Ponzi Tracker Reports: After Ponzi Schemer’s Suicide, Wife Held Liable For $114 Million Judgment

A California woman whose husband committed suicide after being investigated for a massive Ponzi scheme can be held liable for the $114.5 million in damages owed to victims, a California appeals court ruled.  Kathleen Otto is the widow of deceased Fresno businessman John Otto, who committed suicide in May 2009 after authorities began investigating investor complaints about his equipment leasing business.  After an ensuing trial against several of Otto’s companies and ex-employees resulted in a $114.5 million verdict, Kathleen Otto was found to have benefited from her husband’s fraud and thus liable for his debts as a surviving spouse.

John Otto, known as a pioneer in the equipment leasing industry, founded HL Leasing in 2001.  The company solicited potential investors by allowing them to invest in various equipment leases purportedly purchased by Otto from American Express.  Investors were told that the standard investment term was three years, and were promised annual returns of 9%.  In total, more than 1,000 investors entrusted over $100 million with Otto and HL Leasing.

When HL Leasing missed a scheduled interest payment in April 2009, many investors began asking questions.  After authorities began investigating, John Otto committed suicide in May 2009.  Several company employees, as well as Kathleen Otto, then faced civil charges that they knew about the fraud but failed to raise any alarm for fear it would disrupt their lavish lifestyles.  After a 2011 trial, the company employees were found liable by a jury, but Kathleen Otto was not.  After a $114 million judgment was entered against John Otto’s former companies, the Court then found that, because John Otto was considered an alter ego of these companies, his surviving spouse, Kathleen Otto, could be held liable for the debts under California law.

While victims now have another potential target to pursue for assets, Kathleen Otto’s financial situation appears bleak.  She is reported to have recently filed for bankruptcy, and has liquidated a variety of expensive assets including a luxury car collection and fine jewelry.

A copy of the Order is below:

 

otto-doc.pdf by jmaglich1

 

Troy Dooly is recognized internationally as an influencer in the areas of personal branding, leadership development, marketing campaigns, organizational expansion, and corporate launch strategies. Dooly is a speaker, results coach, and radio host. He is a founding member, show host (Beachside CEO) and News Director of the Home Business Radio Network. He is a founding member, and currently serves on the Board of the Association of Network Marketing Professionals