Federal attention aims at lending fraud

June 20, 2008

A federal investigative task force looking into mortgage fraud and related offenses in a seven-county region including San Luis Obispo County will utilize at least 40 FBI agents and investigators from nine other U.S. agencies.

Dubbed SCAM (for Southern California Mortgage), the program was recently initiated, though the probe has been underway for months. San Luis Obispo is one of the seven Southern California counties included in the task force’s range. More than 100 separate investigations are currently being conducted in the region, according to FBI officials.

The select group is investigating various types of lending fraud that have had a “significant effect on our nation’s economy,” said an FBI statement earlier this week.

In addition to fraud directly related to mortgages, the SCAM task force will focus on fraud for profit cases that includes lending fraud, mortgage related bankruptcy schemes, and foreclosure scams.

This week, federal authorities charged two senior managers of the failed Bear Stearns hedge funds with conspiracy, securities fraud, and wire fraud. The charges allege that despite the pair’s knowledge that the funds were in financial distress, they continued to paint a rosy picture to prospective investors.

Similar allegations have been lodged against numerous local players involved in hard money lending businesses. Investors claim that even though Estate Financial and Hurst Financial officials were aware they were having financial difficulties, they continued to lure customers with promises of high interest on their investments.

Numerous investors and other sources claim the FBI is currently investigating both Hurst Financial and Estate Financial. The FBI would not confirm or deny the claims.

Currently the FBI has over 1,400 active national mortgage fraud cases.

“Indictments are imminent,” said FBI press relations official Laura Eimiller. “In the very near future, you will see numerous indictments.”

Federal officials encourage members of the public to report suspected illegal activity related to mortgages and lending scams to the SCAM Task Force at (866) 959-SCAM. Online complaints are also encouraged and can be submitted.


14 Comments

  1. ccn_debate says:

    Member Opinions:
    By: Anonymous on 7/16/08
    Is anyone out there an investor with Hurst/gearhart$
    Try it..you will be sorry
    By: Anonymous on 6/26/08
    Has anyone tried to email the address given for the FBI investigators? I have and it comes back undeliverable! May try the tel. number.
    By: Anonymous on 6/26/08
    to 1iJack

    I think your the 1uJack. I'm doing just find. None of my money was invested with these guys and girl. Not sure what SGS stands for but maybe you will tell me. I'm against the dirty players, Hurst, Gearhart, EFI. I'm for free enterprise and WalMart. I'm against lefty socialist that want to tell everyone what to do and where to go Ellen "the turtle" Beraud, Smokey the Bear Brennler, Luna and his lunatics, the great Union leader Tom "the king" Comar and his little court jester David "brush" Broadwater. Hopefully this eposode is nearing an end and the grifters will be in thier cell blocks soon. The investors recover whatever they can and we can build a better future with this stuff behind us and a new City Council dedicated to new growth in the City :')

    By: Anonymous on 6/26/08
    Insider is obviously one of the good ol boys (or girls) in ATown. Probably going to suffer in the landslide of EFI and Hurst. Greed always catches up with you Insider!

    Your constant comments about the ATown council cleary indicate that you are suffering from a severe form SGS :)
    By: Anonymous on 6/23/08
    Anonymous says:

    Barb's Friend says:

    Barb:

    Many of the posts trying to link Hertel related entities are all from a certain con man whom Dan Blackburn wrote a cover story about for the New Times in April of 2004. Since moving to town, all he's done is move from one con to another. His next one is to dupe EFI investors a second time. Be wary as to any of the info you take from bloggers. Give Dan a call and he'll be happy to feed you more information.
    By: Anonymous on 6/23/08
    Give to U-SLO, help them help us! Without a free and curious press we would be lost. Their reporting has been invaluable to thousands in SLO county and I am sure their future efforts will help even more.
    By: Anonymous on 6/23/08
    SLO County's website does not give out too much info. Someone would have to go by the Clerk Recorders Office and look at the documents.

