Fresno Bee , CA
Aug 6 2011
Fresnans found liable in Ponzi scheme suit
Victims may not collect much from a jury’s $46.5m award.
Posted at 10:25 PM on Friday, Aug. 05, 2011
By Pablo Lopez / The Fresno Bee
Two senior officers of a defunct northwest Fresno business must pay
$46.5 million to more than 1,200 victims of an alleged Ponzi scheme, a
jury ruled Friday in Fresno County Superior Court.
But the victims – many of them from Fresno’s Armenian-American
community – won’t ever get full restitution. The defendants likely
don’t have that much cash or could be hiding their assets, a lawyer
for the victims said.
“They will get something back,” attorney Ara Jabagchourian said. “But
it will be pennies on the dollar.”
Jurors deliberated two days before finding Dan Ramirez, president of
HL Leasing Inc., and Andy Fernandez, the company’s chief financial
officer, liable.
The jury verdict in the class-action suit came three days after Judge
Donald Black found HL Leasing Inc., Heritage Pacific Leasing and Air
Fred LLC also liable for defrauding the victims.
The three companies were created by John W. Otto, the alleged
mastermind of the Ponzi scheme, but he committed suicide in 2009,
leaving his wife, Kathleen, and his two top employees to defend
themselves during a three-week trial.
The jury found Ramirez liable under the theory of fraudulent
concealment and aiding and abetting the fraud. Fernandez also aided
and abetted in the fraud, the panel concluded.
According to Jabagchourian, jurors said Kathleen Otto also knew about
the Ponzi scheme and participated in it. But the panel found she was
not liable for damages because her actions didn’t cause financial harm
to the victims, he said.
John Otto founded HL Leasing at Shaw and Valentine avenues in 2001.
Over the years, he and his employees fraudulently enticed investors to
lend HL Leasing money by telling them that he was buying American
Express lease agreements at a discount, Jabagchourian told jurors.
In return, the investors would get monthly payments on their loans, he said.
Jabagchourian and co-counsel Donald Fischbach said Ramirez used
longtime investors to vouch for the company’s success to prospective
clients. Ramirez also falsely told the prospects that the company was
registered with the California Department of Corporations, they said.
Many of the Fresno victims are members of St. Paul’s Armenian Church
and Holy Trinity Armenian Apostolic Church. Once the churchgoers
learned that fellow parishioners were making money, “it spread by word
of mouth,” Jabagchourian said.
During the trial, Jabagchourian showed the jury loan agreements that
John Otto had signed with investors and a document that showed each
loan was protected by collateral from American Express leases. But
there were no legitimate lease agreements between HL Leasing and
American Express, and therefore no collateral protection, he said.
The Fresno office closed and the alleged Ponzi scheme ended when Otto
shot himself in the head on May 11, 2009, in the parking lot of the
Palm Desert Visitors Center – just a few miles from his $2 million
home.
In arguing the case, Jabagchourian contended Ramirez, Fernandez and
Kathleen Otto knew about the scheme and committed fraud, but kept it
quiet to finance their lavish lifestyles.
Ramirez, for example, made nearly $5 million between 2004 and 2008,
Jabagchourian told the jury. Fernandez made as much as $126,000 per
year plus bonuses as chief financial officer, he said.
Kathleen Otto amassed a fortune, court records show. She owns
expensive cars, more than $1.2 million in jewelry, the $2 million home
in Palm Desert and a membership to an exclusive country club.
Attorneys for Ramirez and Fernandez, however, said the two didn’t know
about the scheme, but once they found out, they reported it to the
FBI.
The FBI said Friday it still is investigating the alleged Ponzi scheme.
Jabagchourian said the Ponzi scheme ruined the lives of many people.
“Many of them lost their life savings,” he said.
He said Kathleen Otto still can be held liable under the theory she
was a shareholder of the three companies that defrauded the victims. A
hearing on that issue is scheduled for September.
“We hope this verdict against the corporations and the jury verdict
against the individuals will be the first step in helping those who
lost everything begin to recover what was lost,” Jabagchourian said in
a news release.
http://www.fresnobee.com/2011/08/05/2490461/fresnans-found-liable-in-ponzi.html