Kelly Gearhart’s personal fall from grace

December 18, 2010

John Gearhart

(Editor’s note: This is the final in a four part series about the story of North County developer Kelly Gearhart and his political allies. Part one is Fraud, arson and betrayal. Part two is Gearhart’s control of Atascadero. Pat three is Gearhart’s casino – the final gamble.)

By KAREN VELIE

The political and financial powerbrokers of San Luis Obispo County might never have heard of Kelly Gearhart if he hadn’t decided to take advantage of family members, including his own father, to power his way to the top.

His lust for power was epitomized by what his common-law stepmother of 35 years once said about him:

“I did whatever he asked me to and then he turned on me,” stepmother Marion Warner said about Gearhart’s financial manipulations that eventually cost her home and retirement. “He was the closest thing I ever had to a kid. I never thought he would hurt me.”

Born 50 years ago in Ohio, the controversial former San Luis Obispo County developer is now the subject of a federal organized crime investigation that started after authorities learned that Gearhart had allegedly cheated hundred of seniors out of more than a $100 million, broke numerous laws and betrayed some of those closest to him.

After Warner’s home in Atascadero was foreclosed on, she agreed to several lengthy interviews with CalCoastNews during which she described Gearhart’s rise from a troubled childhood to power through his financial and political connections.

Warner said Kelly Gearhart’s dad, John Gearhart, would get into physical altercations with both his former wife, Barbara, and later herself in front of his sons. His mother, Barbara Gearhart, moved out of the family home when Kelly Gearhart was about 11, divorced John Gearhart in 1974 and now lives in Colorado.

John, Barbara, Kelly, Mike and Doug Gearhart

When Kelly Gearhart was 10, his parents returned to Ohio to attend a funeral. They were walking home from a club loudly arguing when they passed a group of men gathered on a porch.

John Gearhart and some of the men began exchanging words, according to a report in the Akron Beacon Journal. His father, a former professional boxer, went back to the club and returned with a group of friends wanting to fight.

About a dozen people joined in the violent skirmish. Two of the men from the porch were severely beaten and required medical treatment for their injuries, the Akron newspaper reported.

Sean Dawes, 28, took a gun from the house and fired into the crowd, wounding John Gearhart in both legs and the shoulder and Barbara Gearhart in the back, the Journal said. For years, John Gearhart bragged that he had pounded Dawes even after he was shot and would have inflicted more injuries if he hadn’t been wounded, Warner quoted him as saying.

A few years later, John Gearhart opened the Bingo Palace in Coventry, Ohio, according to the Journal. For $100 a night, Gearhart rented the facility to people who claimed the remaining profits were donated to charity.

Eventually, Summit County Common Pleas Judge James V. Barbuto ruled that the games were, in effect, illegal because they constituted a lottery.

Those who have known Kelly Gearhart over the years suggest that his father’s illegal gaming scheme in Ohio has affected his judgment, including coming up with a plan to have the Salinan Indian Tribe recognized by the federal government in order to open a casino that he would have an interest in.

At about the same time, Kelly Gearhart’s brother, Mike, died in a tragic accident during an eight-grade graduation party in 1973 at Lake Nacimiento. The 13-year-old swung out over the lake on a rope, dropped in and didn’t resurface.

Authorities said the boy drowned.

The death of their middle son put the Gearhart family into an emotional turmoil.  The wife moved out to live with a man she worked with at a Thrifty Drug Store and would eventually cut her deceased son’s images out of most of the family’s photos. The boys, Kelly and Doug, remained with their father, who began drinking heavily.

Kelly Gearhart

In July 1977, Kelly Gearhart, then 15, was traveling at a high rate of speed on Traffic Way in Atascadero with a group of friends when he lost control of the car he was driving and was broadsided by another vehicle. Gearhart’s best friend, Raymond Gin, died and four others were injured, according to the San Luis Obispo Telegram-Tribune.

Gearhart suffered internal injuries and was hospitalized. After the accident, he was ostracized by many of his friends while parents of the other friends in the car sued the Gearhart family.

The incident, some say, affected Gearhart, occasionally driving him into bouts of guilt and anger.

The lawsuits cost the Gearhart family their home on Colorado Way in Atascadero. About the same time, his mother divorced his father and she was awarded the family furniture, including the boy’s bedroom sets, as part of the divorce settlement. John Gearhart and son Kelly moved into a small apartment. The other son, Doug, moved to his own place.

It was at about this time that Warner moved in with John Gearhart, a contractor at the time, and Kelly, who she said were sleeping on mattresses on the floor.

In some ways, Kelly Gearhart would follow in his father’s footsteps. After a short stint as a guard at the California Men’s colony, he began working in the construction business. However, while Kelly Gearhart was a heavy gambler, he did not drink alcohol.