    I just thought it is interesting.
    By: Anonymous on 6/23/08
    to AA:
    what are the details on 2008032035 thru 2008032038? (error correction)
    good scouting.
    By: Anonymous on 6/23/08
    to AA:
    what are the details on 2008032035 thru 2008032035?
    good scouting.

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  2. ccn_debate says:

    By: Anonymous on 6/23/08
    Karen and Josh are back on County Public Records 6-20-08 with First Press Partners.
    DEED(GRANT,JOINT TENANCY,QUIT) Doc 2008032035 thru 2008032038
    By: Anonymous on 6/23/08
    “The Mother of All Heists,” CBS's 2006 60 Minutes report, had all the hallmarks of a classic piece of investigative journalism. The story took the U.S. and Iraqi governments to task for the disappearance of more than $500 million that had been earmarked to fight the bloody insurgency tearing Iraq apart.

    The report, produced by Andy Court and Keith Sharman and reported by Steve Kroft, was more than a year in the making and required filming in three countries.

    And despite being a story the Bush administration would have preferred not be made at all, “The Mother of All Heists” epitomized the chief mission of the press: It uncovered a glaring story of corruption and abuse of power.

    These are the kinds of marquee reports for which network execs publicly profess support. At a time when distracted viewers are bombarded by news and information from a multitude of sources, “The value of reporting something no one else has goes up,” says David Westin, president of ABC News. “I think our ability to do original reporting and investigative [pieces] is the prime example of that, and it becomes more and more valuable.”

    That may be the case, but it's also becoming less and less prevalent.

    Investigations of the rich and powerful, the multinational corporations and monopoly industries, have all but dried up, say a coterie of journalists still trying to ply their trade. To be sure, enterprise reporting on the network level is far from dead. Investigations are, for instance, still staples at 60 Minutes and PBS's Frontline. Brian Ross and his producers are a vibrant force in TV investigations that singlehandedly keep ABC News in the game. But the days of news divisions rich with staff and resources claiming multiple hours a week of primetime real estate with newsmagazines are now history.

    Producers have felt the sting of contracting budgets and swelling corporate concern over the bottom line. Such conditions have been most inhospitable to reporters working on investigations requiring time and resources; these stories are often magnets for legal action.

    “I think there's a huge need for that kind of investigative work, and it's clear there's less of it,” says Bill Buzenberg, executive director at the Center for Public Integrity, which specializes in investigations. “It's risky, it's expensive, it takes huge resources and talent, and with much of the press owned by large corporations, I think there's a certain reluctance to do that.”
    By: Anonymous on 6/23/08
    rippedoffinvestor@yahoo.com is one place ripped off investors can go to find support and info. We are a Hurst victim support group, all Hurst investors are ripped off investors.
    By: Anonymous on 6/23/08
    Wow, I thought the heat spell had broken! Big day in blogtown… KG supporters/supporter have united. Facts are facts, investor money was taken up front, construction was not done, as per loan agreements and the money was spent on whatever KG desired ("works in progress") be it a pig at the fair, political contributions or promise of good deed. I really don't understand how some can defend what is obviously criminal.
    By: Anonymous on 6/22/08
    Seems to me Insider has the lock on reality here. It could be A town has made things hard on Kelly and others but they should know all that when they borrow money. It is their job to know their business. It was Hurst's job to manage the money of investors and they utterly failed. Miller has continued to utterly fail in any of his duties as outlined by his own loan servicing agreements and Offering Circular and other details of his licensing. Every lender should review their documents to see how badly these brokers ripped them off. The apologists for the brokers and builders (except for those the brokers screwed) do not know what they are saying. They are guessing and airing old grievances that have no bearing on this whole issue.
    It is all so childishly simple. Investors loaned money for specific projects, the brokers promised to hold and assign the money to those projects, keeping the UN-comingled money in escrow accounts for construction draws, thereby maintaining equity in the project in case something went wrong. They completely violated their agreements and either used the money for other things or just gave it to the builders, never checking to see if any building happened. This whole mess is fraud and criminal mismanagement. Most of the project sites are raw dirt, and the money is supposedly gone. Someone tell us how that can be explained.
    Why it is taking the authorities so long to close them down is another kick to the groin of the innocent (not stupid, not greedy) lenders.
    Check out the Hurst site for a pack of lie

