A San Luis Obispo Superior Court judge is allowing to move forward another lawsuit alleging a Ponzi scheme as well as fraud and collusion between Cuesta Title and now-bankrupt former Atascadero developer Kelly Gearhart.
Judge Charles S. Crandall has denied motions by Cuesta Title and its Texas-based parent company, Stewart Title, to dismiss a lawsuit by lenders Vincent Crooks and Mid-Coast Mortgage.
Crandall found sufficient cause for fraud by concealment based upon an escrow officer’s duty to disclose improprieties, among other reasons.
In addition to this late-August decision, Crandall made similar rulings in two other cases he heard recently. One involved 400 investors in Hurst Financial — another firm that worked with Gearhart — alleging fraud. The other involved another lending company, Stinchfield Financial.
Gearhart’s bankruptcy records show creditors claiming losses of more than $110 million.
In this latest case, Crooks claims he lent Gearhart $1.5 million on behalf of Mid-Coast and its investors. But Gearhart and Cuesta Title did not secure that loan, as Crooks says was promised.
Crooks also alleges that Cuesta Title staff knew Gearhart’s intentions to defraud investors and should have disclosed his scheme to the lender, according to court documents.
Attorneys for Cuesta Title — which Stewart Title shut down amid the fraud allegations — countered in court that the company had no obligation to police Gearhart’s activities.
He argued that Crooks and other lenders are going after Stewart Title because Gearhart can’t pay his debts and the company is the one with “the deep pockets.”
According to recent financial statements, the Houston-based parent company, Stewart Information Services Corp., has made more than a billion dollars in revenue in the past year.
Crooks alleges that Gearhart never intended to comply with the terms of the loan, wanting instead to give as little collateral as possible so that the properties could be used to secure other loans, thus perpetuating the Ponzi scheme, according to Crandall’s ruling.
He also alleges that Cuesta and Stewart helped perpetuate the Ponzi scheme by continuing to provide services for escrow transactions that Crooks contends had clear improprieties — and that the company continued to benefit from fees derived from those deals.
— Melanie Cleveland
Poly wines earn awards in contests
Wines made by students in Cal Poly’s wine and viticulture program recently received high honors at two Southern California wine judging events.
The 2008 Mustang Red earned the unanimous judges gold medal at the 2010 Riverside International Wine Competition and a gold medal at the 2010 Long Beach Grand Cru International Wine Competition.
The 2008 Chardonnay earned gold at the Riverside event.
In Long Beach, the chardonnay and the 2008 Pinot Noir took silver.
The 2008 Mustang White, 2008 Poly Royal Port and the 2008 Cal Poly Syrah took bronze at both events.
The wines were made from grapes grown in San Luis Obispo County.
— Julia Hickey