Business

Friday, Jul. 10, 2009

Biz Buzz: Gearhart allowed to withdraw $60K from his 401(k)

Approval to take money from his 401 (k) comes after allegations that the account contained investor funds

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The U.S. trustee responsible for the $50 million bankruptcy case of former Atascadero developer Kelly Gearhart and his wife Tamara D. Lowe-Gearhart has agreed to allow the couple’s withdrawal of $60,000 from their retirement plan.

The approved withdrawal is half of what was in the plan since Gearhart filed for bankruptcy protection in Ohio — where he now lives — and $40,000 of that Gearhart has already spent, according to Ken Gibson, an attorney acting on behalf of the trustee.

Normally funds in 401(k) retirement accounts do not become property of a bankruptcy estate, and debtors would be allowed to keep those funds and use them, Gibson said.

However, the trustee filed allegations on June 6 in U.S. Bankruptcy Court that Gearhart made excess contributions and prohibited transactions in the 401(k) funds; it therefore did not qualify as a legitimate retirement account.

He has also alleged that much of the fund came from investors in Atascadero-based lender Hurst Financial and should rightly belong to the creditors.

Gibson had traced at least $240,000 of Hurst Financial investors’ money that Gearhart put into his 401(k) plan, he said.

As much as $2.5 million that went through the plan could have come from investors, he added, although his tracing of the records is still incomplete.

“We think that the settlement is appropriate because some of the early contributions … may have not been tainted by fraud, and the cost of litigation would otherwise eat into any potential recovery,” Gibson wrote The Tribune by e-mail Thursday.

“Mr. Gearhart will still be required to appear under oath at some future date to provide details about these transactions and to account for (all) the money.”

The allegations represent only one side of the story. Gearhart could not be located for comment, and his attorney, Kate Bradley, did not return The Tribune’s repeated calls to her Ohio office.

— Melanie Cleveland

Rabobank donates to housing fund

Rabobank has contributed $15,000 to the San Luis Obispo County Housing Trust Fund, which will help provide financing and technical assistance toward affordable housing throughout the county.

Jerry Rioux, executive director of the Housing Trust Fund, noted that in additon to supporting the agency’s operations, Rabobank has invested $1.1 million in its revolving loan funds.

Rabobank was formerly the Arroyo Grande-based-Mid-State Bank & Trust.

The Housing Trust Fund, a nonprofit corporation, was created in 2003 to increase the supply of affordable housing throughout the county.

Rather than develop, own or manage housing, the fund provides financing and technical assistance to help private developers, nonprofit agencies and local governments produce homes that working families, seniors on fixed incomes and people with disabilities can better afford to rent or buy.

The Housing Trust Fund has provided more than $2 million in financing to subsidize housing projects in the county.

More than $2.5 million is currently available to finance additional projects.

— Bob Cuddy