Big-money frauds top our 2008 investigations

December 31, 2008
Karen Guth and son Josh Yaguda in happier days.

Karen Guth and son Josh Yaguda in happier days.


A scandalous stack of brazen fiscal rip-offs and obscene financial schemes that today imperil the very economic stability of San Luis Obispo County is the most important news story of 2008 – and readers learned of them first through a string of investigative reports on this site beginning March 14.

In a groundbreaking article headlined “Hard money lending schemes creating fiscal chaos, devastating SLO county investors,” we reported that “a number of SLO County investment firms have allegedly participated in schemes that may already have cost local investors more than $500 million, setting the stage for a colossal fiscal collapse unrivaled in this state’s history.”

The article stripped away a veil of deceit from several prominent big-money business operators who were fleecing thousands of local investors and bankrupting builders’ suppliers: “By utilizing a variety of hard money lending ploys and inappropriate management practices, the firms in question have created an environment that may shadow private finances in this county for decades, dozens of informed sources have told during the course of a two-month investigation.”

“It’s like Enron for Paso Robles,” said David Farmer, an attorney with Farmer and Ready, a San Luis Obispo law corporation representing clients who believe they have been defrauded. “Those who claim this has to do with the downturn in the market need to take a cold shower.”

“One firm under particularly heavy fire from unhappy investors,” we reported, “is Estate Financial of Paso Robles, whose president, Karen Guth, has declined comment on her alleged role in the unfolding disaster. Guth also owns Pasolivo, an olive oil producing company, with her son, Joshua Yaguda.”

During ensuing months, this Web site detailed the beginning of the end for these and other wheeling-and-dealing hard money lenders, and used extensive court and divorce documents to recreate the origins of the EFI slide into infamy. During this same period of time, a spate of articles published in the local daily described Guth and Yaguda as the simple victims of an unfortunate dive in the market, and touted prominent developer Kelly Gearhart as a humanitarian hero.

Because of those articles in the daily newspaper, a number of investors continued to put their money into Guth’s hands.

Guth and Yaguda currently are in county jail, unable to post $5 million each in untainted money for their bail while awaiting court action on 26 felony charges.

And we were the first to challenge the credentials, credibility and honesty of one of Atascadero’s “leading citizens,” Gearhart.

Early in the year we broke the story of how Gearhart’s multi-million-dollar Vista del Hombre development in Paso Robles was drastically overleveraged, and probably headed for foreclosure. Gearhart went on Dave Congalton’s talk radio show to rebut the article, but the facts kept getting in his way. Two letters from his lawyers threatened us with a lawsuit, but he backed off. Now he’s fled to Ohio to await the next chapter in his life.

We started our maiden year as, we’ll end as, and during 2008 we have provided the county’s finest investigative reporting of important community issues that just were not being covered by the local daily.

We weathered at least one serious effort by local entities to shut us down. (More on this at a later date.)

Here’s a recap of the hard-hitting and original articles that helped make this Web site the county’s best investigative news source.

Atascadero’s FEMA filching

Over the past four years, Atascadero city officials conspired to bilk taxpayers out of more than $4 million in disaster aid to construct a replacement youth center under the guise the previous center had been rendered unsafe during the 2003 San Simeon Earthquake. The FBI started an ongoing investigation.

Iftiniuk: a costly hospital executive

In 2005, Alan Iftiniuk, French’s CEO, was paid $835,231 in total compensation plus $136,671 to cover his expenses, according to Catholic Healthcare West’s (CHW) financials, French’s parent company. Additionally, CHW lent Iftiniuk funds to help him buy a house.

Recent congressional hearings have focused on financial practices of nonprofit hospitals. An ensuing firestorm of controversy swirls around not only the bloated salaries and extensive perquisites paid to executives, but also the question of whether these tax-exempt facilities are adhering to the obligation of serving the public.

Cal Poly Jubail plan assailed

A cooperative program to establish an engineering college at a Saudi Arabian university with Cal Poly faculty and expertise hit a snag when professors realized the plan would exclude females, Jews, and minorities. Advocates President Warren Baker and Engineering College Dean Mohammad Noori have encountered nothing but problems ever since while trying get an agreement with which the Saudis can live. The plan is currently in legal limbo.

Another lender hosing folks

In May, we reported on the tenuous fiscal footing of Jay Miller’s Hurst Financial Inc. of Atascadero.

“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.”

And we continued our expose of Hurst with our three-part series, “The Dumpster Chronicles,” revealing through hand-written notes from Miller and his employees – obtained from his trash bin by an angry investor – the methods of his manipulation.

Banks give gold to golddiggers

Heritage Oaks Bank and a host of smaller local banks were caught by the dollar downturn, too, which exposed a free-wheeling method of disbursing non-collatoralized, multi-million-dollar loans to developers. Often, the money simply disappeared into darkness.

Thanks for the house, Clay

A top county official’s Arroyo Grande home was jointly purchased by her and the family trusts of local lawyer Clay Hall, whose firm receives hundreds of thousands of dollars annually as the vendor responsible for the majority of San Luis Obispo County’s outside legal work.