In order to move ahead or to reimburse others he owed money to, Gearhart turned on many of those who supported him

In the early 1980s, John Gearhart was working with childhood friend Dan Mackie on a project in Atascadero. That was before son Kelly went to Mackie with claims that his dad’s drinking was causing problems at the work site.

Mackie, who owned a gym in Ventura and did not drink, demoted John Gearhart and placed his non-drinking son as the lead on the site.

“John was really hurt and he never forgave Dan,” Warner said. “Kelly finagled his way in by claiming John drank too much.”

For decades, Mackie was one of Kelly Gearhart’s biggest financial backers and went as far as making him the executor of his will, a mistake that would financially devastate his family.

Dan Mackie died in December 2007.

In 2009, a month before Kelly Gearhart filed for bankruptcy, he transferred a deed that belonged to the Mackie Trust to Sean Freeman without authority to cover a $700,000 debt. In addition, authorities discovered that he did not disclose the transfer to the United States Bankruptcy Court as required by law, according to court records.

Police then evicted Mackie’s widow from her home.

The bankruptcy code says no creditor is entitled to preferential treatment. And, anyone, who gets paid in the 90 days before a bankruptcy is filed, usually has to return the money.

In 2008, following reports by CalCoastNews that Gearhart was in serious financial distress, San Luis Trust Bank placed liens on 13 properties owned jointly by Gearhart, wife Tamara Lowe, Fred Russell and Habib Tavassoli. The properties are in Wadsworth, Ohio.

Russell and Tavassoli are co-owners of a string of bars in San Luis Obispo, including McCarthy’s Irish Pub on Marsh Street.

Then, just 91 days before Gearhart filed for bankruptcy, he transferred 35 properties in Wadsworth with a value of approximately $1.5 million over to Russell, according to federal court records.

In June 2009, the bankruptcy trustees filed a motion to force Russell to transfer the properties back to the Gearhart estate. In interviews, Gearhart said he had transferred the properties to cover debts he owed to the Fred Russell CPA Retirement Trust.

Russell fought the trustees’ motion claiming that he was a hard-money lender in California and that investors, primarily seniors, had invested into the lots. The court accepted Russell’s claim and he was able to keep 33 residential lots and two commercial lots.

Even so, officials from the California Department of Real Estate said that Russell is not a licensed hard money lender.

Warner, Gearhart’s common-law stepmother, said he began wooing the rich and powerful while in his early 20s.

As Kelly’s reputation as a high-profile developer grew, he was able to form beneficial relationships with numerous local and high ranking politicians. Gearhart was touted by several city officials in Atascadero as the city’s hero.

He regularly dined with then state Sen. Able Maldonado (R-Santa Maria), had a direct line to County Tax Assessor Tom Bordonaro and even dined with Republican Gov. Arnold Schwarzenegger of California, sources said.

Warner said Gearhart would ask her to help him funnel money by moving contributions through her checking account to state and local politicians.

She also loaned him about $700,000 —  her entire savings — when Gearhart said he needed the funds to make him appear in good financial shape. He said the monies would be invested into a property and she would receive 10 percent interest on her investment.

In 2009, not long after his father had passed away and following threats from angry investors, Gearhart moved to Wadsworth, Ohio. Before he left, Gearhart asked Warner to meet him at San Luis Trust Bank to sign papers regarding her investment, Warner said.

Marion Warner and John Gearhart

Gearhart and Warner went into San Luis Trust Bank and while Warner thought she was signing documents protecting her investment, she, in fact, was signing several of Gearhart’s outstanding loans, totaling about $559,000, into her name.

Bank officials approved the loans even though the loan application claimed that Warner, unemployed for more than two years, was an employee of a suddenly back-in-business  Gearhart Development.

“Kelly would laugh and say, ‘All I have to do is talk about old cars . . . they will give me anything I want,’ ” Warner said.

“Kelly made fraudulent statements to San Luis Trust Bank. I took $500,000 of Kelly’s debt.”

The bank foreclosed on Warner’s loans and her home earlier this year. She has been forced to sell off personal possession to pay utility bills and other debts.


