Gearhart pleads not guilty to fraud
August 14, 2012
By KAREN VELIE and DANIEL BLACKBURN
Onetime Atascadero “Person of the Year” Kelly Gearhart pleaded not guilty to 16 charges of mail fraud, wire fraud and money laundering at his arraignment Monday at a federal court in Los Angeles.
The former North County developer faces up to 300 years in federal prison if convicted on all charges.
Gearhart and the former president of Hurst Financial, James Miller, have been accused of helping to defraud more than 1,200 investors of more than $100 million in an alleged Ponzi Scheme. Miller and Gearhart bilked investors who put money into Central Coast real estate projects and then siphoned off the monies for other purposes, including maintaining lavish lifestyles, federal authorities alleged.
Their victims include senior citizens, many whom invested their life’s savings with Gearhart and Miller, and local charities such as the Atascadero Meals On Wheals program which reduced meals sizes after losing its investment.
Gearhart’s and Miller’s charges came as part of a larger organized crime investigation, according to a federal seizure warrant for the proceeds from the sale of Miller’s home in 2009.
On Aug. 19, 2011, Miller agreed to plead guilty to charges of fraud and money laundering as part of a plea agreement the court then filed under seal. However, the court did not order Miller to be taken into custody while permitting him to post a $50,000 bail. His sentencing is scheduled for Oct. 29 in the U.S. District Court in Los Angeles.
After Gearhart pled not guilty, Federal Magistrate Judge Jacqueline Chooljian for the United States District Court for the Central District of California placed Gearhart’s bond at $100,000. Two people, a friend and a relative of Gearhart’s, pledged $50,000 surety bonds each to cover the $100,000 bail requirement. Gearhart was not taken into custody.
Assistant United States Attorney Stephen I. Goorvitch of the major fraud section said his office was not releasing the names of Gearhart’s bond holders, though he did say they didn’t appear to be involved in Gearhart’s alleged criminal activity.
“Gearhart did not pay his own bond,” Goorvitch said. “Two people pledged $50,000 each. We do not believe they were involved in the crime.”
Shortly after Monday’s hearing, prosecutors and Gearhart’s public defenders filed a request to continue Gearhart’s trial from Oct. 29 to Jan. 29.
Gearhart’s attorneys said they need more time to review the voluminous amounts of evidence including tapes of a radio show in which Gearhart called into the Dave Congalton talk show on KVEC to claim CalCoastNews’ articles on his alleged fraud schemes were untrue.
The request also says the parties are working on a plea agreement.
“Defense counsel, defendant and the government are discussing whether this case may be resolved without the need for a trial, pursuant to a plea agreement,” the request says.