City officials paved Gearhart’s path of destruction

August 3, 2009


As developer Kelly Gearhart worked to build more than 400 new homes in the Atascadero area, city inspectors and others were apparently looking the other way, allowing Gearhart to avoid paying city fees due to falsified and unfinished inspection reports.

In one case investigated by CalCoastNews, the value of a $700,000 Gearhart home is expected to have lost approximately $200,000 in value because it was not inspected, as required by law, before it was occupied, said the homeowners.

In another instance, former Atascadero mayor Mike Brennler said the lack of oversight cost the city more than $292,000 involving 30 senior cottages.

“I was told by people both inside and outside city hall that Gearhart was given special privilege related to his developments, considerations that were not given to other developers,” Brennler said. “These people were in positions to know.”

Employees and city officials report City Manager Wade McKinney, Assistant City Manager Jim Lewis, and Community Development Director Warren Frace instructed staff to allow Gearhart to skip the city’s Planning Department and allow Gearhart to deal directly with upper level city employees.

Frace, Lewis, and McKinney did not return calls seeking for comment.

“We were ordered to do illegal things,” said an employee of Atascadero who refused to be named, as did a handful of city workers, due to fears of either losing their jobs or of being black balled in the future. “Gerhart’s projects were fast tracked. Projects went directly to Warren Frace and skipped planning.”

Following information that the FBI had began an investigation into the city of Atascadero, officials ordered employees to produce permits and inspection reports for properties that had been finished years earlier.

Attempting to verify that property permits were official, some homeowners discovered that no approved plans for their properties are on file with the city. Officials had previously enacted rules that required city workers to destroy building plans, aside from the original project plans, after 90 days.

The policy appears to circumvent California law governing retention of public records.

“We no longer dispose of plans after 90 days,” said Atascadero Chief Building Official Ken Forman. “We had a backlog of well over 600 un-filed permits.”

In some cases, permits have been signed off on years after the properties were occupied. In the DeAnza neighborhood that sets on the far north side of Atascadero on the east side of U.S. Highway 101, final permits were signed off on though home owners report the final inspections did not occur.

Karl and Jana Dearie agreed to purchase a home on Farrocarril Road from Gearhart in October of 2005. According to official documents, their property received a final inspection on three separate dates.

On December 14, 2005, Karl and Jana Dearie moved into their home on Ferrocarril Road in Atascadero. Prior to moving in, Dearie called the city inspector and was told the city had performed the final inspection, Karl Dearie said.

“We told him, ‘No it had not,’ ” Karl Dearie said. “The roof vents were not painted. We asked him to call when he gets a final.”

Following the cities assurance the property had passed its final inspection, the Dearies moved into their new home.

Melanie Schneider signed off on the escrow and provided Stewart Title officials with a final inspection date of Dec. 12, 2005.

In an odd twist, Schneider, an ex-employee of Stewart Title who was a key person in the majority of Gearhart transactions, reportedly moved to Colorado with Kelly Gearhart’s brother, Doug Gearhart, shortly after the fall of Hurst Financial Inc. (a hard money lender currently being investigated by the FBI due to fraud primarily related to Gearhart projects).

Attorneys retained by investors allegedly defrauded by Gearhart are looking toward Stewart Title for financial restitution for alleged negligence, and in some cases fraud.

Fast forward to 2008, when Atascadero officials began ordering homeowners to allow them to inspect properties occupied in prior years. In a letter to the homeowners Forman writes the purpose of the inspection is to ensure buildings conform to approved plans.

The city’s approved plans for the Dearies’ home not only differ from the structure, but also show the home was built on a portion of their property that is currently undeveloped.

“Please understand that occupying a structure without final inspection and approval by a city inspector is a violation of Section 8-2.110 of the Atascadero Municipal Code,” Forman says in a letter to the Dearies on July 8, 2008. “Failure to comply with this request by the stated deadline may result in enforcement action….”

An inspection report, on file with the city, states that an inspector dated the final inspection as having occurred on Dec. 27, 2005. However, the Dearies said they were home that day and no one from the city came to inspect their home.

