California Department of Corporations' Investigation with Los Angeles District Attorney's Office Leads to Pair Charged with 41 Counts of Securities Violations and Grand Theft

Business Wire, July 30, 2004

SACRAMENTO, Calif. -- Couple Sold Fraudulent Investments to Dozens of Southern Californians

Richard Gellersen and Lillian Otterstrom pleaded not guilty at an arraignment today in Los Angeles Superior Court to a total of 41 charges of securities violations and grand theft. Their arrests on July 23, 2004, were a result of a joint investigation between the California Department of Corporations, the Los Angeles County District Attorney's Office, and the Redondo Beach Police Department.

Gellersen and Otterstrom were the general partners of High Quality Investments, LP (HQI), which they represented to prospective Southern Californian investors as an investment club. The two offered investments consisting of limited partnership agreements with the purpose of investing and speculating on trading stocks on a short-term basis.

As part of the investigation, Corporations Examiner Steven Rodman conducted an analysis of HQI's bank records. He identified 24 Southern California investors whose investments totaled just under $350,000. The Los Angeles County District Attorney's case involves 10 of these investors and $205,000.

The investment contracts were not registered in California. In addition, HQI represented to potential investors that Otterstrom was a very successful stock trader, but omitted the fact that she had filed for personal bankruptcy in 1998. HQI also failed to disclose that the company was losing money, with the exception of a single month, June 2000. The limited partnership's total loss was $342,841.

"The collaboration between state and local government authorities created greater resources and solid results to root out investment fraud," said Corporations Commissioner William P. Wood. "Today's arraignment underscores the Department of Corporations' commitment to take necessary enforcement actions to ensure we have an honest marketplace in California," added Wood.

Gellersen and Otterstrom each face a maximum sentence of 22 years in prison if they are convicted on all charges. Bail is set at $205,000 for Gellersen and $100,000 for Otterstrom.

The Department of Corporations is California's Investment and Financing Authority. The Department is responsible for the regulation, enforcement and licensing of securities, franchises, off-exchange commodities, investment and financial services, independent escrows, consumer and commercial finance lending and residential mortgage lending. For further information or to obtain a complaint form, please visit the Department's web site at www.corp.ca.gov or call 1-866-ASK-CORP (1-866-275-2677).