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  3. ccn_debate says:

    By: Anonymous on 6/22/08
    to insider i agree with some of your remarks but i think its time to coolit a bit,
    By: Anonymous on 6/22/08
    Anonymous says:

    Why hasn't the dept of RE taken away the re license of EFI? I thought that when the Dept of corp revoked their licnence that the dept of RE would follow. Are they still investigatng

    Sooner than later. Patience my friend, patience. I know its in shorth supply in here.
    By: Anonymous on 6/22/08
    The question is who robbed the bank and who drove the getaway car. We can't let one go and prosecute the other can we?
    By: Anonymous on 6/22/08
    to How about the Others

    It appears that Kelly has been gross and blatant about his abuse of investors funds. If others have been gross and blatant about abuse of investors funds they are in the same boat. When you choose to be the big fish in the pond and go on radio declaring it's tough sh@t for the investors you've possibly drawn a little attention to yourself. If any contractor took funds that were borrowed specifically for construction on a project and then used a majority of the funds for other purposes then yes they are in the same boat. Failure alone does not put them in this boat. For example if they borrowed $200,000 to build a house and can show expenses paid anywhere close to that amount then they have just failed. If they borrowed $200,000 and can't show anything except $50,000 in interest payments and the rest went to other things then yes. So to return property does not in itself show conversion. Sounds like Shannon was already picked up. As to Graves and Charnley its all case by case and the people who made the loans to them will have to sound the alarm if they think this has occured. Kelly's situation with his help has become public knowledge and I doubt Miller wants to take the rap for what went in Kelly's pocket. Again just speculation. The one point you make is Kelly can simply pay back the money. To give back the property without the improvements will not suffice however.
    By: Anonymous on 6/22/08
    Why hasn't the dept of RE taken away the re license of EFI? I thought that when the Dept of corp revoked their licnence that the dept of RE would follow. Are they still investigatng?
    By: Anonymous on 6/22/08
    I understand that many builder/developers who borrowed from Estate Financial or partnered-up with Karen on projects are being investigated and will be sued along with Karen and Joshua and Estate Financial. The Gravy Train has stopped for the group of them who were in cahoots with her. Investors stand a chance of recovering some of their investment. It may take a while but at least now the judge in SLO has appointed a auditor to help find out where the money went, what is left, what misdeeds were done and by whom. The culprits will pay one way or another -through losing their own assets and/or jail time. This would be a good time for one of the biggest borrowers to step up and tell the authorities what he knows. He knows someone is going to tell all and whoever does first has the best chance of cutting a better deal for himself than the others. Now, who is first?

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  4. ccn_debate says:

    By: Anonymous on 6/22/08
    insider;

    you are surely after K Gearhart, but he's still here. why arnt you after the other developers who also took investment money, bought big toys or gambled away the money. those developers have walked away from they're debts but you dont think they are bad?

    How about David Graves, Bob Shannon or Andy Charnley?

    these people have walked away from millions in debt, but moved all of thier assets to family members so they cannot be taken.
    By: Anonymous on 6/22/08
    to Former City Employee

    Use that one in court makes sense to me. No if I give the butcher $200 for a roast I want a roast nothing less. If the butcher does anything else with my money its conversion a criminal offence. A misdemeaner for a $200 roast and felony for anything over $400. Better get a better attorney if thats your argument.
    By: Anonymous on 6/22/08
    Kelly Gearhart has generously donated to the community for over 20 years. His financial woes have only occurred over the last year or two. During that 20 year period the investors were very well rewarded also.
    By: Anonymous on 6/22/08
    To Gearheart investors:
    Has anyone filed a lawsuit yet? I don't understand all the fighting back and forth about the city of Atascadero and Walmart and Trader Joes. Did Gearheart lose millions of investor dollars through mismanagement and funding his own personal building projects like Karen Guth of Estate Financial? If so, you should all get together and file a lawsuit like the Estate Financial investors. Did Gearheart's company run the same sort of Ponzi as Karen Guth? If so, what difference does it make that he donated generously to the community? If it wasn't his money he was donating, why should he be applauded? Someone explain please.
    By: Anonymous on 6/22/08
    to Insider:

    I'm sorry, but I am going to answer your questions with questions.