In addition, a half dozen initials signing off on the Dearies 2005 inspection report do not match Atascadero’s Senior Building Inspector David Muehlhausen’s initials or any 2005 city inspector, leading the Dearies to question whether the reports were forged.

“The building department is supposed to work for the community not the developer,” Karl Dearie said. “The city is negligent; it is a clear breach of duty.”

Following a handful of threatening letters and a $227 fine for non-compliance from the city, the Dearies allowed the city to do a final inspection on Sept. 30, 2008. The inspector was unable to the sign off on the septic system because its exact location is not known.

“They have jeopardized persons and property,” Karl Dearie said. “I am not going to sell and not tell people; it is a disclosure issue. We have a different moral compass.”

Frustrated with the city, the Dearies asked Realtor Stacie Ormonde and Stewart Title to look into the status of inspections for their home.

“Kelly talked to the city inspector,” Tamara Gearhart (Kelly Gearharts wife) wrote in letter to Ormonde. “They are cleaning up files. They found they had a correction that was not signed off on the out building. Not a big deal they just never went out to sign off. They have to take a look. Sorry, but this happens a lot.”

Letters from the city in 2008 originally claimed that the house and the out building were not properly inspected. Following complaints by the Dearies, the city changed their request for inspection to include only the storage facility.

In early 2005, Gearhart finished construction on two auto bridges that provide access to the DeAnza neighborhood homes. In both cases, Atascadero officials failed to require city permits and did not inspect the crossings prior to allowing autos to use the structures.

Because of this, the city failed to collect thousands in public improvement fees.

In addition, the creek bridge failed to meet American with Disability Act requirements, according to an e-mail from former Atascadero Planner Steve Kahn.

Gearhart saved thousands of dollars on public improvement, valuation, and impact fees.

Some city planning officials denied that any favoritism was shown to Gearhart that involved his projects. One upper-level city employee, who asked to remain unnamed because of job security issues, contends city officials required tougher building standards when working with Gearhart.

Brennler looked into the 30 cottages that were not finalized correctly and as such he contends the city failed to collect $292,500 in development impact fees and $117,000 in capital impact fees.

“The city bent over backwards to help Gearhart move his projects along and then he turns on the city by moving people in before the properties were finaled and the fees were paid,’ said former Atascadero Planning Commissioner Joan O’Keefe. “Gearhart was able to deflect the blame on the city because of the city’s poor record keeping.”

In June 2007, Brennler asked the district attorney to determine if Gearhart’s violations of local and state building codes were criminal in nature.

Several weeks later, District Attorney Chief Investigator William Hanley wrote that prosecutors were declining to further probe Gearhart as his “conduct does not rise to the level of criminal wrongdoing.” Hanley did not remove himself from the investigation despite his family’s ties to Gearhart.

Del Robasciotti, Gearhart’s close friend and Hanley’s brother-in-law, has worked as a sub-contractor for Gearhart for several decades.

Gearhart, a former Atascadero Citizen of the Year, is under investigation by numerous federal and state agencies for his participation in an alleged lending scheme in which thousands of investors were bilked out of at least $80 million.


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Member Opinions:

By: cheseburger on 9/12/09

Booty Juice, I didn’t laugh because it’s all truth.

By: DashRiprock on 8/15/09

i just don’t understand based on how many people he fleeced he is not behind bars…alot of local politicians with the balls of feild mice i guess

By: Nancimeek on 8/11/09

Well now is Robert Grigger Jones involved? Mr. Jones and his accountant Michael Gould devalued our Father’s estate (the unbiased team we hired said the estate was worth over 4.2 million) and yet Jones and his accountant Michael Gould insist the estate is worth only 2.7 million with 1.0 million in an exemption trust Problem is the exemtpion Trust was never funded for 1 million and on paper after devaluing the properties it appears the estate is worth 2.7 How convenient when after 5 years and only after being threatened with an audit did Accountant Michael Gould FILE the income tax returns on the estate covering 5 years….what took him so long to file? And stating the estate is worth only 2.7 million makes the estate exempt from taxes. Amount paid to IRS ZERO. But at what price, lying about the worth of the estate? I would’t be surprised since Jones is Gearhart’s attorney of record that he had a hand in some of this Might want to check it out. Oh and the accountant Michael Gould………I’ve called him numerous times and spoken to him in a kind way only to have him become defensive and tell me to “Lose his F’ing number and never F’ing call him again” Nice huh?

