State agency lifts Hurst Financial’s permit

July 21, 2008

By THE EDITORS

A variety of accusations were filed today by the state Department of Corporations against Atascadero lender Hurst Financial and its owner, James Miller, and the agency has revoked Hurst’s permit to sell securities.

Miller is one of several San Luis Obispo County hard money lenders on shaky ground because of questionable business practices.

Mary Ann Smith, the department’s senior corporations counsel, charged in the complaint that Miller violated at least five of the permit’s terms.

“The department determined in July 2008 that [Miller] operated his business in contradiction to the offering circular” presented to prospective investors.

Included in the complaint are allegations that Miller: — disbursed to borrowers “all net proceeds” on loans rather than using the “draw system” as promised to investors; — extended loans after the maturity date without approval of investors; — failed to return investor principle when requested after loan maturity date; — permitted at least one investor who was not a California resident to purchase securities in violation of state law.

Miller told investors that construction was starting on certain projects when in fact no construction had started.

According to the complaint, Miller has been violating provisions of his permit since 2004. Miller can appeal the revocation. He could not be reached for comment.

Hurst currently is the target of several lawsuits filed by investors.


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8 Comments

  1. ccn_debate says:

    Member Opinions:
    By: Anonymous on 8/12/08
    Why dont we investors in Vista Del Hombre, develope the land our selves and become million airs. I always thought that was the plan if Kelly screwed us.
    By: Anonymous on 8/9/08
    for more conversation on the Pheonix Recovery Group see the newest article on uncoveredSLO at http://uncoveredslo.com/?id=161&showEntry=1
    By: Anonymous on 8/8/08
    To Another Investor:
    All I can say is that I bought a Midland house about 4 years ago…they were great. I think they've been around for 20 years or something. Maybe another avenue for those of us that may have to take things back.
    By: Anonymous on 8/7/08
    Regarding Phoenix Recovery, I have tried to find a record of a contractor's license for Ron Berry and can find nothing. I even tried Phoenix Recovery Group to see if they had a corporate contractor's license and found nothing. What happens if there is a problem months or years after they finish construction? Who is responsible? I have not seen any comments about Midland Pacific Homes since I saw their ad so I'm going to call and see what they have to say. The last thing I need is for some disgruntled home buyer coming after me to fix things that weren't done right. From what I understand they have 10 years on some things!
    By: Anonymous on 8/5/08
    You would think they would be having the same problems in the real estate market in Ohio. If Kelly let himself play be the same rules there that he instituted here you would have to conclude the results would be similar. In other words if he used money he borrowed there he would be all jammed up there too. On the other hand it he was using money he borrowed somewhere else he could be sitting pretty in Ohio. I am not saying he did it but as with anything money always leaves a trail.
    By: Anonymous on 8/5/08
    If you keep digging you will see that he has some sub divisions on the books. As far as who's money it is I am sure he feels it is his and he earned the good old fashion way…
    By: Anonymous on 8/5/08
    If you keep digging you will see that he has some sub divisions on the books.
    By: Anonymous on 8/5/08
    Apparently he is doing some development in Ohio. Here's a little clip from the Chamber of Commerce online paper.
    May we help you find office space or a building to expand into? Contacts and/or locations are listed below.

    Historic Wadsworth Factory Building-rennovated to fit your needs. Located on Main Street, just south of Downtown Wadsworth. For further information contact Kelly Gearhart 805.674.3711.

    Whos money was used for this? your quess is as good as mine.

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  2. ccn_debate says:

    By: Anonymous on 8/5/08
    To Humbug:
    That explaines what the wads of investors money that Kelly took to Wadsworth,Oh is worth!
    I think he enjoys making a laughing stock out of everyone, everywhere he goes, like, 'Man of the year', (or whatever it was), in Atascadero! What a joke!
    By: Anonymous on 8/4/08
    Even a member of the Chamber of Commerce… Our money at work.

