Head of National Lampoon charged with Ponzi scheme

LOS ANGELES Wed Mar 16, 2011 8:18pm EDT

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LOS ANGELES (Reuters) - The president and CEO of the comedy firm National Lampoon Inc was arrested on Wednesday on charges that he defrauded investors in a $200 million Ponzi scheme built around a separate business loan company.

Timothy Durham, 48, was arrested in the Los Angeles area, one day after he and two co-defendants were charged with wire and securities fraud in a federal indictment filed in Indianapolis.

Since at least 2008, Durham has headed National Lampoon, the company behind a humor magazine established in 1970 and the "Vacation" movies.

The indictment centers on a bankrupt company called Fair Financial Services of Akron, Ohio. Durham and his co-defendant, James Cochran, bought the company in 2002.

Fair Financial, which has operated since 1934, provided companies with investor cash to cover their business loans, according to the indictment.

But instead of employing investor money for Fair Financial's decades-old business, Durham and Cochran used it to "maintain their lifestyles and to pay for personal expenses," according to the indictment.

In 2008, Durham had $150,000 wired over so he could spend it at a casino, and Cochran took $50,000 to pay country club fees, according to the indictment.

The men also used money to back a slew of business ventures, from a race car team to a surgery center, the indictment said.

A spokeswoman for National Lampoon declined to comment, and an attorney for Durham could not be reached.

Durham was arrested near Los Angeles at his West Hollywood home, said Laura Eimiller, a spokeswoman for the FBI.

He appeared in a Los Angeles federal court on Wednesday, where he waived his right to a hearing on his pending transfer to Indiana to be arraigned, said Thom Mrozek, a spokesman for the U.S. Attorney's Office.

Durham is due in court on Thursday to determine if he can be freed on bail, Mrozek said.

When the defendants bought Fair Financial it had debts to investors of $37 million, but by 2009 it owed 5,000 investors $200 million, according to the indictment.

The third defendant in the case is Rick Snow, the chief financial officer of Fair Financial.

(Editing by Peter Bohan)

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