Monday, Jul. 06, 2009
EXCLUSIVE: Gearhart used investors' money for his 401-K, bankruptcy trustee alleges
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closeAttorneys working on behalf of a court-appointed trustee handling developer Kelly Gearhart’s $50 million bankruptcy allege that Gearhart and his wife Tamara Lowe-Gearhart diverted millions of investor dollars — promised for residential and commercial development - -into their own pockets, starting as early as April 2004.
The Gearharts are also accused of hiding their assets in order to hinder, delay or defraud their creditors, according to Ohio Bankruptcy Court filings.
The Gearharts declared bankruptcy on Feb. 11 in Ohio, claiming about $6.5 million in assets and $45.1 million in estimated debts.
They have been under a criminal investigation, but no charges have yet been filed, according to the San Luis Obispo County District Attorney’s Office.
In a number of complaints and adversary proceedings filed with the Ohio Bankruptcy Court, attorneys for the trustee are alleging that the former Atascadero citizen of the year and his wife have taken millions of dollars they borrowed from Hurst Financial investors—and which were designated for such projects as Vista del Hombre and Beacon Road in Paso Robles—and placed that money into their 401-K plan and numerous other limited liability companies.
One LLC allegedly took $1.5 million for start-up costs for a planned billion-dollar, 2,500 acre Indian reservation ( to be built somewhere in San Luis Obispo County), gaming casino, “green” energy plant, and housing and commercial development with hospital and school for the Salinan Tribe of San Luis Obispo and Monterey counties.
That money has come from Hurst Financial investors who were induced by James Hurst Miller, Hurst Financial Corp. and Gearhart “to invest in projects under fraudulent pretenses,” the most recent complaint, filed today alleges.
The attorneys’ conclusions were based on an analysis of complex deed transactions and bank records, which, while still incomplete, are “nonetheless telling,” said Ken Gibson, the attorney working on behalf of Ohio bankruptcy trustee, Harold Corzin.
The Tribune was unable to reach the Gearharts or Kate Bradley, the Gearhart’s Ohio attorney handling the bankruptcy, for comment.
-- Complete story planned in The Tribune on Wednesday.
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