    Wadsworth Fitness Zone
    Kelly Gearhart
    201 Great Oaks Trail
    Wadsworth, OH 44281
    By: Anonymous on 8/4/08
    We made a few trips to Vegas. With a couple big bags of money…
    By: Anonymous on 8/4/08
    Kelly owns a Gym. Now that's funny!
    By: Anonymous on 8/4/08
    You can sign up for gym membership at Kelly's place in Wadsworth, Ohio (where he graduated from High School) or maybe buy into one of his subdivisions. The folks back there are waiting to hear from us.
    By: Anonymous on 8/4/08
    I think the log books on Kellys jet should be checked if theres a way. Chances are, he and Jay took a good deal of investors money out of the country back when Kelly owned the jet.
    And what about all the property Kelly owns in Ohio? Is there a way to get some money back from those?
    By: Anonymous on 8/4/08
    I guess Kelly Gearhart will just slip through the crack. Kind of like the greased pig at the county fair. Now there's an image you want to get out of your head.
    By: Anonymous on 8/2/08
    Ms Velie said on the radio that she would have important NEW news on the Hurst situation in a couple of days. That was July ?, and today is Aug 2nd and still nothing new. What has happened?
    By: Anonymous on 8/1/08
    No, I am not part of Phoenix. I have only heard them briefly. As an investor I am all ears and would like to know the facts not just cloaked accusations. The property I am involved with would never pay back what is owed, nothing there, to many investors.

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  3. ccn_debate says:

    By: Anonymous on 8/1/08
    I had an unfinished property with RPL…we (the investors) took it away, finished it and sold it. we were not bonded, had no contractors licensed (we hired licensed subs) and sold it.

    Why the "sky is falling" tactics? Fact is, these properties can be taken back and finished..you just have to give it the effort
    By: Anonymous on 7/31/08
    To humbug,
    We have to speak in generalities, since I suspect you are part of the phoenix group, wanting someone to say something that you can blow up and threaten another law suit.
    Again, I say, Investors, do your research and have your attorney approve any and all contracts if you do get involved.
    By: Anonymous on 7/31/08
    hey gearhart lets chat about ray ginn .
    R.I.P. raymond
    By: Anonymous on 7/31/08
    Please add "Status Check? says:"

    Why not just share your facts? The system is already muddled with inquiry.
    By: Anonymous on 7/31/08
    Just check those questions and see what answers you get. Don't forget to check with the Atascadero Building Dept.
    I hope that on some future blog I don't have to say I told you so.
    By: Anonymous on 7/31/08
    To Anonymous says:
    Phoenix Recovery? says:
    Beware says:
    New Questions says:

    How many Avatars do you need?
    This is not a game, be specific or move on….
    By: Anonymous on 7/31/08
    I would check to see if Phoenix Recovery are licensed contractors. They can't do jobs over $500-$600 without a license. Are the subs Licensed? If they are unlicensed is the job Guaranteed? Do they have State Comp insurance? Do they have liability insurance? Are they bonded?
    Do your homework.
    By: Anonymous on 7/31/08
    I'm involved with a couple of RPL propery abortions that are being finished by the PG So far, so good.

    By: Anonymous on 7/31/08
    I saw a classified ad from Midland Pacific Homes saying they could help investors. Does anyone know anything about that? I know they've been around for a long time and they have done a lot of construction in SLO County. I was thinking about calling them, but thought I'd check here first to see if anyone already has.

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  4. ccn_debate says:

    By: Anonymous on 7/30/08
    Phoenix Recovery? says:

    Why be so mysterious? Just tell us what your dirt is, we are adults and attentive to say the least.
    By: Anonymous on 7/30/08
    Phoenix Recovery? says:

