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Christopher "Kit" Menkin is of editor LeasingNews.org (http://www.leasingnews.org/), an internet trade publication for the finance/leasing industry. He has 41 years experience in the finance/leasing industry as well as being a founder of a commercial regional bank and serving on... More
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  • Kathleen Otto Found Liable for $114.5 Million Ponzi Scheme 7 comments
    Jan 11, 2012 1:39 PM

    The Honorable Donald S. Black, a Fresno County Superior Court judge issued a decision holding Kathleen Otto, the wife of the CEO of HL Leasing, Inc. (John Otto), liable for the $114.5 million dollar verdict against HL Leasing, Inc., Manufacturers Acceptance Corporation dba Heritage Pacific Leasing and Air Fred LLC. The Court had entered a verdict against these three corporate entities on August 2, 2011. This is in addition to the jury verdict of $47.22 million against the top two senior officers of HL Leasing, Inc., Dan Ramirez and Andy Fernandez, for their involvement in a Ponzi scheme. Over 800 victims of the scheme were from California, many of them residents of the Fresno area where HL Leasing, Inc. operated from. The trial team was led by Ara Jabagchourian of Cotchett, Pitre & McCarthy, LLP, Burlingame, California. Jabagchourian is a Fresno native.

    In its Statement of Decision, the Court found that John Otto was the alter ego of HL Leasing, Inc., Heritage Pacific Leasing and Air Fred. The Court reasoned that since Kathleen Otto obtained the benefits from her deceased husband's fraud, who committed suicide in May of 2009, she stood in the shoes of her husband for purposes of the lawsuit.

    Back in August of 2011, the jury found that the two top senior officers played an integral part in the Ponzi scheme which ruined the lives of hundreds. Dan Ramirez was found guilty of fraudulent concealment and aiding and abetting the fraud and Andy Fernandez was found guilty of aiding and abetting the fraud.

    The individual defendants in this case were Dan Ramirez, the former president of HL Leasing, Inc., Andy Fernandez, the company's former chief financial officer, and Kathleen Otto, the alleged co-owner of HL Leasing, Inc. and the wife of John Otto. John Otto operated the $137 million HL Leasing Ponzi scheme before he committed suicide in 2009 after the Ponzi scheme collapsed. Dan Ramirez, Andy Fernandez and Kathleen Otto are alleged to have been integral parts of the Ponzi scheme, collectively taking millions of dollars of HL Leasing money for their own personal benefit. Although the individual defendants claim no knowledge of the fraud, John Otto himself said before he died that no one can pull off a Ponzi scheme alone with one person, it requires lots of people.

    The plaintiffs were represented by Ara Jabagchourian and Aron K. Liang of Cotchett, Pitre & McCarthy, LLP and Donald Fischbach of Dowling, Aaron & Keeler, Inc.
     


    Ara Jabagchourian

    Jabagchourian said of the verdict, “This Ponzi scheme has destroyed the lives of many individuals in California including hundreds in Fresno, many of whom lost their entire life savings. Now with this decision by the Court finding Kathleen Otto liable for the fraudulent scheme, the victims can rest assured that justice has been done and they can begin the process of being made as whole as possible from the losses they have suffered.”

    The FBI had no comment on the case, which they consider "open."

    Many of the victims have not been able to file for loses as they claim it has not been determined a Ponzi scheme, although others on the blog say they have filed losses, one stated: and received "... over a 550K lost I received approximately $123K back from the IRS. It did take them a long time to finally send a check but I did get it with no further documents required."

    There are those who lost their house, their retirement, and have gone back to work, moved in with their children, and others whose lives have been changed as dramatically due to the money they invested and appear will never see again.

    It appears the Otto home and many assets are held in a family trust, and other investments seem to have been liquidity as having more debt than assets, such as the Air Fred, the private plane company. A discovery perhaps will determine what assets are available, as well as an appeal may be in the works regarding Judge Black's decision.

    Previous Stories:
    http://www.leasingnews.org/Conscious-Top%20Stories/heritage_leasing.htm

     

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Comments (7)
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  • I am interested in this not because I am a victim of John Otto s crime ( my heart and prayers go out to the people affected by the greed of the Otto`s and the other two criminals) I am interested because I was involved with John Otto and Air Fred LLC. John Otto, Andy Fernandez, Sharlene Cross and David Roach are all very bad people. They are cruel and dishonest!
    Thank goodness justice prevailed! I just hope anyone caught up in this mess are able to recoup some of their lost savings.
    14 Jan 2012, 01:12 PM Reply Like
  • Author’s reply » will post an up-date in blog, as didn't know if readers here
    would be interested in more
    15 Jan 2012, 01:11 PM Reply Like
  • I lost a tidy sum in this Ponzi scheme. I've read about the monetary awards; but is anyone going to be tried in a criminal court? Has the DA filed charges against anyone? I also have received money back from the IRS for some of my losses, and am trying to get more for other tax years. I have some claims pending, but so far have not been officially denied anything.
    20 Apr 2012, 04:32 AM Reply Like
  • Author’s reply » No receivership and no FBI. There may not be an FBI as
    the main culprit committed suicide. Kathleen Otto in the class action suit was originally found not guilty by the jury, so the attorney appealed for assets and won the appeal.

     

    Both those convicted said they were not aware of the scam, even
    lost money themselves, and the entire operation was run out of
    Otto's home in Southern California and they were not privy to
    any of the accounting.

     

    $163,720,000 Collections to begin May 9
    20 Apr 2012, 11:47 AM Reply Like
  • It is now 3/3/13. Has any moneys been collected yet. Looks like the FBI does nothing. Looking forward to seeing this on AMERICAN GREED
    4 Mar 2013, 04:47 AM Reply Like
  • Has any moneys been collected yet? Looks like the FBI is a joke.
    4 Mar 2013, 04:48 AM Reply Like
  • Author’s reply » John Otto, the alleged perpetrator of the Ponzi scheme, where money was lent by investors for a rate of return for leases that did not exist, committed suicide. Corporate officers were taken to a class action suit in Fresno where a jury ruled for a judgment against Heritage Leasing, MAC dba Heritage Leasing, Kathleen Otto (wife of John where bookkeeping was maintained at their house in Palm Desert (and Air Fred (small airline where they leased planes) for $114.5 million, plus $46.5 million against both Dan Ramirez and Andy Fernandez; $720,000 on top of that against Dan Ramirez.

     

    Ara Jabagchourian and Aron K. Liang of Cotchett, Pitre & McCarthy, LLP and Donald Fischbach of Dowling, Aaron & Keeler, Inc. began search for the assets (which were few, it appears, as the money had been spent by Otto to keep the Ponzi scheme going).

     

    The FBI has no one to indict, and in reality, Kathleen Otto was only brought into the action in the class action suite for basically being an officer of the corporation. She has filed personal bankruptcy as well as Dan Ramirez. Both basically have nothing, although transfers of real estate and a vehicle before the bankruptcy are being brought up before the judge.

     

    In the meantime “http://bit.ly/XUDWTN blog” started May 14, 2009 has 1098 emails, with victims trying to prove the loss to the IRS to take tax deductions on their losses (many have lost everything, homes, retirement, money saved for kids college education, you name it).

     

    Attorney Ara Jabagchourian is a native of Fresno, and works for Cotchett, Pitre & McCarthy firm that allows him to spend this time as this case the attorneys get 23 1/2% of what is recovered, and doesn't look like too much at all.
    5 Mar 2013, 04:46 PM Reply Like
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