By: Truthbeknown on 8/6/09

Credibility? Surely you jest, insider. Cal Coast Enquirer cannot even get the basic facts correct:

“In addition, the creek bridge failed to meet American with Disability Act requirements, according to an e-mail from former Atascadero Planner Steve Kahn.”

Steve Kahn was the former Public Works director, not a Planner.

How can you trust the “stories” here when they get the simplest facts wrong?

By: insider on 8/6/09

Wake up CCN every $700,000 home in Atascadero has lost $200,000 in value or more in just the last year. Inspections or not. You will loose your credibility with statements like that.

By: BeenThereDoneThat on 8/6/09

It is amazing how some people here get so hysterical that they miss the point.

The case of tring to make Del guilty by association is preposterious! So if someone in your family killed someone does that automatically make you a killer? Not spinning here, I am saying if impling Del is guilty then show some facts or shut up!!

Again I for one (can’t speak for others) would LOVE to see Kelly get 20 years if he is guilty of this. I do believe in justice. The case against Kelly has been noted here and in other places and there seems to be quite a bit.

Again if you have something on Del lets hear it.

This here I see nothing but the fact that you have an ex relative. Pretty simple (point made prior) to understand I thought.


To BootyJuice: AMEN to particularly Paragraphs 7 and 9.


LifeLongAtascResident: You apparently see nothing wrong in ANY of Gearhart’s antics, since you practically kiss his a*# everytime his name is mentioned!! Perhaps some things have been sorted through, some have not. It doesn NOT mean that he has any type of remorse for his obvious lack of ethics. It is only that he was caught with his hand down his pants that he finally forked over some $ that was due the City for a very long time. Don’t believe for one nano-second that he would have given up any monies if not for people such as Brennler and others who caught wind and followed the stench. Apparently, you and others have been living too close to the stench to smell it anymore or maybe you just choose to ignore it. Shame on you either way.

By: pismoclam on 8/5/09

I love Number 9.

By: Longtimelocal on 8/5/09

Ok, I’m not usually an advocate for censoring, but give me a break – please block “booty-crap” from posting these nonsensical ravings! I have learned not to actually read them, but just skimming the surface tells me that he/she is clinically unbalanced and for the most part completely off-topic. And now the postings are so long it takes forever to get past them. . . I wasn’t even aware the inmates at ASH had access to the internet! Thanks much. . .and now. . .let’s get back on topic, shall we?

By: JorgeEstrada on 8/5/09

One more time, Do I see this right, Robascotti the guy dressed in cammo, Gearhart the political genius money guy and Hanley the cop/criminal investigator with lots of aquaintances?

This is the kind of team you don’t look at unless you are the top dog or second in command. Today top dogs 1 and 2 have been fired, some of the DA’s are currently judges and Karen Velie continues to report the facts.

With more facts things are likely to change. A closer look from a bigger pond continues…..

By: BeenThereDoneThat on 8/5/09

George. Thanks for reposting with more spacing between paragraphs. Easier on the eyes!

By: George on 8/5/09

Thanks mccdave I found the right button and fixed the mess. Here’s Booty (apostrophes took a while)

Booty_Juice posted an opinion in Cal Coast News

I’ll take a wild stab at this and say the Pulitzer guy isn’t quite

settled into the editor’s seat yet. Not even in the building more

likely. That is undoubtedly this year’s greasiest fry up of

journalistic bone, sinew and ligaments. High school editors are

laughing and poor George is surely bleeding internally, wondering what

drove him to accept such a ghetto gig – massive economic trauma or

worse, most likely. Karen is once again removing all doubt, if there

ever was any, that muckraking and mushrooms just don’t mix.

