still will.
Some will wonder how a guy whose campaign is based largely on being savvy found himself in a corporate entity with no clear ability to exit should things go awry, and we’ll ask why he wasn’t more aggressive in his “extraction” from Durham. (In fairness, Williams' reasonable defense is that you don't divorce your spouse the first day you think things aren't going well, and how can you fault a guy who simply trusted someone who turned untrustworthy?). We might even ask whether the investors took a 30% cut on the promissory notes because they feared that if they didn't get their money before the litigation flood gates opened up, they might end up completely empty-handed.
Being plagued with questions is what most of us do in hindsight....which is too bad because that’s not the kind of vision Williams was touting for Indianapolis.