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Fraud lawsuit filed against Gearhart, Hurst

May 6, 2008

By KAREN VELIE and DANIEL BLACKBURN

Local investors are alleging they were bilked out of millions by Hurst Financial and developer Kelly Gearhart.

David Rios and Murray Powell filed an 11-count lawsuit Tuesday in San Luis Obispo County Superior Court. Allegations include fraud and civil conspiracy by Hurst Financial president Jay Hurst Miller, Hurst loan officer Courtney Brard, and Gearhart, and claims they misled investors and misappropriated funds.

Gearhart is alleged by investors and others to have co-mingled finances, paying from one investment fund to construct another.

The complaint revolves around a construction loan by hard money lender Hurst Financial to Gearhart for the erection of a commercial building at 5730 El Camino Real in Atascadero. On Oct. 12, 2006, Gearhart, through Hurst Financial, received $2 million from 17 investors to finish the project. That loan had an April 12, 2008, loan maturation date. The property is currently a vacant lot.

Miller and Gearhart did not respond to UncoveredSLO.com’s requests for comment.

Hard money lenders specialize in short term, high interest construction loans that are often used as bridges to help a developer finish a project. Loans are based on the value of the underlying asset rather then the borrower’s credit rating. These kinds of loans are primarily funded through private investors.

Lenders lure investors with promises of high interest, low loan to value rates, and assurances that funds are placed into secured accounts with payments provided to developers as the work progresses.

According to the claim, Hurst wrongly asserted funds would be disbursed as improvements were made to the project. Hurst doled out the entire construction fund to Gearhart even though no work had been done on the property.

Miller admitted this in an April 18 e-mail to Powell regarding the project:

“After reviewing this loan within our escrow trust account, all net proceeds from Cuesta Title Co. after the purchase of the property and points paid to Hurst Financial went to Morro Road Homes LLC (Gearhart), in good faith,” Miller wrote in the e-mail obtained by UncoveredSLO.com. “After doing business with Gearhart Development for 23 years, I have done many of my loans in the same nature. I obviously know we are under-secured at this time, due to the building not being constructed.”

Rios and Powell are seeking recovery for all investors in the loan for damages of $2 million, interest fees, cost of the suit, and unspecified punitive damages.

Tags:, Atascadero, fraud, Gearhart, Hurst Financial, lawsuit


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By: Anonymous on 6/10/08

Hey, how did you all know about Hertel cheating us ? i just got today the papers where they have in fact defaulted on about $21,876,987.00 dollars in loans just on the Atascadero deal gone bad. The file is going to get worse they did hide the monies in HOB, shame on them,.

By: Anonymous on 6/8/08

I want my money back as well, Estate Financial may not be the only one that may not have acted in good faith with others peoples money. Those who wish to cast stones may wish to clean up the mess in their own back yards.


By: Anonymous on 5/23/08

to exfriend


I forgot. Do it over and over and over and over and over again.

By: Anonymous on 5/23/08

to exfriend


Here's the program. Find real estate. Get hard money loan for land, construction, interest reserve, misc. expenses. Pay off land at closing and take rest of money and use it anyway you want. Give land back to investors at greatly devalued basis. Call it all good. Maybe they will be able to sell at 10 cents on the dollar of what was borrowed on the project since nothing was built, you paid too much for the land since it wasn't your money anyway, and you didn't build a damn thing with the construction funds. Nice gig if you can get it.

By: Anonymous on 5/23/08

to insider. all of us i mean all of us are tired of hearing from you. go away. may the bird of paradise fly up your nose. go away.

By: Anonymous on 5/23/08

"Insider" is right, wake up! Jay Miller and Courtney Brard want all of us to get frustrated and confused, it's part of their plan. DON'T GIVE UP THE FIGHT, too much is at stake. Hound these 2 until you get your money back, it is all their own doing with what has taken place.

By: Anonymous on 5/22/08

Wake up investors. You're looking lethargic. Are you laying down and playing dead?

