Gearhart files bankruptcy

February 12, 2009


Kelly Gearhart, a North County developer with ties to hard money lender Hurst Financial, has filed for Chapter 7 bankruptcy protection in Ohio.

Gearhart and his wife, Tamara Lowe, filed the bankruptcy petition on Wednesday, claiming $6.5 million in estimated assets and $45.1 million in estimated debts.

Their filing attorney is Kate Bradley of Akron. She did not return requests for comment.

Gearhart and Lowe moved to Wadsworth, Ohio, in November following threats of physical violence by an angry investor. Gearhart filed the bankruptcy petition in the Northern District of Ohio U.S. Bankruptcy Court.

The bankruptcy lists Gearhart’s personal assets and liabilities and does not include his corporation and LLC holdings. Even so, Gearhart asserts in his petition that his LLCs and corporations “are substantially insolvent and have no realizable value.” Hurst Financial lent Gearhart and his holdings more than $70 million, the bulk of which went to Gearhart through his LLCs and corporations and is not included in this bankruptcy filing.

Cal Coast News has chronicled Gearhart’s legal and financial troubles in procuring loans for properties at highly inflated values — like Vista del Hombre in Paso Robles. Hurst Financial Inc. lent the troubled builder approximately $26 million on the property even though it was appraised at only $4.5 million, subjecting investors, primarily seniors, to millions in personal losses.

Dozens of properties docketed in the bankruptcy petition list values substantially below monies owed.

Last summer, David Rios and Murray Powell filed an 11-count lawsuit against Gearhart and Hurst Financial principals Jay Miller and Courtney Brard in San Luis Obispo County Superior Court. Allegations include fraud and civil conspiracy by the trio and claims they misled investors and misappropriated funds. Gearhart had provided Rios and Powell a personal guarantee on the business related debt.

Gearhart was slated to give depositions regarding the suit today though he declined to appear. The bankruptcy filing will put a 30 day stay on the lawsuit.

Gearhart’s debts include $5 million owed to First Bank of San Luis Obispo; $1.7 million owed to San Luis Trust Bank; $39,421 owed to local attorney firm Adamski, Moroski, Madden, and Green; $11 million owed to Hurst Financial for interest in Beacon Road and a parcel on Highway 41; $6.4 million owed to the Fred Russell Trust; and a long list of local lending institutions, companies, government entities, and individuals. More than 600 creditors are listed on the petition.

Chapter 7 bankruptcy allows the creditor to start anew. Under Chapter 7, assets are sold and proceeds distributed to creditors.

However, the bankruptcy court is a court of equity where honest men go to discharge honest debts, and trustees do not discharge tainted debts, said a local attorney. Gearhart is currently the subject of an FBI investigation into fraudulent business activities, according to sources.



  1. ccn_debate says:

    Member Opinions:
    By: Nameless on 2/15/09

    Depend when was the payment made. If it was within the 90 days of filing, yes. Unlikely.
    By: Fedup on 2/15/09
    I wonder if the bankruptcy court will make the city of Atascadero pay back the donation that Gearhart made with other peoples money.
    By: skyler on 2/14/09
    Gearhart now and lots more to come with all of his cozy friendships/dealings with other fellow local developer "citizens of the year" BIG…donations, Big plans, with BIG
    politics.. and lots of gaming in the mix.
    The dominoes are toppling boyz…
    Better "shore up" your economies.
    By: George on 2/14/09
    If you troll here at least be funny,stupid misspellings and partisan hackery cheerfully deleted. try freerepublic instead.
    By: George on 2/14/09
    no more panic attacks for a few days(comments deleted by moderator)
    By: hotdog on 2/13/09
    My apology for assuming the worst with your wordplay. Some posters have gotten out of hand, your wording certainly seems appropriate. It does appear like that town is having difficulty entering into the 20th, and now 21st century. Transparency, democracy, honesty-these may be strangers in areas of the north county but even in the glorious county seat we have many problems too!
    By: mccdave on 2/13/09
    "Atascabama" is a well-known pejorative combining "Atascadero" with "Alabama." I chose it over the usual "Atrashcadero."
    By: hotdog on 2/13/09
    mccdave, what do you mean by that word play with A-town CofC?
    Any reference to our pres is off topic, and if deemed stupid, racist or wicked will draw vicious and rapid response-and risks getting removed and the poster banned for a long time. Such posts have been removed this morning in case you hadn't noticed. Keep these posts literate and on topic or the site gets diluted-anyone wishing to create idiot cross talk will disappear.
    By: mccdave on 2/13/09
    Is Gearhart the only reason one would be embarrassed to be associated with the Atascabama Chamber of Commerce? Aren't there ample reasons for shame there?

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  2. ccn_debate says:

    The chickens (or vultures) have come home to roost for the past "Citizen of the Year". Can we have a parade for his homecoming as well?! Makes me embarrased to be associated with Atascadero, the Chamber of Commerce (who has voted another knucklehead as Citizen this year) and all the dopes who continued to support this white-color criminal with the grace of a snake. I hope that Akron likes having him there. Good luck. He's a keeper!!!
    By: karen on 2/13/09
    I will be on the Dave Congalton Show tonight at 5:05 p.m. to discuss this issue, turn your radio to 920AM or listen live at
    By: outsider on 2/13/09
    News Flash…somebody is reporting that Dabama's Stimulus Package includes a helping hand to Gearhart.
    By: InTheKnow on 2/13/09
    I wonder when he will file bankruptcy on his LLCs. Why does the Tribune want to make this about a bad economy? Gearhart has been behind on bills for years. Look at the Hurst financed projects, many of those where upside down years ago.

    When you let projects sit for months on end while paying 12 percent interest, your bound to have financial trouble.

    And what do you think paid for his Rolls Royce, jet, and trips to Vegas? I bet he spent the money from all the projects he never started. I remember hearing him say on Congalton, that it was his money and he could do what he wanted with it.
    By: Vagabond on 2/13/09
    something strange here, the Trib. online had a similar story stating the county tax debt but have since modified the story deleting 11 mil.

    By: insider on 2/12/09
    It used to be our criminals would flee to Mexico or even Costa Rico. How much more convenient Akon is. The exchange rate is so much easier to understand. On top of that when it's time to pick him up we can send Dog the Bounty hunter without violating his agreement with the Federalies.
    By: insider on 2/12/09
    Maybe Akron and Wadsworth need a man of the year.
    By: hotdog on 2/12/09
    Remember when the arrogant and flatulent gearhead was on Congalton, crowing about his innocence and professional excellence? He even threatened to sue the principals of this news venue for their investigation into his activities. As usual they were right, he was wrong. He has fled the area after botching all his projects and now chickens out seeking 'protection'. What a loser. But even after all this we will get him, he has so many enemies he is toast.
    By: Jim on 2/12/09
    Is this guy related to Guth and Yaguda…?
    By: Booty_Juice on 2/12/09
    It's surprising he's still alive, and that he didn't win the recent Citizen Of The Year Award again.

    I always dreamed of living there.

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