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Christopher Menkin
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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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  • HL Leasing $132 Million Fraud? What’s Next? 3 comments
    May 15, 2009 12:50 PM

    HL Leasing Investor Blog

    http://johnottohlleasi...

    [headlines]

    ----------------------...

    HL Leasing $132 Million Fraud? What’s Next?


    John Otto

    Investors in John Otto’s company HL Leasing, Inc., Fresno, California claim fraud. The claim the “American Express” leases they lent money as collateral did not exist. They want their “principal” investment back. There may be over $128 million owed. There also may be claims by other Otto’s enterprises and creditors as well as those who want to protect their interest or involvement.

    None of the investors had ever heard of a UCC let alone knew how to ask for a copy of their “security.” It places them last in line as an unsecured creditor. All they got was a loan number and monthly interest payment. Until April, 2009.

    How did this happen? The guessing is as the economy turned soar, less business was coming from Heritage Pacific Leasing, cut back over two years ago to a skeleton crew, to other investments, yet to hear about, as well as HL Leasing investors asking for principal back due to the economy (their agreement said they could get it back any time with a written thirty day notice, one of the draws of investing, the cash was running out and interest payments could not be met. The man considered the "big bucks" of the leasing industry, well-liked, welcome all the time, even spoken highly by people he let go, appears was leading a double life.

    John Otto’s main business was a separate leasing company,
    Heritage Pacific Leasing, which he started in 1984. At one time he claimed he was doing $36 million a year, primarily in agriculture equipment leases that he sold to banks. Two years ago he let almost everyone go from this operation.
     
    Somewhere in this period he decided to skip the banks and raise money from investors.  At one time, he may have operated in this manner, but appears to have grown into a Ponzi skim.

    The story appeared in Leasing News on Monday, it was read by John Otto. He was to return a Monday morning telephone call about the article, “American Express” leases, interest payments, UCC filings, but left his house never to return.

    It seems many believe HL Leasing President Dan Ramirez is "innocent," many claiming he said he and his family also invested. Both he and John Otto not only worked the telephones, but also appeared at investor meetings, where new and old prospects were brought together to learn more about investing in leasing.

    Leasing News asked veteran attorney Tom McCurnin, Los Angeles, who won the prosecuting cases involving the CMC Leasing Ponzi scheme (remember them?). He also had the unique experience of representing American Express in the past, who John Otto said he had purchased leases from and was offering them as collateral for the investments for the last ten years.

    “I have handled about a half dozen investment scams and ponzi schemes over the past three decades for both the government and the victims. While there is certainly an urge for immediate aggressive action, there are simply too many investors with divergent interests to formulate a single correct strategy.

    Receivership? This is a possible outcome, either by the Department of Corporations or the SEC. The problem with this strategy is that the Receiver works for all the investors, not just a few. So victims that pay a retainer to an attorney could find out they are funding 500 other investor’s claims. Moreover, the Receiver has the ability to set aside fraudulent conveyances, and those include payments to the investors. Yes, you heard me right, there is a whole body of law which allows the Receiver to pursue payments made to the investors as fraudulent conveyances. The lawyers could email me for a short article I wrote on Receivers, fraudulent conveyances, and the dichotomy of “winning investors” and “losing investors.”

    Involuntary Bankruptcy? This is certainly the cheapest alternative, but again, the Trustee works for all the investors, and has the same authority to prosecute fraudulent conveyances, including against the very investors that form the backbone of the unsecured creditors. It is a bit of a Robin Hood strategy (“rob from the rich and give the poor”).

    Civil Actions? I represented American Express from about 1998 to 2004, and will tell you that there were no new lease generations from about 2003 forward. All their lease assets, including physical locations, pools, and employees were transferred to Key Credit. I doubt there is a stream of payments against which the investors can tap. This sounds like a ponzi scheme to me. Moreover, if any lawyer hits it big, what would prevent a jealous investor from filing an involuntary bankruptcy and getting all that money back as a preference or fraudulent conveyance? If you think the principals of HL Leasing are both culpable and collectable to pay a multi-million dollar judgment, you may miss your mark.

    While there is an urge for immediate action, be careful what you wish for—you may get it.

    Tom McCurnin
    Barton, Klugman & Oetting
    350 South Grand Ave.
    Suite 2200
    Los Angeles, CA 90071
    Direct Phone: (213) 617-6129
    Fax: (213) 625-1832
    Email: tmccurnin@bkolaw.com
    Visit our Web Site at: www.bkolaw.com

    Investors suspect Heritage Leasing $132 Million Fraud
    http://www.leasingnews...

    Heritage Pacific Leasing, Fresno, California
    by Christopher Menkin
    http://www.leasingnews...

     

    Disclosure: No Positions

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Comments (3)
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  • G@scopelabs.net
    , contributor
    Comments (9) | Send Message
     
    i knew MANY people in this scam and begged them to liten and pull out! so dum!
    8 Sep 2009, 02:20 PM Reply Like
  • G@scopelabs.net
    , contributor
    Comments (9) | Send Message
     
    go to scopelabs.net and see rest of scams to avoid!
    8 Sep 2009, 03:22 PM Reply Like
  • Darold Kempster
    , contributor
    Comment (1) | Send Message
     
    When did the government decide this was a fraud if ever. I never could get information from the FBi to file a claim for a loss on my taxes that it was a Ponzi scheme.
    Any information would be appreciated.
    Thanks
    Darold Kempster
    Waukegan, Illinois
    8 Dec 2013, 08:47 PM Reply Like
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