Bankruptcy Trustee: Kelly Gearhart should not be allowed to walk away from debt

The Ohio trustee handling Atascadero developer Kelly Gearhart’s bankruptcy case is seeking to deny Gearhart and his wife the ability to eventually walk away from bankruptcy court debt-free.

The request is relatively rare, bankruptcy experts say.

But trus-tee Harold Corzin said it’s warranted based on what he alleges are the developer’s fraudulent acts: failure to disclose and account for numerous properties, vehicles, bank accounts and money, as well as destroying, falsifying or concealing important financial documents and other records, and lying under oath, according to a document filed in Ohio bankruptcy court Monday.

Corzin, who has spent almost a year tracking down Gearhart’s assets and liabilities since the builder and his wife, Tamara Lowe-Gearhart, moved to Ohio and filed for Chapter 7 bankruptcy, says the Gearharts allegedly failed to disclose in their bankruptcy documents, as required by law, the following information:

Neither the Gearharts nor their attorney, Kate Bradley, responded to Tribune requests for comment.

Although the trustee’s alleged findings could serve as a basis for criminal proceedings, his request to deny a general discharge of the Gearharts’ debts is unrelated to a criminal sentence or restitution order.

Such alleged offenses are typically investigated by a federal agency, such as the FBI, and are often prosecuted by the U.S. Attorney’s Office or the Dept. of Justice, according to local bankruptcy attorney Paul Ready.

“These are very significant omissions and oversights,” Ready said. “While this is not a criminal complaint ... the trustee is proceeding on the theory that they are not mistakes, but intentional acts.” Ready is not involved with the Gearhart case.

San Luis Obispo County Deputy District Attorney Steve von Dohlen told The Tribune a year ago that Gearhart was the subject of a criminal investigation by the county District Attorney’s Office, the FBI and state regulators for a range of alleged fraud, including misappropriating money and possibly creating Ponzi schemes.

When the Gearharts filed for bankruptcy in February, they listed $6.45 million in assets and $45 million in debts. However, creditors who have filed their claims in the bankruptcy court say Gearhart owes them (collectively) at least $110 million.