Hurst’s lending practices under scrutiny

May 10, 2008


Hard money lending schemes and questionable business practices have jeopardized hundreds of millions of dollars of investors’ money and placed several San Luis Obispo financial firms directly in the path of a sweeping probe by federal, state, and local investigative agencies.

Some lenders have closed up shop; others have simply ceased making interest payments on loans.

(See previous articles, “Fraud lawsuit filed against Gearhart, Hurst,” May 6, and “Gearhart’s $28 million Paso project imperiled,” April 29, on this site.)

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.

Now, however, many of Hurst’s monthly interest payments on numerous construction projects have abruptly stopped, and investors are becoming increasingly concerned about the future of their funds.

Rita is a 65-year-old Cambria resident who suffers from multiple sclerosis and can no longer walk. Her husband placed the couple’s savings, $830,000, with Hurst Financial prior to his death from a long term illness, thinking he had guaranteed his wife’s financial security.

“I need 24-hour care,” Rita explained. “Without my interest and possibly my investment, I’m not going to be able to afford my caregivers and I will have to sell my house. I don’t know where I will end up. I am scared.”

According to Rita, Miller failed to return numerous calls she placed to him requesting information. In the midst of the financial turmoil, Miller took a 10-day trip to Hawaii.

“I am appalled that they would leave their business in the state it was in,” Rita added. “How do they dare go on a vacation? It shows they have no concern for their investors’ situations.”

Miller did not return phone calls and e-mails from reporters requesting comment.

Professionals with intimate knowledge of details of the unfolding venture disaster predict that local investors will be lucky to recover pennies on the dollar. interviewed numerous individual local investors, contractors, attorneys, law enforcement agencies, and lenders while preparing this article.

Hurst’s key player’s lifestyles were allegedly right out of the movies: fancy cars, gold jewelry, private jets, and high rolling excursions to Las Vegas. Investors allege Hurst and his associates used construction monies to live the high life, while paying interest from one account to fund another.

The pitch was alluring. Investments were supposedly secured by first trust deeds; had low loan to value ratios; and all monies were placed into secured accounts with a draw system – funds to be paid out only as construction work progresses.

Hurst assured investors they would be provided with copies of construction agreements on projects in which they were vested; Hurst failed to provide the documents, according to investors.

Numerous investors claim they were wooed with talk of accurate property appraisals, only to find out later that many projects had been given alleged inflated values. Hurst’s appraiser, Terry L. Pippin, is licensed only as a “certified residential” appraiser, licensed to appraise residential property from 1 to 4 units, each with a maximum market value of $250,000; or commercial properties valued at no more than $250,000. Investors report Pippin’s name has appeared as the appraiser of record on commercial projects valued at millions of dollars.

The firm also sold securities out-of-state, according to investors in Texas and Idaho. Generally, state regulations governing hard money lending require lenders to be licensed in the state where the investor resides.

Jim and Michele Mitchell live in Idaho. The retired couple has the bulk of their retirement funds, $638,000, invested with Hurst. The entire transaction occurred through the mail between Hurst’s Atascadero office and the Mitchell’s Idaho home.

“We made a trip [to California] to talk to Jay last month,” said Jim Mitchell. “We went to a couple of properties. There was no structure, nothing. It’s disturbing to me.”

Allan Beil, a 65-year-old retired Texas resident, also claimed Miller knew he was living out of state when he asked Bell to invest his retirement, $480,000, into Hurst construction loans.

“Jay absolutely knew I was living in Texas,” Beil said. “I think it’s going to be very hard for anyone to get money out of this. It took us 30 years to put that money together, and he just took it all. My wife and I are talking about going back to work. It’s an appalling thought to me. We worked to get to a point where we can retire comfortably. Everything I worked for is literally falling apart. They destroyed it. They stole the money. It is not about investment risk.”

Hurst maintains one-person offices in Arizona, Nevada, New Mexico, Oregon and Florida. Sales originating in each respective office generally must be made to qualified investors in that state only.

Yvonne Zamora, an investor with both Hurst and Estate Financial, took matters into her own hands when interest payments on her loans ceased last fall.

After checking with local law enforcement officials, Zamora began marching back and forth in front of Hurst’s Atascadero office, carrying a sign that read, “Hurst is the worst! Don’t Invest!” on one side and “Hurst is cursed! Don’t invest!” on the other side.

Within 45 minutes, Miller agreed to return Zamora’s investment. She was paid in full the following day.

Zamora proceeded to Estate Financial, another beleaguered hard money lender, where she picketed for three days to no avail with a sign that read “Meet your fate at Estate” on one side and “Burned at the stake by Estate” on the other.

Tags:, Estate financial, Gearhart, Hurst Financial, Paso Robles

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Member Opinions:

By: Anonymous on 5/22/08

Insider! You're back! I thought you had left me! Ok, ok, I'll cancel the call to the Whambulance. Whew! Hey did you know a Super Wal-Mart actually has a little medical center? And Drs. that work for Wal-Mart. Maybe they'll have a "Wal-bulance"!

Hey how'd that job interview go? Wal-Mart IS always hiring if the thrift shop doesn't work out.

By: Anonymous on 5/21/08

to sobia

Whaaaa Whaaaa Whaaaaa Quick somebody call the whambulance sobia's going to cry.