Gail Wilcox, assistant county administrator, owns one-half undivided interest in the house on Blackberry Avenue, according to county property documents. She took a $417,000 mortgage in April 2007 to purchase her fifty percent share of the residence. Clay Hall, his wife Kristy A. Hall, and several of their family trusts own the other half. The total purchase price, according to records, was $580,000.

Nothing like a good fight.

Our story about a verbal altercation between Atascadero Mayor Mike Brennler and Councilman Tom O’Malley got more than 550 comments from readers.

Sheriff’s deputy slams cars, arrested for porn

A San Luis Obispo County Sheriff’s deputy on administrative leave drove into four parked vehicles before flipping and rolling his pickup truck in a July 19 mishap. Deputy Bryan Goossens was northbound on Traffic Way in Atascadero at 8:50 a.m. when the chain-reaction collision occurred.

Currently on paid administrative leave in an unrelated matter, Goossens was not ticketed or charged by Atascadero police officers.

Then we reported that the “unrelated matter” was an accusation of child porn. Goosens was the target of an FBI investigation which included a search of the deputy’s house and the seizure of his computer. He’s awaiting trial.

Protect, serve and sell T-shirts

A San Luis Obispo police officer peddled custom imprinted T-shirts, sometimes while on duty, as a federal bankruptcy court considered his twin Chapter 7 petitions.

Officer Christopher Charles Chitty apparently runs the cash business from the home he shares with his wife, Lisa Solomon, Paso Robles’ chief of police.

Chitty said Sunday that the business, Trick Tape, no longer exists. An investigation by suggested otherwise.

Male cops claim discrimination

A contentious reverse discrimination claim that has embroiled the Atascadero Police Department in controversy will cost the city a bundle.

Earlier this year, city officials launched an internal probe into complaints of reverse discrimination made by male officers against female officers in the city’s police department. The complaints allege preferential treatment for an alleged lesbian officer, provided by an upper level officer with whom she was romantically involved, sources said.


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By: Cindy on 1/6/09

Gee McDave,

Sorry to hear that your browser reads this site in such a convaluded fashion. If that happened to me I would find it frustrating. I haven't heard of that happening to anyone else. From where I'm sitting everything fits nice and neat regardless of which browser I use.

You did mention something that would be helpful for CCN (although it has nothing to do with effecting anything that the readers would notice). You say "They've got identical content mirrored across three domains. Google's and other search engines' guidelines strongly advise against this. It'll harm page rank". This is true. I recently worked for a company that does SEO (search engine optimization) and its common knowledge for anyone who cares about ranking not to mirror content like they are doing here for the very reason that you stated . CCN should correct this problem because Yahoo and Google will deffinetly penalize them in the rankings.

By: George on 1/4/09

IE users have our condolences, the cure for your textual displeasure is: Ctrl + or – as the need arises.

By: Cindy on 1/3/09

Do I detect some envious competitors blogging on this thread? I have never read anything written by Dan or Karen that wasn't backed with facts. Regardless if its a commentary (opinion piece) or a news story they have never been proved wrong. They obviously have reliable sources and have every right to protect them. I recall the days when people went to jail to protect sources like what happened during the old water gate scandal and even to people like Larry Flint. Some people just can't stand not knowing who the "deep throats" are. Well too bad. The opinions they deliver are always right on the money.

McDave This site is laid out well and its easy to navigate. Maybe you would like to enlighten us all with some of your (questionable expert) "tips" on what "eye candy" you think this site could use and send CCN a donation to implement it (in case they want to). Its called put up or shut up. Your on this site consistently and are obviously getting more value from it than you return.

By: nosedatruth on 1/2/09

Right on Riley. A real news site would keep its reporting objective, check its facts and refrain from mixing speculation and opinion in with the news stories. If you want to have an opinion section, and rip your enemies a new one, be my guest: the First Amendment protects your right to do so. But don't try to slip it in under the guise that it's real reporting. The only readers who don't see through that are the ones that believe everything they read without considering the source.

Nice job of patting yourself on the back, though.

By: Jim on 1/2/09

I am an out of the area "investor" with Estate Financial… and find myself coming to this site quite often…

I think you do a great job… as this is one of the (very) few venues giving me (accurate) news on E.F.

I also appreciate being able to leave notes from time to time… and enjoy reading other "noters" as well…

By: Black_Copter_Pilot on 1/2/09

Good call Riley, but that's what you get when loons are the the majority of bloggers

By: Riley on 1/2/09

We need to take responsibility for where we get our information that forms our opinions, or in some cases, reinforces our opinions. My problem with any source is when opinions are interwoven with the reporting. The presumption of guilt is so overwhelming in too much of the reporting on this site. "untainted money" tells me any money these folks (in this case EFI) had was illegally obtained. They, and many others you report about are guilty before being proven otherwise. Your headlines on other articles have the National Enquirer sensationalism. Yet, it provides a forum for what some locals think, how they think (I'm too new to understand the slams against North County and Atascadero) and I try to get an understanding of the history. I do chuckle, however, at the notion that people continued to invest with hard lenders based on the reporting in the Tribune. That's similar to those who blame Barney Frank for the problems with Fannie Mae and Freddie Mac, it's much bigger and more complicated that one person or one newspaper. May 2009 prove to be better for us all.

