Last week’s indictment of two top officers at National Lampoon Inc. complicates the outlook for the comedy company that has done business under a cloud for years.
The U.S. Justice Department on March 15 charged Chief Executive Timothy Durham and Chief Financial Officer Rick Snow with 12 counts of wire and securities fraud. The alleged misconduct involved an Akron, Ohio-based finance company that apparently made loans to prop up National Lampoon, a West Hollywood-based film production company, and other Durham-controlled businesses as well as supporting his lavish lifestyle.
The company’s previous chief executive, Daniel Laikin, is serving time on conviction in a securities fraud case. Laikin and Durham were business associates.
Matthew Rosengart, a partner in the West L.A. office of law firm Manatt Phelps & Phillips LLP and who is not affiliated with National Lampoon or the case, said that if Durham acted criminally to benefit National Lampoon, and those actions were within the scope of his job, the company could be found liable. So far, the company has not been charged or named in a legal action.
National Lampoon could be sold even before the legal proceedings end as part of a separate bankruptcy case regarding the finance company. But Rosengart said that the evolving legal situation will complicate any negotiations for a sale.
“Obviously the company is less attractive than it would be otherwise,” he said. “The buyer would have to take into account possible civil liability down the road.”
On the same day as the indictments, the Securities Exchange Commission filed a civil suit seeking $207 million in restitution to defrauded investors against Durham, Snow and another partner. Both Snow and Durham were taken into custody March 16. Snow was released the same day but Durham remained in jail pending a hearing Monday.
Durham and Snow’s legal troubles center on Fair Finance Co., a defunct factoring company formerly controlled by Durham, Snow and another partner.
“These defendants used a company with a decades-long track record in consumer finance to raise money to finance their personal businesses, lavish lifestyles and repay other investors with the promised return in the nature of a Ponzi scheme,” Daniel Hawke, regional director of the SEC in Philadelphia, told the Business Journal. The Philadelphia office has jurisdiction of the case because the alleged crimes took place in its region.
Messages left at National Lampoon offices were not returned.
Roy Black, Durham’s attorney in Miami, did not respond to an e-mail.
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