Yes I get the gist of the piece: Living or doing business in

Atrashcabama is a corrupt, inept, perverse circus of s**tinfested

incest. Its citizens largely consist of mangled zombies from a past

orangutan breeding experiment gone horribly wrong. I’m shocked. I

always dreamed of living there. The next best thing to actually living

there is to pay 350 a night for a lovely room in the shade of the 101

where you can gaze upon the mongs robbing, stabbing, p******g up the

wall, or clutching a Bud Light while gazing longingly at their sisters.

But the sad fact is that government is corrupt everywhere and at all

levels, isn’t it?

Yet millions have kept silent because they have a family, they have

employees, they have contracts to fulfill that employ American workers.

These are the people that have created jobs and wealth and added value

to this country. Governments cannot create jobs, not real ones at

least, that produce goods or provide a needed service. Government Jobs

are about monitoring things, prohibiting things, controlling things and


The American people are being slowly reduced to acquiescent slaves to

work without a murmur as drones in the factories and offices of this

country, while corporate monopolies determine the price of our food, and

destroy farmers, while monopolistic incompetent Banks destroy businesses

on a daily basis, while helping themselves to Taxpayers money.

Treat with contempt everybody you come in contact with who ‘deal’ in the

Law. They have an agenda and they are not your friends. They are not

there to protect you.

This is what America has become under Welfarism since 1945.

They’re not going to stop s******g in your faces until you make them

stop s*****g in your faces, are they?

With the false walls built by fools gold now crumbling down around them,

the halls of power are rank with the smell of raw terror while inside

the Ruling Class trembles with fear.

Who is going to cut what?

Watch them squabble. Watch them try to scare the public, reassure the


F**k that.

We are skint. The public has listened to the inept, corrupt, thieving

Ruling Class telling them they have never had it so good. They have

watched their house values artificially inflate, borrowed against it for

hot tubs, plasma tv’s and SUV’s and now the Rulers are squabbling

over who is going to break the bad news.

I will.

Public debt is going to explode for the next seven years. It will reach

80% of GDP without cutting it. We’re f****d. Bust. Kaputt. Skint. The

last 12 years have been a sham. You were all sold fools gold, and

that’s your fault. Stupid is supposed to hurt, it’s how we learn

and survive. We have borrowed against our childrens future and now we

have to pay it back.

So. What to cut. Something has to go. The Rulers cannot or will not tell

us what, so here are a few suggestions:

1. The Welfare State. You will no longer be paid to sit on your arse.

Get out to work. If 20 million illegals can send money home, so can you.

2. Take responsibility. If you cannot afford to feed your family, then

say goodbye to the boat and the car. Get the f*****g bus or get a job

that pays enough.

3. Stop spending your money on S***. Save it instead

4. Eat less. The whole country looks like a pod of Whales washed up on

a beach. Useless, bloated and doomed.

5. Mongs, tweakers and the workshy – No more mobility carts, no more

handrails on Mt. Everest, no more aromatherapy. Sorry, we’re skint. Pay

for it yourselves.

6. No more Albanian lesbian single mom drop in centers.

7. I’m sorry Sir, your child is a thick, ill mannered little xxxx. No

more teaching assistants for him. He’s bone idle, arrogant, dangerous

and out of f*****g control. Oh, and it’s YOUR fault. Not mine, not the

States, not his astrological star sign or an invented “syndrome”. Sort

it out at YOUR cost.

8. You work for the City or State? You are now redundant. Fired. Go

and get a proper job. All of you.

9. Sort your heroes out. Michael Jackson, JLo, LiLo, 50 Cent and the

lot are not role models. Neither is some 17 year old Jamaican Gangsta

with 12 kids by 12 women driving an Escalade with spinners bought with

drug money. They are the enemy. Same with fat, inbred, ignorant,

bloated countrified locals who brag, pose and squak about their religion

and their community but only really care about lining their pockets with

your hard earned. They are the enemy.

