Widow in Ponzi scheme must pay $115M to victims

FRESNO, Calif. — A judge has ordered the widow of a Fresno businessman targeted by fraud investigators to pay $115 million to hundreds of victims of his alleged Ponzi scheme throughout California.

Fresno County Superior Court Judge Donald Black said Kathleen Otto must pay the investors because she benefited from her late husband’s fraud, the Fresno Bee reported Wednesday ( http://bit.ly/zbER8M ). The 70-year-old Otto’s assets include expensive cars, a corporate jet, more than $1.2 million in jewelry and a $2 million home in Palm Desert, according to Ara Jabagchourian, an attorney for some 800 victims.

Kathleen Otto’s husband, John, was accused of defrauding investors by convincing them to loan his company, HL Leasing, money based on business agreements he purported to have with American Express.

But those agreements did not exist, according to Jabagchourian.

John Otto, 67, committed suicide after authorities began investigating the alleged scheme in 2009.

A jury found two of the company’s senior officers liable for $47 million in damages in August, but exonerated Kathleen Otto.

Jabagchourian then appealed to the judge, who agreed in a written ruling last week that Kathleen Otto was liable.

“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,” Jabagchourian said.

Kathleen Otto’s attorney, Marc Miles, said he plans to appeal Black’s ruling partly on the grounds that the jury found she did nothing wrong.

Miles said the victims also failed to file a claim in Probate Court within a year of John Otto’s May 2009 death, making them legally ineligible to collect any judgment.