By: Anonymous on 5/19/08

…hmmm..pretty weak, insider, but I'm glad you're back over here. How about if you play "Wal-Mart, Wal-Mart, Who's got the Wal-Mart" on this blog and leave the other one for important discussions. I can't guarentee I can play with you as I have other important things to do…which, by the way, weren't you supposed to be out looking for a J-O-B this week?

Have fun! I'll check back from time to time!

…Wal-Mart causes ACME? I never knew that! I knew they caused ACNE though!

By: Anonymous on 5/19/08

road rage, white slavery, poverty, acme, gingivitis, black lung, have all been added to the things caused by building a Wal-Mart as reported by OPM and the Comarites. Stay tuned the list is growing.

By: Anonymous on 5/18/08

The Super Wal-Mart in American Canyon is right on the hwy between Vallejo and AmCan. Folks who don't know the area think it's Vallejo. Either way, it's the same animal. Vallejo has a regular Wal-Mart. And it didn't stop the city from going bankrupt.

I didn't know the developers bought fire trucks for the city! Really? I was just confused because of all the firemen who were up at the podium asking for support for a Wal-Mart because they needed the "Much Needed Tax Revenue". Huh! How about that! So just what DOES all the 'much needed millions and millions of dollars of much needed tax revenue DO then? If the city goes broke because all the developers were fleeced by a couple of thieves, once again, Wal-Mart had nothing to do with it.

No, I wasn't talking about the Orange County thing with Anaheim. People seem so sure Wal-Mart is the answere to all their woes and that it will 'save' them….I was just pointing out two cities that went bankrupt in spite of having a Wal-Mart.

By: Anonymous on 5/17/08

to sobia

Your losing crediblity. Everything you say seems to turn out incorrect. Your linkage to ideas and events are rediculous at best. We may survive we may not but it is certain we could use the funds the Wal-Mart deal would bring. I assume your mention of Anahiem had to do with the Orange County investment deal of about 8 years ago which Atascadero was also invested in to a lesser degree. What that has to do with Wal-Mart only you could know. Your like a game of mental twister. Keep it up your up to your neck give it another try.

By: Anonymous on 5/17/08

To Sobia,

You need to do your research on Vallejo, there are plenty of articles out there. They did not allow the Super Wal-Mart, could be the reason why they just went bankrupt. Atascadero should take note and you should get your facts straight.

By: Anonymous on 5/17/08

Once again the City of Atascadero stands out. EVERY city, the County, the State and even schools are reducing their budgets. Have you heard of any budget reductions from the genius's at City Hall? The only one so far has been the outrageous statement from Ellen Beruad, the next mayor if you can believe that, that she could not let the people of Atascadero have the opportunity to vote for its mayor. Her reason, the $300 a month stipend to each councilmember may have to be increased. One would think that even the Atascadero City council could uniformerly vote no on that.

I personally think it's way too late. Wal Mart, Nordstroms, Macy's whatever you want will not save the town this time. Any revenue from any of those stores is at least 5 yrs. away and by then the annex will probably be empty because there has not been any development at Del Rio and ECR. And we can all point the finger (index not middle) to Luna, Brennler and Beraud along with Frace and Harris (both who do not live in this town) in the Planning Dept. for all of the negative barriers that they put up against commercial growth.

By: Anonymous on 5/17/08

I agree. We must genuflect to the developers and investors for they be the ones to bring Atascadero from sleepy bedroom community to Middling-City status. Praise be the minimart.

By: Anonymous on 5/17/08

INSIDER i'm in shock I actually agree with 95% of what you just wrote

By: Anonymous on 5/17/08

To Cindy,Sobia, Luna, Brennler, Bereau, The planning Commission, Patterson and his lovely assistant Sarah Cristee

Rejoice the developers are gone. The cost and fees and free housing to welfare recipiants on one end, all supported by the above individuals, and the greed and over speculation by the hard money lenders and thier favorite builders on the other end have completely closed the gate to the hardworking and for the most part honest small builder that for many long years provide afordable housing to our area. For the most part these small buisness men were run out of the area years ago by greedy self absorbed no growth politicians and money churning hard money lenders and thier hand picked croneys. Unfortunately the people who were selected for City Council who were supposed to keep the gate bought into this bull about inclusive houseing. Free housing for the poorest people who then are stuck with a dingbat house with a 50 year deed restriction and basically something they can't even sell if they needed to. What's the American Dream in that. To support that all other housing at the next level starts at plus 50k. How many people have you cut out of the american dream of home ownership. No one will ever know. We need to get this Wal-Mart on tract. Cancel all plans and fees for inclusive housing. Allow small local contractors to start once again to build and sell for a living. Reduce fees. Increasing fees will only reduce permits and not increase revenue. And immeadiatly reduce the city budget by 20%. Yes with layoffs! All other goverment agencies are doing it. The State, The schools, and the County. The City thinks its better to use up all our reserves just so they can maintain staff. These people have become too close with staff. They think far more highly of staff than the citizens of Atascadero. We will not survive under our current leadership unless someone stands up and takes control. Cut now they are hiding in the broom closets now. We had 16 permits this year thats down from 250 or so. Thats a 1500% reduction with no staff reduction. Get real before its too late.