Judge dismisses Gearhart’s bankruptcy protection

November 10, 2010


A federal judge has ruled that Atascadero developer Kelly Gearhart’s bankruptcy was applied for fraudulently and as of October 7 his creditors may legally go after his future earnings, according to a November 8 court order.

“They can sue him for a judgment, but they cannot go after properties or assets in his name because the bankruptcy trustees have the right to administer those assets and provide distributions to the unsecured creditors of the estate,” said trustee attorney Ken Gibson who noted it would probably take a year to liquidate the assets.

Gearhart and his wife Tamara Lowe filed the bankruptcy petition in February 2009, claiming $6.5 million in estimated assets and $45.1 million in estimated debts. The couple was accused of helping to defraud investors of more than $100 million in an alleged Ponzi scheme. They moved to Wadsworth, Ohio, in 2009 following threats of physical violence by an angry investor.

Gearhart filed the bankruptcy petition in the Northern District of Ohio U.S. Bankruptcy Court.

In July, bankruptcy trustee Harold Corzin made a request for the dismissal of Gearhart’s bankruptcy protection because he had fraudulently transferred and concealed assets. Specifically, Gearhart and Lowe failed to mention ownership in numerous properties and businesses including the Atascadero Printery building, Atascadero All Night RV Park, Atascadero based Print and Copy Solutions and the Links golf course in Paso Robles.

The couple disclosed 12 active bank accounts even though they had more than 50 different accounts when they filed bankruptcy, according to court records.

The trustees also contend Gearhart and Lowe failed to properly report money made through the sale and transfer of vehicles.

For example, investigators discovered that within 90 days of his bankruptcy filing, Gearhart transferred the title of a 1956 Chevrolet. The undisclosed recipient of the transfer sold the Chevrolet for $74,600, put $40,000 in a U2 LLC account and kept the remainder for himself.

In addition, the couple has failed to account for approximately $5 million in personal property that was listed on previous financial statements or informed the court of $10,000 payment to the Planet Hollywood Casino.

Even though the trustees believed that Lowe shared some culpability for the non-disclosure of assets, the trustees agreed to release her from future liability from creditors as part of the compromise. The trustees noted that the creditors did not have any substantial claims against Lowe.

In an objection to the proposed compromise, Murray Powell, an investor in the alleged Ponzi scheme, said that Lowe should not be allowed bankruptcy protection because of her involvement in fraudulent business activities. For example, Powell noted how monies he invested for the construction of a project were transferred into the Gearhart and Lowe’s personal bank account.

“Why release her to have an agreement with Gearhart when they had him dead to rights,’ Powell said.

On October 25, Federal Judge Marilyn Shea-Stonum agreed with the trustees’ assertion that Gearhart was the more culpable party and approved the compromise.

“The proposed compromise will not affect any potential criminal liability of the debtors…,” Shea-Stonum said in the order authorizing the compromise.

Gearhart is also one of the subjects in a two-year racketeering, money laundering and wire fraud investigation by the FBI that includes Gearhart’s former business associate Jay Miller of Hurst Financial. Last year, the allegations were heard by an impaneled federal grand jury.

The Fifth Amendment to the U.S. Constitution requires that charges for all capital and “infamous” crimes be brought by an indictment returned by a grand jury.

Because of secrecy involving the grand jury, hidden assets discovered by the criminal investigators cannot be shared with the bankruptcy trustees until an indictment is made. Meanwhile, the two year time period for the discovery of assets to be included in the bankruptcy for distribution to creditors comes to a close in early 2011.

“I am very frustrated that these indictments have not been made public,” trustee attorney Gibson said. “I have shared a lot of information with U.S attorneys and the FBI and because of grand jury secrecy there is no return.”


