Big-money frauds top our 2008 investigations

December 31, 2008

By THE EDITORS

A scandalous stack of brazen fiscal rip-offs and obscene financial schemes that today imperil the very economic stability of San Luis Obispo County is the most important news story of 2008 – and readers learned of them first through a string of investigative reports on this site beginning March 14.

In a groundbreaking article headlined “Hard money lending schemes creating fiscal chaos, devastating SLO county investors,” we reported that “a number of SLO County investment firms have allegedly participated in schemes that may already have cost local investors more than $500 million, setting the stage for a colossal fiscal collapse unrivaled in this state’s history.”

The article stripped away a veil of deceit from several prominent big-money business operators who were fleecing thousands of local investors and bankrupting builders’ suppliers: “By utilizing a variety of hard money lending ploys and inappropriate management practices, the firms in question have created an environment that may shadow private finances in this county for decades, dozens of informed sources have told UncoveredSLO.com during the course of a two-month investigation.”

“It’s like Enron for Paso Robles,” said David Farmer, an attorney with Farmer and Ready, a San Luis Obispo law corporation representing clients who believe they have been defrauded. “Those who claim this has to do with the downturn in the market need to take a cold shower.”

“One firm under particularly heavy fire from unhappy investors,” we reported, “is Estate Financial of Paso Robles, whose president, Karen Guth, has declined comment on her alleged role in the unfolding disaster. Guth also owns Pasolivo, an olive oil producing company, with her son, Joshua Yaguda.”

During ensuing months, this Web site detailed the beginning of the end for these and other wheeling-and-dealing hard money lenders, and used extensive court and divorce documents to recreate the origins of the EFI slide into infamy. During this same period of time, a spate of articles published in the local daily described Guth and Yaguda as the simple victims of an unfortunate dive in the market, and touted prominent developer Kelly Gearhart as a humanitarian hero.

Because of those articles in the daily newspaper, a number of investors continued to put their money into Guth’s hands.

Guth and Yaguda currently are in county jail, unable to post $5 million each in untainted money for their bail while awaiting court action on 26 felony charges.

And we were the first to challenge the credentials, credibility and honesty of one of Atascadero’s “leading citizens,” Gearhart.

Early in the year we broke the story of how Gearhart’s multi-million-dollar Vista del Hombre development in Paso Robles was drastically overleveraged, and probably headed for foreclosure. Gearhart went on Dave Congalton’s talk radio show to rebut the article, but the facts kept getting in his way. Two letters from his lawyers threatened us with a lawsuit, but he backed off. Now he’s fled to Ohio to await the next chapter in his life.

We started our maiden year as UncoveredSLO.com, we’ll end as CalCoastNews.com, and during 2008 we have provided the county’s finest investigative reporting of important community issues that just were not being covered by the local daily.

We weathered at least one serious effort by local entities to shut us down. (More on this at a later date.)

Here’s a recap of the hard-hitting and original articles that helped make this Web site the county’s best investigative news source.

Atascadero’s FEMA filching

Over the past four years, Atascadero city officials conspired to bilk taxpayers out of more than $4 million in disaster aid to construct a replacement youth center under the guise the previous center had been rendered unsafe during the 2003 San Simeon Earthquake. The FBI started an ongoing investigation.

Iftiniuk: a costly hospital executive

In 2005, Alan Iftiniuk, French’s CEO, was paid $835,231 in total compensation plus $136,671 to cover his expenses, according to Catholic Healthcare West’s (CHW) financials, French’s parent company. Additionally, CHW lent Iftiniuk funds to help him buy a house.

Recent congressional hearings have focused on financial practices of nonprofit hospitals. An ensuing firestorm of controversy swirls around not only the bloated salaries and extensive perquisites paid to executives, but also the question of whether these tax-exempt facilities are adhering to the obligation of serving the public.

Cal Poly Jubail plan assailed

A cooperative program to establish an engineering college at a Saudi Arabian university with Cal Poly faculty and expertise hit a snag when professors realized the plan would exclude females, Jews, and minorities. Advocates President Warren Baker and Engineering College Dean Mohammad Noori have encountered nothing but problems ever since while trying get an agreement with which the Saudis can live. The plan is currently in legal limbo.

Another lender hosing folks

In May, we reported on the tenuous fiscal footing of Jay Miller’s Hurst Financial Inc. of Atascadero.

“Among the lending companies currently under scrutiny is Hurst Financial of Atascadero, owned and operated by Jay Hurst Miller. Hurst makes high-risk, generally short-term “bridge” loans to contractors. Investors, during good times, would receive 12 to 14 percent on their money in monthly interest payments, with their entire principal returned upon maturation of the loan.”

And we continued our expose of Hurst with our three-part series, “The Dumpster Chronicles,” revealing through hand-written notes from Miller and his employees – obtained from his trash bin by an angry investor – the methods of his manipulation.

Banks give gold to golddiggers

Heritage Oaks Bank and a host of smaller local banks were caught by the dollar downturn, too, which exposed a free-wheeling method of disbursing non-collatoralized, multi-million-dollar loans to developers. Often, the money simply disappeared into darkness.

Thanks for the house, Clay

A top county official’s Arroyo Grande home was jointly purchased by her and the family trusts of local lawyer Clay Hall, whose firm receives hundreds of thousands of dollars annually as the vendor responsible for the majority of San Luis Obispo County’s outside legal work.

Gail Wilcox, assistant county administrator, owns one-half undivided interest in the house on Blackberry Avenue, according to county property documents. She took a $417,000 mortgage in April 2007 to purchase her fifty percent share of the residence. Clay Hall, his wife Kristy A. Hall, and several of their family trusts own the other half. The total purchase price, according to records, was $580,000.

Nothing like a good fight.

Our story about a verbal altercation between Atascadero Mayor Mike Brennler and Councilman Tom O’Malley got more than 550 comments from readers.

Sheriff’s deputy slams cars, arrested for porn

A San Luis Obispo County Sheriff’s deputy on administrative leave drove into four parked vehicles before flipping and rolling his pickup truck in a July 19 mishap. Deputy Bryan Goossens was northbound on Traffic Way in Atascadero at 8:50 a.m. when the chain-reaction collision occurred.

Currently on paid administrative leave in an unrelated matter, Goossens was not ticketed or charged by Atascadero police officers.

Then we reported that the “unrelated matter” was an accusation of child porn. Goosens was the target of an FBI investigation which included a search of the deputy’s house and the seizure of his computer. He’s awaiting trial.

Protect, serve and sell T-shirts

A San Luis Obispo police officer peddled custom imprinted T-shirts, sometimes while on duty, as a federal bankruptcy court considered his twin Chapter 7 petitions.

Officer Christopher Charles Chitty apparently runs the cash business from the home he shares with his wife, Lisa Solomon, Paso Robles’ chief of police.

Chitty said Sunday that the business, Trick Tape, no longer exists. An investigation by UncoveredSLO.com suggested otherwise.

Male cops claim discrimination

A contentious reverse discrimination claim that has embroiled the Atascadero Police Department in controversy will cost the city a bundle.

Earlier this year, city officials launched an internal probe into complaints of reverse discrimination made by male officers against female officers in the city’s police department. The complaints allege preferential treatment for an alleged lesbian officer, provided by an upper level officer with whom she was romantically involved, sources said.

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