By: WiseGuy on 1/2/09

The basic design of the CCN website seems fine to me. It's clear and uncluttered. It does the job. I think you have that part down well enough for now, and it is certainly not something you need to fret about.

By: Fedup on 1/1/09

There are always some idiots that shoot the messenger instead of making an intelligent comment on the subject. It appears that these people think that they are smarter than everybody when in fact they are not smarter than anybody. If you are so smart why aren't you doing the digging and reporting.

By: mccdave on 12/31/08

Booty_Juice says: "…Any self-deluded Atrashcabaman knows that if yer gonna be dumb, you better be tough."

A truer ode to the Atasca-ethos has never been written, and this principle manifested in many of my dealings with various Atascayokels during the three years I lived there.

Booty_Juice needs his own column here. S/He's a national treasure.

By: Booty_Juice on 12/31/08

They got into the online news content business before they knew a single damn thing about the "online" side of it.

They then proceeded to attract a large enough participant base to easily monetize via numerous well established and successful models.

Subsequently, in a generations-old north county tradition, they snatched defeat from the jaws of victory by suffocating rather than monetizing their business. Surprisingly, living large on the ad revenue from U-Pick’em Blueberry’s and Methlab Warehouse just hasn’t worked out. But then again, stupid is supposed to hurt, isn’t it?

No worries, I’m sure Dan can handle it as any self-deluded Atrashcabaman knows that if yer gonna be dumb, you better be tough. Besides, writing pieces in between shifts at the Dairy Queen aint all that bad.

By: JorgeEstrada on 12/31/08

This is tuely a cost cutting, tree saving forum. Maybe the well organized Greenies will apply for grant monies to fund this sheetless access to accountability. For those who have a puppy that needs training, use junk mail until that is gone too.

(Dan's comment below sounds like Sandra Duerr responding only to praise and never to criticism.)

By: calvertworthington on 12/31/08

30 yrs. ago I moved to SLO Co. fro LA Co. At the time, friends 'warned me' about how corrupt a little place it was. Over the years that's been confirmed, but to an extent proportionate to the rest of the 'world'. Same sorts of folks seeking power, cheating, and screwing the little guys. One story that seems forgotten was the original French Hospital (Marsh St.) and a book written about same by a local MD. Seems the targets of the critical author tried to buy-up all copies before they were sold.

By: rack-n-blurb on 12/31/08


mccdave is a little ray of sunshine.

By: sharibaby on 12/31/08

nice back hand compliment mccdave. "You are doing good…but you still suck." Dan, just ignore the unconstructive criticism.

By: Bluebird on 12/31/08

To: MyThoughts

I too canceled my Trib subscription for the same reason – no news and an incredibly boring opinion page.

To: Dan – Mccdave is right. You need the links.

There would be no real news in SLO County without CalCoast News. Karen and Dan keep shaking up the establishment. They are feeding off the same trough as the white collar crooks.

I applaud those businesses that have had the guts to advertise.

By: MyThoughts on 12/31/08

I saw the Tribune article this morning touting the hard money lending fiasco as it's #2 Story of the Year. I almost lost my breakfast.

The Tribune sat on its hands while UnCoveredSLO/Cal Coast News did all the heavy lifting, dug up the facts and put these stories in the spotlight.

If it were up to the Tribune, people like Guth, Yaguda and Gearhart would be in Costa Rica with Linda Kennedy, smoking fine cigars savoring caviar and sipping champagne with all that money that was bilked from investors.

This is why I cancelled my subscription with the Tribune … The Tribune has gone to stories that are all about feel good and vanilla. They are supposed to be watchdogs of public interest but have failed miserably.

I support UncoveredSLO/Cal Coast News and encourage everyone to do so as well. Somebody has to look out for us common Joe's

By: mccdave on 12/31/08

CalCoastNews has reason to be proud and is well worth reading, but this year-in-review is a good example of where you're falling short.

First a nit: You present a list of stories without linking to the original articles. There's this thing called hypertext…

Clearly the story behind the story of the hard money lenders is the speculative property bubble and crash that has rocked the global economy. Other local press outlets have been shamefully dishonest in covering the bubble, and if nothing else, CalCoastNews could catalog the ongoing press failures here. If there had been more general awareness of the dangers of a property bubble, would these hard money lenders have raised so much money? I doubt it, and it's curious that such relatively big schemes occurred in SLO County. Scams like this always appear during speculative bubbles, and investors who were scammed can partly blame the local press for completely failing to call BS on it. This is the biggest missed story of the decade if not the century, and CCN also missed it to an extent.

By: Newsome on 12/31/08

The financial angel aint me, but I do send you $40 every six weeks, and hope that other beneficiaries of your work do the same.

By: DanBlackburn on 12/31/08

Newsome: Thanks for your always productive comments. The only impediment to our progress is a lack of $$$. We operate on optimism and the belief that our work is important. Is there a financial angel out there?

By: Newsome on 12/31/08

Congrats on an excellent first year. I hope your business model allows you to pursue generating these stories on a full-time basis. Your last published story was more that a week ago!