UPDATE: Courts asking for portion of casino profits
September 14, 2009
By KAREN VELIE
Federal bankruptcy court attorneys plan to ask for a portion of proceeds of a proposed Indian casino to be available to reimburse creditors of bankrupt North County developer Kelly Gearhart.
In June, Ohio Federal Bankruptcy Trustee Harold A. Corzin filed a fraud complaint against local attorney Robert “Grigger” Jones, as well as Chris Molina, Daniel Phillips, and the group’s Pejihota LLC for allegedly hiding assets for Gearhart, who is suspected of defrauding investors out of millions of dollars.
The trustee alleges that Gearhart transferred $1 million to $1.5 million into an LLC working to finance an Indian gaming casino in either San Luis Obispo County or Monterey County at a time Gearhart was insolvent with the “intent to hinder, delay, or defraud creditors.”
Responding to the trustee’s claims, the defendants deny allegations that they intentionally caused damages to the creditors of the Gearhart bankruptcy. The group stated that its business venture “had no value” at the time Gearhart resigned as a member of Pejihota LLC, according the defendants joint answer to the complaint filed last month.
In regards to claims that their past relationships with Gearhart subjects the ex-business partners to greater scrutiny by the court, the defendants say they do not have sufficient information to answer the allegation of an insider relationship “and therefore deny the same.”
Trustee attorney Michael J. Moran said the trustee and his attorneys were still conducting discovery and planned to ask that the defendants pay monies for a portion of Gearhart’s bankruptcy.
In addition, if the defendants are successful in constructing a local Indian gaming facility, the trustee plans to ask the court to require additional payments to help reimburse Gearhart’s creditors.
The Pejihota members expect to reap 40 percent of all gaming proceeds for a period of seven years with an option to extend for an additional seven years in exchange for financing the casino’s construction. Also part of the financing would include federal recognition for the Salinan Indian tribe to operate the casino.
Pejihota documents project earnings of approximately $600 million over the next 50 years, according to the group’s records.