    Why be so mysterious? Just tell us what your dirt is, were adults and attentive to say the least.
    By: Anonymous on 7/30/08
    All of you investors had confidence with EFI, Hurst, Real Property Lenders etc.. If you are going to condsider the Phoenix Recovery-beware. Mr. Berry does have some heavy baggage. Contact the Atascadero Building Dept. or become a victim again.
    By: Anonymous on 7/30/08
    Phoenix does not pertain to the homes rising again. It is all about the people who would run the "Phoenix Group" rising again at your expense.
    Do a lot of back ground investigation before getting involved.
    IMO
    By: Anonymous on 7/30/08
    Lots of chat about Phoenix. If anyone has anything substantial why not post it? I wonder if there is a person in the land who has not done some un-permitted work in the past. The lenders need to know if Phoenix can help them deal with the mess Hurst put them in, we are not interested in unrelated issues.
    Does anyone know of any other options available? Get real, help is needed and burned once should encourage the lenders to watch whoever they deal with with more caution than we did with Hurst.
    By: Anonymous on 7/29/08
    Where's Kelly Gearhart maybe he can save us. Kelly Gearhart a true visionary.
    By: Anonymous on 7/28/08
    Karen and Dan:

    It might be worth doing some investigation work as to those involved with "Phoenix Recovery Growth" before they work to rip off the same folks who were taken by EFI and Hurst. Why is a transmission shop owner holding himself out as a "Construction Expert"? What's their background? Have they been involved in criminal legal problems in the recent past? Check it out given they want to use your site to get at the victims!
    By: Anonymous on 7/28/08
    I would recommend that anyone interested with the phoenix recovery group to drop in at the Atascadero building department and ask for a recommendation of Ron Berry. You also might wnt to go down on Traffic Way where he had his transmission shop which was red tagged after he cut the trusses, Now that's exceptional construction knowledge don't you think.
    By: Anonymous on 7/28/08
    No, I'm a victim of Mr. Berry along with others in Atascadero. Check the Calif. Contractors Licensing Board to ee if he has a license. Although he will provide you with an estimate for any construction-that's against the law. He is just another predator out there.
    By: Anonymous on 7/28/08
    BEWARE: YOU MUST BE ONE OF THE LICENSED CONTRACTORS WHO STOLE ALL THESE INNOCENT PEOPLES MONEY, RIGHT !

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  5. ccn_debate says:

    By: Anonymous on 7/27/08
    Well heck "Beware" what do you have to offer? Perhaps a RMA?
    By: Anonymous on 7/27/08
    If you want to be taken again, sign up with Berry and really get cleaned out. Very unscrupulous and will rob you blind.
    By: Anonymous on 7/27/08
    Buyer beware! You might want to check these characters out. Their building expert is not licensed and his past record of doing business would align him wit EFI and Hurst.
    By: Anonymous on 7/27/08
    PLEASE BE ADVISED THERE IS AN INVESTOR MEETING FOR THE BEACON ROAD PROJECT SCHEDULED FOR TUESDAY JULY 29TH AT 6:00 P.M. AT THE ATASCADERO LAKE PAVILION. THE MEETING IS BEING HOSTED BY THE PHOENIX RECOVERY GROUP. PLEASE VISIT THEIR WEB PAGE AT http://WWW.PHOENIXRECOVERYGROUP.COM FOR MORE INFORMATION OR CALL THE OFFICE AT 238-5313.
    By: Anonymous on 7/25/08
    Good for Miller, Gearhart, etc. They all net to be in the slammer and srtipped of all thier wordly posessions. They all should FRY
    By: Anonymous on 7/24/08
    RAMs are highly regulated loans by which a person over 62 that owns thier home can recieve a lump sum or monthly payment loan that can only be redeemed by the lender on thier death or upon them moving out. Hurst I believe is only a broker of these loans and does not raise capital or provide funding or servicing but acts as a middle man between borrowers and lenders. Character will however most likely come into question.
    By: Anonymous on 7/24/08
    How does a reverse mtg work? With Hurst at the helm, I'd be afraid to let them be in charge of ANYthing that has to do with MY money! Kind of like the fox looking after the hen house!
    By: Anonymous on 7/24/08
    It could be the DOC license is only required for the investment business. The RAM business may only require a license from the DRE and be a more traditional Mortgage broker business were they are not the lender but more the arranger of loans. If the DRE decides to take action against thier brokers license that would put that business in jeopardy also. Fear not anonymous there are many lenders that provide RAM loans for seniors it's a program sponsored by both the government and the private sector. Hurst abilities to services this industry will have no affect one way or an other. Thier abillity to have a legitimate income source may however may allow them to make some repayment to investors should agreement be achieved.
    By: Anonymous on 7/24/08
    That is true that reverse mortgages are a vehicle for seniors to tap into the equity in their homes and stay in them, hopefully. What I find interesting and more than a bit scary is that folks like Hurst Fi are pedaling the products and working the deals.
    By: Anonymous on 7/24/08
    Humbug

    Without reverse mortgages, a lot of seniors would be reduced to eating Alpo. You need to back up your assinine remarks with factual proof.

