Property spruiker Rick Otton files for bankruptcy

Australia’s most infamous property spruiker Rick Otton, the controversial How To Buy A House For $1 author, has filed for bankruptcy, crippled by the largest fine in corporate history.

It comes five months after he and his company were fined $18 million for misleading property investors following ACCC legal action.

The Federal Court judgment found breaches of Australian Consumer Law of $12 million against Otton’s business and $6 million against him personally.

But his four bank accounts have just $18,800, including $5.74 with NAB, ­according to his statement of affairs filed on the national personal insolvency index at the Australian Financial Security Authority.

There was $37,000 owing on his credit cards.

Otton’s We Buy Houses company had been conducting “training programs” since 2000.

It is known that between 2011 and 2014, he generated around $20 million in revenue from the training programs.

The Court found that Otton made false or misleading representations that his students could successfully implement the wealth creation strategies he taught.

About 3400 consumers attended the free seminars, and a further 2000 people attended the boot camps. Would-be investors were given some information at the initial free session, then more if they paid $3000 to attend the boot camp or the $26,000 mentoring workshops.

The court noted “there may have been consumers who were determined to buy the respondents’ snake oil regardless of the respondents’ conduct”.

Otton, who demonstrated he was “profoundly uninterested” in compliance, was banned from managing corporations for 10 years in Australia.

Otton’s last property deal was the recent sale of his own Bondi Beach semi.

The four-bedroom Roscoe Street property, listed with a $3.2 million to $3.5 million price guide, fetched $2.9 million last December, having been bought in 2007 for $1.6 million.

He now gives his address as a one bedroom Coogee flat.

His paperwork advised his occupation now as a retiree.

There was little property listed as assets, just a Otton family superannuation trust owning a $2 million commercial building, along with an option to buy a 45,000 Euro apartment building at Saint Spyridonas in Greece, where he's shifted his spruiking sessions.

Otton taught real estate investment strategies that suggested students could buy a house for $1, without needing a deposit, bank loan or real estate experience, using little or none of their own money to create passive income streams through property.

They were advised they could quit their jobs to start making profits immediately.

In August 2017, the Federal Court found these claims were misleading, in contravention of the Australian Consumer Law, with Otton lodging an appeal.

The book authored by Otton, and websites included testimonials from ‘students’ claiming they were able to buy a house for $1, which the court found were false.

The ACCC instituted proceedings against We Buy Houses and Otton in 2015 following a co-ordinated investigation with New South Wales Fair Trading. 

Justice Jacqueline Gleeson’s judgment said consumers enticed by Otton were given a variety of strategies which included “rent-to-buy”, a “sandwich lease option” involving a middleman, and “sweat equity” option, where the buyer carries out renovations in lieu of paying a deposit.

Justice Gleeson accepted that some of the strategies were theoretically possible, but added there was no evidence they had been used by its students successfully.

None of WBH’s most successful students, known as “big kahunas”, provided evidence to the court to show what they had claimed to have achieved.

The ACCC called nine consumers as witnesses to describe how they had never achieved success.

One consumer and his partner attempted to buy properties in Bass Hill, Quakers Hill, Homebush West, North Bondi, Eastlakes and Lake Haven without financial success.

“In her judgment on liability, Justice Gleeson said the free seminars were a waste of time, and that the boot camps and the mentoring programs were an expensive waste of time,” the ACCC chairman Rod Sims said.

The decision imposed the largest pecuniary penalty order against an individual and separately, against a corporation, for breaches of the ACL, has been heralded as a new era of tougher penalties for ACL breaches.

This article was first published in the Sunday Telegraph.