A week before a civil trial involving Atascadero developer Kelly Gearhart is set to begin, one of the defendants, Heritage Oaks Bank, reached a settlement with investors, according to San Luis Obispo Superior Court.
The terms of the settlement were not announced. And James Neudecker, an attorney for Heritage Oaks, said he was not prepared to comment on the settlement Tuesday afternoon.
Numerous investors filed suit against Heritage Oaks, Stewart Title and Cuesta Title for their roles in a fraudulent scheme they say was perpetrated by Hurst Financial Corp., its principal James Hurst Miller, and Gearhart.
The plaintiffs claim the title companies knew Hurst Financial, Gearhart and Hurst were committing fraud and aided them. Heritage Oaks, they claimed, aided the fraudulent scheme because it was "fully aware of, and assisted in, the fraudulent re-conveyances of the deeds of trust by Hurst," according to court documents.
Heritage Oaks had lent Gearhart roughly $1.5 million for the development of the Vista Del Hombre project in Paso Robles.
In their suit, the roughly 500 investors said they were seeking $80 million in damages. In a four-year span, beginning in 2004, "Gearhart helped Miller solicit about $73 million from private investors for 25 separate real estate developments, all of which eventually failed," court documents stated.
Gearhart has been indicted on 16 counts of fraud and money laundering. Miller pleaded guilty to four counts of fraud and money laundering in federal court.
The suit against Stewart Title and Cuesta Title is set for trial next Tuesday.