Widow Of Fresno Businessman Ordered To Pay $114.5M In Ponzi Scheme
The widow of a Fresno businessman who committed suicide after authorities began investigating his alleged Ponzi scheme must pay $114.5 million in damages to hundreds of victims throughout California, a judge has ruled.
Fresno County Superior Court Judge Donald S. Black reasoned that since Kathleen Otto benefitted from her dead husband’s fraud, “she stood in the shoes of John Otto for the purpose of the lawsuit," said Ara Jabagchourian, one of the attorneys who represented an estimated 800 California victims, including 250 to 350 in Fresno.
Prosecutors alleged that 67-year old John Otto, who founded HL Leasing in Fresno in 2001, and his employees had been fraudulently persuading investors to loan money to HL Leasing by telling them that they were purchasing discounted agreements from American Express. The investors were promised monthly profits on their loans. However, there were no legitimate lease agreements between HL Leasing and American Express, and when the alleged Ponzi scheme crumbled in 2009, Otto closed HL Leasing and then shot himself in the head.
An investigation led to a trial, where Judge Black ruled that HL Leasing had defrauded the public.
“This Ponzi scheme has destroyed the lives of many individuals in California including hundreds in Fresno, many of whom lost their entire life savings," said Jabagchourian.
However, Kathleen Otto’s attorney, Marc Miles, said that he plans to appeal Judge Black’s ruling, partly because the jury during trial had found she was not liable for damages because her actions didn’t cause financial harm to the victims. Furthermore, Miles said that the victims are not legally able to collect on any judgment because they didn’t file a claim in Probate Court within a year of John Otto’s death.