Hopefully the truth, all of the truth, comes out about gearheart and his many connections to those in power who helped him. Interesting that the same names continue to come up when any scandal is hinted at and yet nothing is ever resolved…


Pssst, Kelly? Remember when you stood before me and said, very loudly , “Don’t you KNOW who I am??” Well, now EVERYONE knows who you are. And Atascadero knows who “made” you. Many of those are still in city government. I can only imagine their morning coffee today.

It’s a beautiful day in my neighborhood, which, Mr. Gearhart tried to take by eminent domain. I could not hear better news. Thank you, CCN!


I am even willing to bet that this guy goes to church on sundays as a business predator to enhance his image and credibility


I find it ironic that he left town in fear of his life over a dispute in a grocery store. He has defrauded thousands of seniors and people with families and all it takes is one of them to put a contract on him. I think it is even more ironic that knowing the many he defrauded are outrage and want recovery, that he files banckrupsy fraudulently to legally escape restitution only to p*i*s*s* off his victims more.

Was being in fear of his life “unexpected” NO! OBVIOUSLY, NO! Its a natural expectation when you deliberately screw someone over that law abiding people be upset, then he uses the system by saying criminal revenge is made to use our tax dollar paid LE to protect his a*s*s*

How sickening, do you feel sorry for him?


My understanding is the final thing that persudated him to leave town, was when a young man showed up at his house with an ax. The only strange thing was that when the man went back to his own car upset, he hacked the hood of HIS OWN CAR in frustration. Kelly must have figured he could have been that hood? ;-)


It’s really to bad he wasn’t the hood and then the blacktop under the tires, any body got a current address? Er, I have to serve him with some more papers, yep, time to pay now Kelly, you never answered my complaint and it was filed way before your bankruptcy, hello default judgement like that will help, maybe the department of real astate’s victems fund will some day get funded, $25,000 per fraudulent loan I believe.


Body parts are very valuable if ‘It’s done right’ :-)


P.J. Nice thought, but his heart is bad from being fat and everything else is, well jowls are not exactly in the trend this year, we could take all his fat and make soap, he still wouldn’t come clean though, never will! So this one is a little more on subject, we are all free to pursue legal actions that have been put on stay by the Federal Bankruptcy? Might get a Default judgment just to say I did! It’s all typed out and ready to send old cousin jowls his copy!


Well he has received it by now or will in the mourning, better get on it, jowls, it lasts for ten years. This default was filed Friday, the 12th, in case CV 088-068 you are hereby notified, your cooked now like a lichen (pig), with an apple in it’s mouth, would calling you allegedly, a big fat pig be going to far,? Naw,,,, don’t think so!


The default judgment was entered Nov. 22, 2010, Guess there’s two people, or __________s out there that really don’t like it and I bet you can guess who they are. I guess calling them pigs would be going to far.


Imagine, the SOB and his wife lived the best of life that money can buy. Not too long ago, the average person who failed to respect him is automatically a scum by all common people and people of power and authority.

A while back, I was with my daughter buying a lottery ticket, my daughter said that if I win she wants a brand new custiom painted car and I told her that I would drive an old beat up junk car and dress with clothes from goodwill because I do not want a bunch of stupid vultures around me. I advised her that mom will buy a high class car and all the luxuary to suggest symbols of sucess. I told my daughter that my wife is stupid.

Gearhart probably had some experience in Real Estate where he had to dress in expensive suits and drive an expensive car (rented) showing sucess, he does not sell himself but the people he con-empress sells him to their friends (doubling credibility via a trusted friends).

No different than Maddoff.

I will not send my kids to Mission Prep!


Gearharts home was right by the 101 freeway. Imagine with all this open space and the quiet that Atascadero affords it’s residents and Gearhart lived right next to the freeway? So much for enjoying the dark of night and taking advantage of the lighting ordinance in A-Town or listening to the crickets and star gazing. Guess that tells you what it was that he liked about this town or at least, what he didn’t care about.


