Former fighting champion Chuck Liddell should blame his “good friend and traveling buddy” Kelly Gearhart for a risky investment that cost him $2 million, an attorney for an escrow company told jurors Wednesday.
But Liddell's attorney says Gearhart wouldn't have succeeded in his fraud without help from Cuesta Title Company.
But Liddell’s attorney says Gearhart wouldn’t have succeeded in his fraud without help from Cuesta Title Co.
Liddell is one of 500 plaintiffs who have sued Cuesta Title, along with related companies Stewart Title of California, which acquired Cuesta, and Stewart’s sister company, Stewart Title Guaranty. The plaintiffs all say Gearhart — a developer and a former Atascadero Citizen of the Year — defrauded them in a Ponzi scheme, using investor money to pay off himself and other investors.
Liddell’s suit is now going to trial, along with two other parties that contain other plaintiffs.
Cuesta Title has successfully fended off lawsuits in two previous trials related to Gearhart.
“The bad guy in this is clearly Kelly Gearhart,” said Gerard Kelly, an attorney for Cuesta Title.
Gearhart is set to be sentenced on federal fraud charges in Los Angeles on June 1. Because he has declared bankruptcy, plaintiffs have focused their lawsuits on Cuesta Title, saying it knew of Gearhart’s fraud.
Kelly said Cuesta Title knew nothing about Gearhart’s fraud and did what it was supposed to do as an escrow company.
“They took risks,” Kelly said of the investors. “When their investments turned out bad, they tried to find someone else to blame.”
Liddell, with his signature Mohawk haircut, sat in the audience beside his wife, not far from the jury, as attorneys offered opening statements. A former light heavyweight champ, he was considered the face of the UFC and is often credited with helping the popularity of mixed martial arts soar.
In trial, his attorney referred to him as the Muhammad Ali of ultimate fighting.
While fighting and living in San Luis Obispo, Paboojian said, Liddell — a Cal Poly graduate and former Mustang wrestler — began to make good money and decided to invest.
He was not seeking a risky investment, Paboojian said. Instead, Liddell purchased four lots on a $24 million golf course development known as Vista del Hombre.
“He was buying property in a town — a community — he lived in,” Paboojian said.
Gearhart, who spearheaded the project, suggested Liddell open escrows with Cuesta Title, Paboojian said. Melanie Schneider, a Cuesta Title escrow agent, handled the Vista del Hombre escrows, Paboojian said, even though she had numerous conflicts of interest.
She had flown with Gearhart and his wife on their private jet, lived in the Gearharts’ guest house for a while and wound up in a relationship with Gearhart’s brother.
“Chuck Liddell did not know that,” Paboojian said, adding that the lack of disclosure represented a breach of fiduciary duty.
Eventually, Paboojian said, Cuesta Title released Liddell’s funds before the close of escrow and without transferring title to the properties.
Liddell believes his signature authorizing the transaction was forged, the attorney said.
Schneider knew that Gearhart was committing fraud, he added, but did nothing about it.
“You don’t have to be a lawyer,” he said. “You just have to say, ‘I’m neutral, and this is not looking right.’ ”
Maria Hutkin, an attorney for the co-plaintiffs, said Cuesta Title allowed Gearhart to swindle his clients.
“The evidence will show that Cuesta didn’t do what it was supposed to do,” she said.
Some of Hutkin’s clients, Kelly said, had previously enjoyed good profits investing with Gearhart, prompting them to pursue other investments.
“He was a success for many, many years,” Kelly said.
While Liddell hadn’t invested with Gearhart previously, he should have done more homework before signing a deal on a risky investment, Kelly said.
“Mr. Liddell did no investigation,” Kelly said. “He just plopped down his two million bucks and said, ‘Release the money.’ ”
While Schneider flew with the Gearharts on the Gearhart private jet, so, too, did Liddell, Kelly said, traveling on the jet to his own fights and other bouts.
“Chuck Liddell was a passenger on that jet many more times than Melanie Schneider,” he said.
The escrow company, he said, is not allowed to give financial advice or to tell a client they are making a bad investment. It merely follows the instructions of the parties, he said, which is what Cuesta Title did.
So it was Gearhart — their “good friend and traveling buddy” — who failed the plaintiffs, Kelly said.
Their losses, he said, “were not caused by anything — anything — that Cuesta did or did not do.”