By: Anonymous on 5/15/08

it's all the baby boomers fault

By: Anonymous on 5/15/08

Test

By: Anonymous on 5/14/08

I have posted a copy her original post that had been on TOPIX. The way I found it was to use the search engine at the bottom of the page. I'm sorry if the link I posted doesn't work anymore but this is all that I can find that Cindy (the other Cindy) posted there.

By: Anonymous on 5/14/08

to dog huts


Its not just the City Councel of Atascadero the Board of Supervisors is in the middle of thier own ordinance that will assure unafordability in housing for now and the future.


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By: Anonymous on 5/14/08

Remember it's the Atascadero City Council that has imposed these unrealistic deed restrictions on the so called "affordable homes." Anyone with half a brain wouldn't invest in hard money loans or buy a deed restricted home. They are all guilty of ripping us off.

By: Anonymous on 5/14/08

to black helicopter pilot


Good or bad this blog is dirrectly responsible for the excellerated pace of the Estate and Hurst Financing matters. In my few the investors have an opportunity to recoup millions more than had they just stood idle. I'm sure this type of forum scares the hell out of the scam artists and politicians out there. Lets face it generally there is a handfull of people out there mismanaging our money and resources but that group, Estate, Hurst, Gearhart and other developers, the City Council, the Board of Supervisors can make our life miserable. What they don't steal from our pockets when we turn to look the other way they take with unnecessary regulations that distort the market and instead of making housing affordable to all make it unaffordable to anyone that doesn't quallify for one of thier dog hut 50 year dead restricted homes. So thank god for this format where people can under anonymity express thier fews without the elite few surpressing clear thought.

By: Anonymous on 5/14/08

This is trully FREE PRESS at its best.

By: Anonymous on 5/14/08

To Black Helicopter Pilot,

You are correct. This is where the real news is. The rest are careful to balance what their advertisers want to see in print. A large advertiser can put the pressure on an editor like nobody's business.

By: Anonymous on 5/13/08

Yes!


The only true, reliable source of ANY news is this here blog and The New Times!


All the rest are a function of a Large Conspiracy!

By: Anonymous on 5/13/08

The Fibune will in no way report any news that is negative in any way towards all the real estate advertisers!

It's rigged! It's fixed! It's a huge scam!

Stop your subscriptions and take a stand. Money is the only thing that will alter the course of this train wreck!

By: Anonymous on 5/12/08

This will soon be national news, while the Trib's head has neen so far up the perp's asses they can inspect the backs of their tonsils.


The Federal justice system is a non-stop but slow motion meat grinder.

By: Anonymous on 5/12/08

Gearhart must of finally hired an attorney he doesn't seem to be shooting his mouth off any more.


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By: Anonymous on 5/12/08

Nice to see someone is doing something, FYI Cindy got her monies and moved to Nevada, to enjoy her retirement. She made a deal and is going to stay out of the loop. She warned many investors apparently none listened, until now. My spouse has been investigating several SLO Developers and Investment Scams for the past two years for an Insurance Company who is concerned one of their clients has been running a con game. One matter that has gotten the ATTENTION of the IRS is a local developer named Ronald W. Hertel of RW Hertel & Sons in a Florida Federal Case # 2007-CV-61031-JIC where the developer tried to launder ill gotten monies from SLO to the tune of about $ 14,975,000.00 apparently a LLC called COOKHAM HOLDINGS, LLC and ATASCADERO VENTURES,LLC all connected to a Winery called the 5 Mile Bridge dba VERDOT GROUP, LLC are all connected to several scam operations with Rossi, Hertel, Fowler, Guth, Hurst, Point Center Financial, Inc. The Dolphin Group, DOYA Partners, Troxler Ventures Partners, Inc. Woodlands Ventures, LLC Central Coast Development Co., Los Robles Ventures, LLC SLO-HAAS, LLC and them some. He tells me a case has been going on for some time trying to determine Insurance Fraud, and Defrauding investors. I asked him could he talk to any of you and he can't since he works for a Major Insurance Carrier who is concerned they may be liable if a suit ever comes down they are in the damage control mode. But he warned some of those he has interviewed to go to the authorities with their information. Good Luck. FYI Cindy was an insider who did provide in valuable information to the Federal Authorities

By: Anonymous on 5/12/08

TO: Found Cindy's Post


That website for topix is invalid – can we try it again.