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  6. ccn_debate says:

    By: Anonymous on 7/23/08
    Thanks for maybe getting us back on track. The reverse mortgage market is the new way to bilk seniors out of the equity left in their lives. Hurst is a big player here and in other states.
    By: Anonymous on 7/23/08
    What does this all mean to the reverse mortgage buisness that seems to be the new bread and butter for Hurst Financial Corporation? It seems to have the exact same name. Will its assets support the losses of the hard money loans?
    By: Anonymous on 7/23/08
    Not A Kiss Azz

    Isn't nice that you and everyone else has a place to vent their frustration or opinion. You don't haveto agree with any one and can sya it as you feel like it. True freedom of expression.
    BTW I don't care for any of the talk show hosts. Theyall just blubering talking like they know it all. Liberal conservative, so what. They all like a "FART IN THE WIND".
    By: Anonymous on 7/23/08
    OMG Carol, why dont you just kiss your monitor and get it over with.
    Dave Congigaldumb is lucky to have a job. I cant take him any more seriously than I would Rush or any other radio jock that couldn't handel a real job so they go on the air and act like know it alls. Most of them were professors that acted like know it alls first.

    As for Karen and Dan, they have made a pretty good thing going, for reporters that couldn't make it in the real world. Karen was so liberal that the most liberal paper in town let her go.
    By: Anonymous on 7/23/08
    Ths is exactly what uncoverdSLO said was going on and now the DOC has confirmed it. I wonder if the DOC reads this site and then runs out and confirms the facts? Keep reporting on these hard money lenders. The DOC is on a roll.. Thanks Karen & Dan for this site and Dave Congalton for the added radio coverage.
    By: Anonymous on 7/23/08
    To Miller's Motivation.
    1/2% of 100 Million is 500K not 5 Million. The 1/2% obviously isn't where Miller made his money. I'd say he made it by wheeling and dealing and gambeling with your money for the benefit of his "personal interest" and that of his good friends. Maybe he was just a "front man" and was really this ignorant?
    By: Anonymous on 7/23/08
    Humbug says:

    We are not alone.

    We should form an organization "SUCKERS UNTITE".
    By: Anonymous on 7/23/08
    We are not alone.
    By: Anonymous on 7/22/08
    Scott Coles Hard Money Loan man found shot dead in his Arizona home had connections to SLO. ?

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  7. ccn_debate says:

    By: Anonymous on 7/22/08
    On my loan doc's Kelly claimed a MONTHLY income of $500,000.00. At the time I thought it was yearly. The IRS must love him.
    By: Anonymous on 7/22/08
    that should have said NO business
    By: Anonymous on 7/22/08
    Has anyone considered that maybe Hurst is just not very smart, got comfortanble or just lazy.

    I think Kelly is a weazel and could have done this to anyone.

    The problem here is greed. Hurst's greed. Kelly's greed. And the greed of the people who have business sticking their noses into everone elses problems.

    Isn't kind of sickening that we dont have better things to do than sit around and admire how terrible this situation is.

    I dont know about you sick freaks, but this sick freak is going to go play with my kids, they are far better company.
    By: Anonymous on 7/22/08
    I talked to a developer the other day who actually refused to take whole payment from Hurst. He told me Hurst never checked on anything, just kept giving money whenever demanded. I will try to make sure this person in honored as the others, hopefully, go to jail.

    Today, 7/22, at 4 pm, Karen Velie of Uncoveredslo will be on Congalton for a rousing chat about Hurst and related issues.