Don’t doubt you are wrong about Gearhart and his motives, but you are all wrong about MCP! That school is not about being rich or flashy — they have a lot of poor kids there on scholarship. MCP is all about working hard, giving everything your best shot, not being afraid to try new things, and giving back to the community. My son went there, and it was a great growth experience for him and our whole family. I really can’t say enough good things about Mission Prep as a school.


I recant with appologie to my inflamed remark about Mission Prep. I agree with you, many good families and kids I know attended there. Pretty much all of the schools here are good and so are most of the children. Another thing inherit which is wrong of me is to suggest condemation on any children even if they have crooked or criminal parents. Being inflamed by the sort is just as bad in the opposite as being guilable to them like the officials and those that envy him as an idol or icon.


I have heard from two very good sources that referanced early 2011 as the time the you know what, hits the fan. Now seeing the time line of early 2011 mentioned in article, I am even more convienced that we are getting to the chase seen of this story. Stay tuned.

Also I just got my bankruptcy notice on my personnel involvement as one of the unsecured creditors and it pretty much hits on the same as mentioned in article.


I was just thinking the same thing BTDT. This early 2011 time frame fits in with exactly what I’ve been hearing. They are going to bring a big bus to Atascadero and cart away more people than we are aware of including some city officials. The FBI has been following the money for quite sometime now and Gearhart sang lots of songs to them and then some of those people sang songs and the sound of music is in the air.


You got me thinking mentioning the bus. This can be like a reunion party. Most guests will arive by bus. The main entertainer will arive via plane from Ohio and instead of a black tie affair at the Ritz, it will be an all orange affair. Instead of being served steak and lobster at the Ritz, we will serve them boloney sandwiches and chips at the elegant County Center, located off highway 1 in San Luis.


We really need to start putting the hurt to these people. They work the system and get off scott free. Dont bring gearhart back here to go to jail. He was a big Parkinson contributor.


Man of the Year! What a joke. Liar of the year is more accurate and his pants are on fire. I wonder if his defenders like the Chamber CEO, Joanne Main, Jim Wilkins president of the Atascadero Historical Society (and most of the board), Bev Aho, Tom O’Malley, Jerry Clay, Grigger Jones, Wade McKinney, Mike Sherer, Jim Harrison, Barbie Butz, Heritage Oak Bank and all the other whose who boot lickers, who thought Gearhart would save Atascadero, are just a little embarrassed. That would be expecting too much.

I just wish the FBI could move a little faster. By the time they pull it altogether no one will remember who Gearhart was.

Anon E. Muss

I’m sure he wouldn’t have been voted citizen of the year in 2006 if people knew then what we know now. he hoodwinked a lot of people, and they aren’t necessarily in bed with Gearhart just because they didn’t see this coming years in advance.


Do you mean people like Jerry Clay and Tom O’Malley who complained that I was “picking on Kelly” when I asked the DA to investigate Gearhart for failing to pay his development impact fees, allowing units to be occupied without final inspections and failing to have two bridges finaled.

Or do you mean people like Roberta Fonzi and her husband Al who claimed Gearhart was a great guy and that I should apologize to him for going to DA. Of course it is interesting that Gearhart complained that Fonzi the realtor and planning commisioner was squeezing him in order to put in perks (appliances) in the Gearhart homes she sold to her clients. Gearhart complained about it but realized that as long as she was sitting on the planning commission and approving his projects he would have to put up with it.

There were plenty people in bed with Gearhart and many simply knew about his deeds but were willing to look the other way.


My take Fowler and Grigger Jones are up to there necks in this one!


Well hello Mike(5150)Brennler. How’s the blood pressure? Be careful what you wish for, because you can be caught in you own snear. I think you and some others have forgot about me. I’ve been sitting back patiently taking notes and gathering documents, some that you refused to provide to me while you were the Mayor. What goes around, comes around Mikey.


We will make sure Gearhart’s name lingers for generations to come in Atown. He won’t be forgotten.


It will be interesting to see if the FBI really does stand up for justice or if they let yet another scoundrel free to feast on the bones of elderly victims