Thanks.

By: Anonymous on 5/12/08

To Insider:

Your right it is the Dept. of Corporations. I guess I may be thinking way ahead when the Dept. of Corrections will be monitoring these people.

By: Anonymous on 5/11/08

Hi All, Karen might delete this but I'll try since it's good info.

You all just got scammed, her firm has been doing a Ponzi Con for some time. She has so many companies, doing the Con as:

Estate Financial, Inc.

Buena Vista Place, LLC

First Press Partners, LLC

ECR 24, LLC

DOYA Partners, LLC

DOYA Partners II, LLC

Estate Financial Mortgage Fund, LLC

Clavis Development International, LLC

HFL Express, LLC

Hertel Group, LLC

Atascadero Ventures, LLC

SLO-HAAS, LLC

SLO-Verdot, LLC

De Witte Mortgage Investors Fund, LLC

Point Center Financial, Inc.

Verdot Group, LLC

Ventura-Duval South, L.P.

This is the short list too.

She and her associates ripped you all off, her Lawyer and silent partner is SLO Lawyer Roderick Rodewald who is the hubby of County Clerk/Recorder Julie Rodewald who has been her inside source.


Guth has set up many phony 401 K's look at one now going broke is Steinbeck Vineyards 401 K many others as well. It is all going to fall apart sooner than you know and she and her small circle of people are now banking the money so they can close up and belly up.


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By: Anonymous on 5/11/08

http://www.topix.com/forum/personal-finance/TKJG6…

By: Anonymous on 5/11/08

To Anonymous


RE: TOPIC FROM TOPIX


I remember reading a posting from Cindy in one of the earliest blogs on the Estate Financial Ponzi scheme. When I tried to find it again, it was gone??? It would be really interesting to hear from her again. If she had insider information it would sure help out current investors stuck in Karen's quagmire – by passing along her information to Vince Otto of the FBI, Preston DuFauchard, California Corporations Commissioner, Mary Ann Smith, Senior Corporations Counsel Enforcement Division, and Roger Frederickson of Sinsheimer Juhnke Lebens & McIvor in San Luis (who has mailed a letter to all Mortgage Fund investors asking them to request a meeting of investors – we only need 10% – to discuss our options for preserving Mortgage Fund assets and getting our money back). If you are out there Cindy – Please help. Felloow Investors – Please sign the form requesting a meeting. It will cost us nothing to speak to some professionals who will give us straight answers and options – something we will NEVER get from Karen and Josh.

By: Anonymous on 5/11/08

to Get it Right


I don't think the Dept. of corrections has anything to do with either one of these companies at this time however it these charges pan out they may. Maybe you mean the Dept. of corporations. You tell me. I am quite sure that Hurst has used thier real estate brokers license to list properties, I've seen it. I believe estate has also used thier brokers licence to sell thier own properties however I cannot confirm that. The point is they are real estate brokers. Same qualifications, same test, same rights. Same. I would agree this does not condem other real estate brokers or agents it is however the origin of this type of buisnes. It is not banking it is Real Estate Brokerage.

By: Anonymous on 5/11/08

should read that most did NOT make a mistakesorry about that.

By: Anonymous on 5/11/08

Yes they have real estate licenses although their practices are controlled by the Dept. of Corrections. None of these people, Hurst & EFI sell real estate. You don't have to sling everything you think you have up on the wall to see what sticks.

It's like saying that everyone who is invested made a bad mistake, Some may have but most did and that's an area where you don't have to go because the fraud is what is causing this-not realtors.


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