Biz Buzz: Gearhart reaches deal on debts

Kelly Gearhart, the Atascadero builder and real estate developer under heavy pressure from creditors who claim he owes more than $100 million, has agreed to a compromise where he is not released from paying his debts.

Gearhart had filed for bankruptcy in Ohio seeking relief from the debts, but the trustee had requested the discharge of debt be denied because he allegedly attempted to hide millions of dollars of assets during the bankruptcy process, according to documents filed by Ohio trustee Harold Corzin in Ohio bankruptcy court July 20.

Although the 49-year-old former prison guard — and former Atascadero citizen of the year — has not been charged with a crime, he has been under the shadow of a continuing criminal investigation for about two years, along with his key real estate development partner, Hurst Financial president Jay Hurst Miller, according to San Luis Obispo County Deputy District Attorney Steve von Dohlen.

Corzin’s alleged findings could be used to support a criminal case, but offenses of this type are typically investigated by a federal agency, such as the FBI, and are often prosecuted by the U.S. Attorney’s Office or the Department of Justice, according to bankruptcy experts.

Specific allegations by Corzin include Gearhart’s failure to disclose: ownership in a significant number of parcels of real property and personal property with a value up to $5 million, his interest in an Indian casino project, a 401(k) plan, and other partnerships with LLCs that owned parcels of real estate.

Although Gearhart and his wife, Tamara Lowe, who is listed as a co-debtor, did not admit to the allegations, and noted they made amendments to their schedules that subsequently disclosed the information, they nonetheless agreed to the denial of Gearhart’s debts and to cooperate with the trustee in providing additional information and testimony required to liquidate the remaining assets of their estate. In return, the trustee will allow Lowe to be released from her debt obligations.

“The Trustee believes that Tamara Lowe Gearhart shares some culpability for the non-disclosure of assets and transactions,” Corzin stated. “Further the Trustee considered whether or not Tamara Lowe Gearhart’s discharge would provide Kelly Gearhart with a means for concealing … future assets. … Finally, there is an ongoing concern that not all of the assets … have been discovered and that some … may be titled in the name of Tamara Lower Gearhart.”

However, the trustee said Tamara Gearhart had been cooperative in recent proceedings, and if Gearhart attempted to use her as a conduit to defraud creditors, “there are adequate state court remedies to deal with those circumstances.”

The trustee believed the compromise is in the best interest of the creditors, according to the filing.

“The compromise assures that Kelly V. Gearhart will not receive a discharge of any of their claims against him by creditors and that such creditors will be free to pursue those claims … at the close of the bankruptcy proceedings or sooner upon order of the court,” the filing reads.

The debtors will also pay to the trustee the amount of $3,650 for Lowe’s wedding ring, which resolves a disputed issue in favor of the trustee.

— Melanie Cleveland