Allegations of fraud have surfaced in the bankruptcy case of the president of the now-failed lending company Hurst Financial as attorneys seek to claim assets on behalf of his creditors.
Jay Hurst Miller filed for voluntary bankruptcy Aug. 17.
At that time, he listed about $68,000 in assets and more than $11 million in liabilities.
Jerry Namba, the bankruptcy trustee assigned to Miller’s case, filed a lawsuit in October against Miller’s wife, Laurel Miller. The suit alleged she and Miller defrauded his creditors by illegally transferring in her name about $420,000 in proceeds from the sale of their Templeton home, according to court documents.
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The trustee also filed a motion in bankruptcy court asking for more time to complete his investigation into Miller’s assets and liabilities.
He needed the time, he said, because he learned Miller was the subject of an ongoing criminal investigation by the FBI, the U.S. Attorney’s Office and an impaneled federal grand jury, according to documents filed in bankruptcy court Nov. 19.
A San Diego law firm, Kirby Noonan Lance and Hoge, has also filed a complaint against Miller with the bankruptcy court asking that it be allowed to continue to seek a judgment against Miller from a lawsuit that it filed in civil court last June.
That suit alleges that Miller and Courtney Brard, his daughter and vice president of Hurst Financial, colluded with developer Kelly Gearhart and representatives from Cuesta Title to defraud almost 500 Hurst Financial investors out of millions of dollars. The suit is seeking more than $60 million in damages.
In 2007, the date of Hurst Financial’s last filing with the state Department of Corporation, the lending company showed more than 1,000 investors and almost $90 million in real estate loans. All of those loans have since been defaulted or foreclosed on.
The lawsuit alleges that some of the investors’ money was used to pay falsely inflated fees to Hurst Financial and Cuesta Title, as well as “improper expenditures” by the Hurst Financial president and developer Kelly Gearhart — one of the firm’s major borrowers.
Miller acted as a loan broker, soliciting money from hundreds of investors, promising them the money would go toward construction loans, which would pay them 12 percent interest until the principal was returned.
Attorneys for these Hurst Financial investors filed a similar motion with an Ohio bankruptcy judge in Gearhart’s bankruptcy case. That judge has allowed the civil case to proceed against Gearhart in civil court, even as Gearhart is under bankruptcy protection.
Typically, that protection halts lawsuits against debtors until it disburses the debtor’s assets to creditors and discharges his or her liabilities — unless a creditor successfully asks a bankruptcy court to allow a civil case to proceed.
Bankruptcy Court Judge Robin L. Riblet, who is hearing Miller’s case in Santa Barbara, has not ruled on the filings.