    1. If a loan is granted for $200,000 then that loan is still owed, right?

    2. If the loan is paid back, but the security does not resemble what was intended, isn't the loan still paid back?

    3. While you, or the bank, is still owed this money, the borrower has not run away from the loan as of yet, has he?

    Think about it, if you pay $200 for a roast, it is an investment in sustenance, right?

    If that roast is converted into hamburger, it might not look like a roast, but it is still sustenance, right?

    So are you going to sue the butcher because he converted your roast into hamburger, which you can still eat?

    If Gearhart were to run from your loan and refuse to pay or negotiate, then I would agree with you that you have a problem. Until then it is just hamburger.

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  5. ccn_debate says:

    By: Anonymous on 6/22/08
    Just to add a little to the reputation of the Atascadero Planning Dept. and the city itself. Consider the new Holiday Inn getting ready to open in town. There will be 70+ rooms at the hotel. Then there is Motel 6 across the fwy with probably 45 rooms. An 80+ room Marriott has been approved by the post office.
    Now the kicker, there is a restaurant pad next to the Holiday Inn with exposure to close to 200 hotel rooms. Any other city and the restaurants would be in line trying to get that location. But there are no takers for Atascadero-they will not put up with th B.S.
    Although there is one taker-rumor has it Jack in the Box will take a shot at it. Should be interesting if they want a drive thru-good luck.
    So just ask yourself, what is your city doing for you except increasing your fees.
    The misuse of city funds should be right in there with EFI and Hurst.
    By: Anonymous on 6/22/08
    to We the People and over the years

    Tell it to the judge I'm sure he will be very sympathetic. Acually I think I'm helping you out here. You get to hear the prosecutions case.
    By: Anonymous on 6/22/08
    I have seen the plans that Gearhart has submitted in the past. I've seen the correction lists. I've been told directly by city management and department heads that they had to teach Gearhart a lesson because they couldn't break him by making him do exactly what THEY wanted, which was pick ou t colors, type of windows and doors etc. I was also told that all Gearhart projects were intentionally delayed because they didn't want the Luna group, homeowners assoc., tree huggers etc. ever think that Gearhart was possibly getting some type of favorable treatment.unfortunately this type of behavior is condoned by the city council and that is why NO ONE will come to this town in an attempt to develop it.
    By: Anonymous on 6/22/08
    to insider, You must not have any friends what a shame to STAND ALONE.
    By: Anonymous on 6/22/08
    All of you who are criticizing Gearhart for his contributions, which have been millions of dollars, seem to forget his other contributions. Do any of you have any idea how much he has paid to the city of Atascadero in fees alone. Every unit is worth about $25,000 each and most are more. Then there are the school fees. Can anyone tell me where all of that money went? Could it be studies?Our city has 2 city managers, redevelopment director and a financial officer who are paid hundreds of thousand of dollars who cant't tell us what the financial problem is with this town. If they can't do their job get rid of them.
    Everybody knows that Atascadero is the least respected city in the county even worse than Los Osos. It appears that the city council doesn't care as they have done nothing to correct the image.
    The truth of the whole story was when Trader's Joe's didn't come to Atascadero because,as they quoted,"Atascadero is too wishy washy and you can't trust them." BINGO-that tells it all. Do you know who was instrumental in trying to get Trader's Joe's here-Kelly Gearhart. There was no help from this city when the developers (not Gearhart) offered $2,000,000 to Trader's Joe's to come to Atascadero which offered nothing.
    When it's over there will be people from the city administration receiving another perk-room and board provided by the FBI.

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