Court: Fresno widow liable for $114.5 million judgment from husband's Ponzi scheme

October 30, 2013
Fresno Bee

The widow of a Fresno businessman who committed suicide after his clients uncovered his massive Ponzi scheme must pay $114.5 million in damages to hundreds of victims, an appellate court has ruled.

The Fifth District Court of Appeal upheld Fresno County Superior Court Judge Donald S. Black's ruling in January 2012 that Kathleen Otto benefited from her dead husband's fraud and therefore is liable for his debts.

"The ruling shows the legal system works," San Francisco attorney Ara Jabagchourian said Wednesday.

Jabagchourian was the lead attorney who successfully represented an estimated 800 victims throughout California, including 250 to 350 in Fresno, many of them Armenian churchgoers who entrusted John Otto with their life's savings.

Whether the victims will ever collect the money damages is another story.

Jabagchourian said Kathleen Otto, 72, has filed for bankruptcy and liquidated some of her assets, which include a collection of expensive cars, jewelry and a country club home in Palm Desert. He estimated her assets to be worth $1 million to $1.5 million -- far from the $114.5 million she owes the victims.

The law, however, allows her to keep some of her money, he said.

Two years ago, Jabagchourian laid out the facts of Otto's Ponzi scheme to a Fresno County jury.

John Otto founded HL Leasing at Shaw and Valentine avenues in northwest Fresno in 2001. Otto and his employees then fraudulently enticed investors to loan HL Leasing money by telling them that he was buying American Express lease agreements at a discount... (To read the entire article, please click HERE)