Former Ultimate Fighting champion Chuck Liddell has joined a long list of investors alleging they were scammed by Cuesta Title Co. and North County developer Kelly Gearhart.
Liddell, in the public eye most recently for his appearance last fall on “Dancing with the Stars,” filed the suit in November with co-plaintiff U2 LLC, a San Luis Obispo-based real property company.
In the suit, Liddell, who lives in San Luis Obispo, claims he lost $1.5 million, and U2 alleges the company is out $1 million, from a fraudulent deal over property in Paso Robles owned by Gearhart.
Houston-based Stewart Title bought Cuesta Title in 2004, according to the lawsuit, which names Cuesta and Stewart as the defendants.
The lawsuit, filed in San Luis Obispo Superior Court, represents only one side of the case.
Stewart Title didn’t respond to a request for comment on Wednesday, and Liddell did not respond to numerous requests for comment. U2 co-owner Usman Iqbal, and the attorney representing both plaintiffs, Allen K. Hutkin, declined to comment about the case.
Gearhart, who is in the midst of bankruptcy proceedings, isn’t being sued, but he is identified in the lawsuit as an alleged participant in the scheme.
Liddell and U2 claim they never received the title for lots they agreed to buy at Vista Del Hombre, a mixed-used development project that Gearhart was planning to build on his golf course, The Links Course at Vista Del Hombre, in northeast Paso Robles.
According to the suit, around August 2007 Liddell entered into an agreement to buy three lots for $500,000 each and U2 spent $1 million on two lots there intended for commercial property.
Hutkin claims in the court document that his clients were told they’d receive title, but first had to pay the money to Gearhart to finalize a tract map to create the lots.
Cuesta Title’s Melanie Schneider and her company allegedly were handling the escrow and title insurance service in the Paso Robles branch office and were aware of Gearhart’s scheme and benefited financially from it, the suit says.
“(My clients) did not receive anything in return,” Hutkin wrote in the lawsuit.
Hutkin claims that Gearhart wasn’t using the money he received from investors to develop property; instead, he claims Gearhart operated a Ponzi scheme.
The plaintiffs accuse Gearhart and his business of paying other investors who previously invested funds with them, pocketing money or diverting the money to other development projects.
The defendants “never intended to convey title to these lots once the money was released,” Hutkin wrote.
The lawsuit also alleges that the title company, acting as escrow holder for two additional investors who are unidentified, used the Vista del Hombre lots to collect more than $12 million in loans for the developers without the knowledge of Liddell and U2.
Cuesta and Stewart also have been accused in a lawsuit filed by more than 400 Hurst Financial investors of helping the North County lender in a multimillion-dollar Ponzi scheme that they allege preyed on the elderly. That suit also claims fraud involving Gearhart and his Vista del Hombre property.
Hurst Financial isn’t mentioned in the suit filed by Liddell and U2 LLC.
A case management hearing on Liddell’s suit has been set for March 30 at 9 a.m. in Judge Charles Crandall’s courtroom.