10. Do not believe a f*****g word a Politician tells you. EVER.

By: Cindy on 8/5/09

Thanks George – I’m in line with Hodin except to say that sometimes the truth hurts. Like from paragraph 3 and onwards.

By: R.Hodin on 8/5/09

Thanks, George, for re-posting the booty rant—an example of blog posting at its finest. It hurts.

By: BeenThereDoneThat on 8/4/09

Hey Lifelong. You are OH so right!!!

By: BeenThereDoneThat on 8/4/09

Again I do not care for Kelly but I hate to see facts distorted no matter guilt or innocence. The bridge over the railroad tracks and then the second over the creek to the senior center, were in approval process for nearly three years!

The railroad because Southern Pacific takes forever.

Watchful eye on Gearhart. Read the post. I talked to the inspector. How about you?? NOPE.

Spin on Del? Do you know him?? If so o.k. If not, then you must not know to much.

I see a lot of people talking about things they think (or want to think) they know about or that they were there. Afraid not.

On the things I have stated. Go look it up.

Oh and on the Senior project maybe you are confused on the lowdown how it went down.

It was stated (if you read it) at the time that Kelly owed over $400,000 to the city. They then came back later and said it was a mistake and was only $220k+.

There was even a brew ha about the fact that the city had there numbers wrong. Go down to the library and look it (article)up. Then come back and act like you know what you are talking about.

Again not a Kelly fan but hey lets get our facts straight.

By: Lifelongatasresident on 8/4/09

WOW, more crap from the past. Fees at the senior housing were agreed to and paid. Our city inspectors do not take kick backs. Finding a septic tank takes like 20 minutes with a professional. If you got a tax bill the house was finaled. I can not believe all the crap this crappy blog keeps digging up. Del is not Hanley’s brother in-law his sister and Hanely have been divorced for years, Im not still relted to my ex brother inlaws am I? A Brennler was in on the meetings for the senior housing and hes a liar if he says the fess were not paid, I was there too! Hey Brennler just because you can’t see then does not mean they arent following you, remember that. Have a good day

By: paperboy on 8/4/09

Oops, my bad. It’s not an encroachment permit, it’s a stream alteration permit from Fish and Game.

By: paperboy on 8/4/09

I find it unbelievable the city didn’t collect more than $200,000 in developer fees. If that’s true then heads should roll.

This is why cities have audits every year, to catch things like this money that should have come in but didn’t.

Shoot, Atascadero CC needs to completely clean house to get rid of the foul odor from all this Gearhart stench.

As for the inspections, the city needs to get out to these places and inspect them and then sign them off ASAP. They are totally at fault for negligence and need to fix this pronto.

As for the bridges, usually you have to get an encroachment permit from Fish and Game to build anything near a creek let alone a bridge over a creek. You also need to have it signed off by Army Corps of Engineers, Fish and Wildlife Service, EPA, Cal-EPA, etc… So there’s got to be a lot more to that case.


BTDT: Watchful eye on Gearhart?! Now that theres funny!!! They had the fox watching the chickenhouse. Lord have mercy. He even screwed over his “friends” in the deals. Look up the word sociopath. I’m thinking his fat mug is right along side the definition.

By: JorgeEstrada on 8/4/09

Did I read this right? Gearhart, Robascotti and Hanley were team players? When was that? Could it have been when Gearhart was building for Hanley’s, Neighbor-Father-In-Law/Robascotti?

Now there’s site to see, a new developement of non-conforming, questionable permits, eco-violations and sadly a previous lost cause for one investor.

I am troubled by this relationship, a previous “conduct does not rise to the level of wrong doing”.

Genius Gearhart obviously did not work alone and was handed white gloves for his next job? A pile of gloves have been found.

Thank you very, very much Karen!!!!!!

By: Cindy on 8/4/09

BTDT – “Del Robasciotti. Contact him. He is no longer friends with Kelly or liker of.” The key words here are “no longer”. At the time that Mike made his inquiries there was in fact a working relationship. Watch your spin.

