Hurst, Gearhart drawing battle lines
May 12, 2008
By DANIEL BLACKBURN and KAREN VELIE
Two prominent North County real estate confederates appear headed for a showdown after one announced today he “will be filing notices of default” on many delinquent loans, including at least several with developer Kelly Gearhart.
Hard money lender Jay Hurst Miller, president of Hurst Financial of Atascadero, wrote in an e-mail to investors, a copy of which was obtained by UncoveredSLO.com, that he “was advised by [his] attorney” to take the action against Gearhart as well as “all [other] applicable loans.”
A notice of default is sent to people who are far behind on making payments, and is the first step toward foreclosure.
Several large Miller-to-Gearhart loans are for the yet-to-be-developed Vista del Hombre golf course and multi-use commercial development on 14 acres east of the Paso Robles city limits. Miller has loaned Gearhart about $27 million on that project alone.
Also, Miller, Gearhart, Hurst and one of the company’s loan officers are being sued for fraud and conspiracy for their alleged actions in the handling of a $2 million investment by private lenders on an Atascadero commercial building.
One of those filing last week’s lawsuit, Murray Powell, said the action “is nothing more than window dressing by Hurst to show everyone they are cleaning up their act. It is way too little, too late.”
Powell said he “was told Jay [Miller] is filing default on our loans and others. If you look at our loan agreements, Jay is to file a notice if a property is in default for 30 days, and he has the ability to give the developer six months to work things out. We have loans that go back two to three years; technically, he should have filed those defaults when the loans became due.”
Powell said he has talked to San Jose law firms about filing a class action lawsuit. One of those, he added, was a lead firm in the class action lawsuit against Unocal in the Avila Beach cleanup.
Miller suggested in his e-mail to investors that his action “puts additional pressures on [Gearhart] to perform.”
The full text of Miller’s e-mail to investors follows:
“I wanted to inform you that I will be filing notices of default on all applicable loans as of next week. I was advised by my attorney to do so, to further protect my investors and their securities in these notes. Kelly Gearhart is still putting together his ‘work-out’ deals per project/loan. However, this puts us in the lead position and put additional pressures on him to perform. I am currently working with [Gearhart’s] office to get all accounting and documentation per loan/project. Therefore I can proceed with my meeting to present these ‘work-out plans’ for my investors. I will be in touch with my investors next week by either e-mail or mail as when to expect these meetings.”