    By: Anonymous on 7/22/08
    Miller's motivation obviously went to public school…probably Atascadero HS
    By: Anonymous on 7/22/08
    Try $500,000.
    By: Anonymous on 7/22/08
    In one month????
    By: Anonymous on 7/22/08
    Exhibit A: Hurst "servicing fee" is 1/2%

    Exhibit B: 100 million in bad loans, "serviced" with new investors' money (Ponzi)

    Simple math: 1/2% of 100 million is 5 MILLION BUCKS.
    By: Anonymous on 7/22/08
    Oh man! I feel so bad for all the people who have lost so much! Guess it's sometimes good to be forever broke like me and not have money to invest anywhere! But what now, so Jay get his permit and possibly his license taken away, can he just open under a new name, and continue on? Can he just move off to anothe state, like Kelly is going to, and open a whole new business, leaving the investors with nothing? And where does that leave the developers that actually tried to do the right thing for the investors before all their money was gone? Do they take the rap for it all? What an amazing mess!

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  8. ccn_debate says:

    By: Anonymous on 7/22/08
    Unfortunately, Hurst got "away" with this scam because people do not follow through, they don't want to know and they are not able or willing to investigate issues. Sometimes, we would rather just stick our head in the sand and let things slide. Unfortunately, this is just the perfect attitude for those who have nothing but selfish motives and wanton disregard of others. I feel for those who have lost so much, not only $$ but hopes, dreams – the future.
    By: Anonymous on 7/22/08
    So, I think I have this sort of figured out. At first, it didn't make any sense that Hurst would take over a developers projects and just make the payments to the investors, what was in it for him? But, if this is true, than Hurst made money each month he 'serviced' the loans, for the past how ever many years, and then when the bottom fell out of the market, he gives them back!According to a friend of mine, who isn't a builder but is in the trades, some of the developers tried to get Jay to give the property back to the investors several years ago, and Jay wouldn't allow it, (does he have that much control?). If the investors had gotten the property back then, they could have sold the property and gotten their money back. In todays market, they'll be lucky to just get anything at all! How can he get away with that?
    By: Anonymous on 7/22/08
    Paso guy, Gearhart is liable for many things. Even though Hurst illegally gave all the money to most borrowers the whole thing stinks. Hurst is going down and so will many borrowers. For those who want to be in touch with others in this fight put your e in a blog or send to me, rippedoffinvestor@yahoo.com.
    By: Anonymous on 7/22/08
    Where do I sign up for the lawsuits.
    By: Anonymous on 7/22/08
    Remember Gearhart is cloaked under many LLC's. Not sure if he even holds a CSLB License but they are usually open to complaints. He has certainly violated many statutes.
    By: Anonymous on 7/22/08
    Seems yo me that one would have to examine the agrrement between borrower (gearhart) and lender (hurst) to determine if there was wrongdoing by gearhart. I would think that Hurst would be the only one who is positioned to take action against Gearhart
    By: Anonymous on 7/22/08
    EFI failed because they didn't fund thier loans to thier builders even after pocketing thier fees. Hurst failed because they funded thier loans 100% but gave all the money to the builder without documentation of construction. It will be hard to prove the builders at fault with EFI however with the Hurst case it appears the builders may have taken the money and ran. How that could be legal astounds me. Gearhart?
    By: Anonymous on 7/22/08
    Didn't seem to take very long for the DOC to act once they looked. How do we get them to look at Gearhart???
    By: Anonymous on 7/22/08
    Does anyone else see a 'domino effect' about to take place?
    By: Anonymous on 7/22/08
    Hurst has been conducting business in such a shoddy manner that anything seems to be possible in examining their affairs. I have been saying Hurst is following EF in their downfall by a month or two, I think Hurst will be toast in the near future.
    After losing various licenses they hold it will be time for fitting them up with new suits and shackles. It will be interesting to see if any of the more than $100 million they managed to lose of investor money will be recovered. I am sure many borrowers and others will find themselves caught up in this scandal. Let the fireworks begin.
    By: Anonymous on 7/21/08
    I've actually heard that Hurst took over some of the developers projects when they wanted to turn them back to investors years ago,and continued to service the loans. Has anyone else heard this? If this is true, why would Hurst do this?

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