As for the fees that were paid by Gearhart. Those fees were never paid in full. That was also included in the Tribunes article. He was given an additional 30 days to pay everything he owed. He never paid, Dude.

By: BeenThereDoneThat on 8/4/09

I have to take this article to task some.

Del Robasciotti. Contact him. He is no longer friends with Kelly or liker of. He as others has been screwed for over $220k.

Del is a straight shooter so check out your sources Karen.

As far as the senior projects that $220k+ was taken care of about three years ago. It was in the TRIBUNE. State as resolved. If memory serves I think Mike B. even then stated as solved? So why is our excellent sourse Mr. B. still prattling on about this?? Someone get him some more valium.

That said I am not a Gearhart defender. Read other posts of mine. Just saying lets get the facts straight on some of this.

Oh and on the inspection thing. I also wonder how legit. On the source that said the city really watched over Kelly and that they set a higher standard on his projects on inspection. I am not sure in the beinging but I can state for a FACT that it was that way from the Senior housing project forward till it (GD Development) fell apart. Mr. Muelhausen stated to me as such in a conversation, that the upper management was putting presure on him to keep a VERY watchfull eye on Gearhart projects. Yea I have sources too.

By: mccdave on 8/4/09

“The inspector was unable to the sign off on the septic system because its exact location is not known.”

This may be the perfect metaphor for Atascadero. If I may play Guest Editor, you could make this the title of the piece: The Case of the Missing Sh*tbox. (You’ll have to pick someone else for Guest Proofreader.)

Fun stuff. I wonder if the city can be put into receivership. FBI agents wearing hazmat suits could swoop in and hose the whole place down with industrial disinfectant.

By: Cindy on 8/4/09

WOW Booty – You have some interesting things to say. I actually relate to “most of” (not all of) what you have to say after paragraph 3. I recommend that people start here. “But the sad fact is that government is corrupt everywhere and at all levels, isn’t it?”

You should probably remove paragraph 2. It might get your post deleted and it’s unbecoming of your intellect anyway in fact that paragraph is outright childish.

By: Becky on 8/4/09

Good Ole’ Atascadero in the news once again and not in a good way. I can remember a meeting behind closed doors with Wade and a couple of Public Work guys who hashed out a deal with some developers as a way to kick back $. If you can get all memos or Staff reports from 4/25/06 item A-10 to began with, where the City Manager and Public Works staff made it appear a couple of local developers doing business with the city would get a kick back in the form of a sewer deal. As i recall it was involving tract 2525 and others, all the developers in the deal are either now gone or facing investigations. Indeed some records have ended up in a federal investigation in the Central Valley, Fresno area where the Federal Bureau of Investigation and the United States Attorney’s office is doing some snooping around seeking indictable evidence on some developers involved in this scheme in Atascadero. the federal prosecutor is named Kirk E. Sherriff and one of the led Agents is Andrew Brandt of the FBI, so some things are differently going on. Good reporting guys. A co-worker said some questions surround two local developers who are now in Bankruptcy.

By: bluemule on 8/4/09

You have to wonder whose palms Gearhart was greasing to get that kind of preferential treatment. I bet the city officials named in the story as well as two or three of the current city council could tell us.

By: Cindy on 8/4/09

In response to the following: “Officials had previously enacted rules that required city workers to destroy building plans, aside from the original project plans, after 90 days.

The policy appears to circumvent California law governing retention of public records.”

The city has also destroyed all historical property tax records. I had an occasion to research property tax records related to my land. I needed to go back 10 years. I was told that the only existing records were my own and not those of the previous property owners. I was informed that the city no longer has any historical property tax records apart from those of a current owner because of storage issues! Unbelievable! I can go to SLO City and review records over 100 years old. There have always been abnormalties regarding some Atascadero lands due to the Atascadero Development Syndicate and the Colony Holding Trust executors. Property still remains in those trust to date and has been “questionably” distributed in some cases. Who approved the destruction of the property tax records? In fact I’m aware that some of these lots were given to Kelly Gearhart.