If you're in politics, do "due diligence" on your friends. There's a reason political folk call the scandal-plagued "radioactive" - everybody near them suffers from the fallout.
The Star reported yesterday that CLST Holdings, a Texas company on whose board Tim Durham serves, is under investigation by the SEC, most notably because CLST Holdings picked up "millions of dollars of receivables from Fair Financial."
But here's what intrigued me. The Star reported that CLST used to be a wholesale cellular phone provider, but it liquidated and is now just a holding company (a/k/a "an empty shell" that does nothing but hold other investments and manage them).
I immediately thought, "How curious" because Durham made a killing on Brightpoint stock. Brightpoint is a wholesale cellular phone company. I couldn't put my finger on it, but something smelled funny.
Well, the Star today connects some dots, and reveals that when Cellstar wound up operations, it's biggest buyer was "Plainfield logistics (and wholesale cell phone seller) Brightpoint, which paid $88 million in cash for CellStar's U.S. operations."
For those scoring at home, Durham makes millions on Brightpoint stock in 2005, then gets on the Board of a company that is a Brightpoint competitor, and he sells its pieces to Brightpoint, thereby forcing the CLST stock into the toilet. How did Brightpoint fare thereafter?
Inside Indiana Business reported back in 2006 that revenues from the acquired operations were expected to make Brightpoint $450 million in the first year, but this must be the gift that keeps giving.
This from a February 2009 filing with the SEC:
"The increases in wireless devices handled and revenues were primarily due to the impact of the Dangaard Telecom acquisition in July 2007 and the CellStar acquisition in March 2007. Excluding these acquisitions, revenue decreased 22%, primarily due to a decrease in wireless devices handled and average selling price brought on by a global economic slowdown in the second half of 2008."
But wait. Which tail was wagging which dog? Did I forget to mention that in 2006 Durham was buying shares of Cellstar at the same time Brightpoint was submitting an allegedly secret non-binding bid to buy Cellstar? In March of 2007, Durham stated, "Nobody believes it, but I was completely unaware of all that." We sure don't believe it now.
Oh, and as most of you may know from the Indianapolis Business Journal, Brightpoint is run by Bob Laikin, the brother of Dan Laikin. Dan was the CEO of National Lampoon until he pled guilty to conspiracy to commit securities fraud for trying to jimmy his company's stock through straw purchases. Who took over National Lampoon? Tim Durham, with whom Dan served on the NL board. To my knowledge, nobody has ever accused Bob Laikin of cutting corners, but isn't it conceivable that a sibling of a CEO might obtain insider information just by virtue of being around, and couldn't that sibling, if so inclined, share that information with a friend?
Yes, I'm speculating, but there are just too many coincidences and dirty pieces here for the puzzle to be clean, which gets me to Brizzi.
The Star reports that Brizzi bought CLST stock before Durham became a board member.
Umm, Carl, what in God's name would make you say, "You know what? I'm going to invest $10,000 in a struggling, Texas-based wholesale cell phone company?!?!" I'm supposed to believe you didn't get a wink or nod about CLST from a guy who was your biggest donor?
Brizzi's defense is that he lost money on the stock, which is worth about ten cents a share now. Sure, the stock lost value, but Durham was elected to the board to sell off the assets and distribute the proceeds to the shareholders. How much did Brizzi get on the distribution?
Also, where did Brizzi, a guy who has been on the public payroll longer than I can remember (since 2002 as Marion County Prosecutor, then under Scott Newman, and before that, under Dan Burton) get the money to invest in Harry & Izzy's? And how much did he invest? It's a nice spot (with great steakburgers, so kudos to Manager Jeff Smith), but there's no way that decor was cheap.
Brizzi needs to come clean on his finances. Whether he does or not will tell you whether he can. And if he can't, you won't see him on the ballot in 2010.
Initially, I was going to credit Brizzi for not throwing Durham under the bus. But given the extent of his relationship, Brizzi would have looked worse trying to disavow it. Moreover, I started wondering what Brizzi thinks about a "Durham recovery?"
In America, the wealthy usually recover, even from federal entanglements. Conseco crashed, and we thought Steve Hilbert was toast. Anybody think he's suffering at MH Equity Advisors? Michael Milkin did prison time for securities violations. His net worth now? $1.2 billion. Donald Trump went belly up. Anybody think he had to sacrifice hairspray? Excluding Madoff (who, even with over a billion swindled, got placed in the "crown jewel" of the federal system), big idea men stay big idea men. They know how to mobilize and capitalize on capital.
Even if Durham is charged criminally (and there's no indictment of any type yet) and serves time, five years from now, he will be back at it and wealthy again, and he'll remember a guy who publicly said "Tim and I are friends" in the present tense when the chips were down.
Brizzi is standing by his man. And with the cash and possible "favors" Durham has doled out, should any of us be surprised? That wouldn't be looking a gifthorse in the mouth; that'd be turning it into glue.
Brizzi Talking Bull on Durham?