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oldatascadero

This is really sad story…..How does this happen….He needs to pay for what he did I agree. I am an old Atascadero family and I am in tears reliving when Mike died and when Raymond died. I remember that like it was yesterday, people were really sad when it all happened some never got over it. I wish the story could have only been about what he did and not drag the family and friends of the people who died through it again. I do not believe he tried to kill raymond it was something stupid he did. VERY STUPID and we all still hurt over it. I feel like I am back in 8th grade when I heard he was killed. I am sure there are people reading this that would agree. The other people in the car were forever changed and they where hurt badly too. He needs to be in jail for what he did…(Fraud,Arson betreyal) I feel so bad for the people who lost everything they will forever be changed also…Kelly is a very messed up disturbed person, there is still alittle bit of me that feels empathy for him becasue he just never got it. I do believe in hell and that he will pay for what he did. But maybe for now we could just pray for justice and peace in the hearts of the people that are hurting. These are all good people that will not be going to hell. I am going to remember how funny Raymond was, and thinking of his family this Christmas season… God Bless to all…


Nancy

I think the intent of this last part of the series was to offer some insight into Kelly Gearhart through his experiences during his early years. There is always a curiosity as to who is the sycophant behind the mask when a fraud of this magnitude occurs. Unfortunately there are always those, like yourself who recall all too well and were deeply affected. The accidental loss of these people is for the family and loved ones a memory that lasts a life time, with or without a reminder. My condolences to those who loved and continue to miss Mike and Raymond.

I found all of the 4 articles in this series to be informative and interesting as they offered an inside glimpse of how this current fiasco unfolded over the years and the associates/cadre who fostered these creative financing “schemes”. It is literally a who’s-who’s with banks, title companies, city officials, high level politicians and the list goes on. When the FBI starts bringing on the indictments and arrests, this story could very well and most probably will go National. Outstanding job CCN.


cheseburger

“In July 1977, Kelly Gearhart, then 15, was traveling at a high rate of speed on Traffic Way in Atascadero with a group of friends when he lost control of the car he was driving and was broadsided by another vehicle. Gearhart’s best friend, Raymond Ginn, died and four others were injured, according to the San Luis Obispo Telegram-Tribune.”


“GINN”, see I am right I just spelled the name wrong,”four others were injured” and one of them had a little baby inside her! This nowadays this would be manslaughter, or, baby slaughter!

I had ten times, a worse childhood and I did not grow up to steel old people’s money and lie and lie and lie, like a snake in the grass!


abby62

To set the record straight it was not his parent’s car he was driving when Raymond was killed & I imagine the family who owned the automobile in question ended up paying most of the lawsuits that were filed. We are all a product of our environment and sometimes our actions are unavoidable due to that situation because we know no better. In this case Mr. Gearhart was a gambling man since his teens, back when it was a game to impress your peers and make a few dollars. He had friends whose parents were well off and maybe he felt he had to try and show them he was capable of acquiring financial prosperity. He also had a job & a car so he was not totally poverty stricken. Sadly it seems he forgot to grow up and realize he was not flipping quarters behind the gym anymore when he entered into financial agreements using other people’s life savings to pull off his shady dealings. As far as the people who endorsed his credibility without close scrutiny and said things like he was saving Atascadero, those claims could only compare to foolish rantings of people who only judge books by their covers and will worship a shiny icon until they are truly marred by the filth that emanates from them. I am sure the past Gearhart worshippers are singing a different tune now. I am not saying Kelly was all bad and he always has been pretty cool to me personally, but I am saying that he should have had the people’s best interest in mind that were investing capital in his ventures and not taken such big chances with their money. I would also like to add that he did not act alone and his co conspirators deserve to carry the burden right along with him.


oldatascadero

Very well said..and you are correct t was not his car, and they did pay heavily…I agree people put him on a pedistal without reading the book. When this was all happening and the city of Atascadero thought he was a hero I could see through it all because I knew Kelly…He worked people and yes there are other people that worked right along side of him.


OsborneCox

No, Cheseburger, you’re not right. And neither is the reporter. To top it off, you both misspelled Raymond’s last name.

It was a single-vehicle accident on July 3, 1977. with one fatality. No alcohol involved.

I’ve supplied a couple people on here with newspaper articles concerning the accident. The best article appeared in the July 5, 1977, Paso Robles Daily Press and it included a gruesome photo. Check it out yourself next time you’re at the library.


cheseburger

“The best article appeared in the July 5, 1977, Paso Robles Daily Press”.


What the best version of what happened, for you to believe you mean right? One car? Why do you think the paper did this? Tell me I want to know which is correct, next it will be three cars and a tank, somebody changed the facts, you can’t have two papers saying different things, one has to be right and one has to be wrong,,,.


But one thing what happened that dreadful day, is dead and gone and even though it is completely irrelevant, it was still Gearhart’s fault and he got away with it, then in fact he went on to lie, cheat, bribe his way to the top,,,,IS THIS THE AMERICAN WAY,,,,,you are defending Gearhart with a non-credible news paper article, what’s in it for you?


oldatascadero

Yes you are right his last name is “Gin”. It was his best friend, his girfriend and another friend in the car he was driving. I do not believe Kelly was drunk, I knew him pretty well and he did not drink. I really do not believe the report was fixed either what would the point of that be. Also I can tell you are very angry with what I wrote…I never for one minute think he is excused for his bad behavior becasue of his childhood. I am just saying that the whole thing is very sad. Raymonds family does not deserve this.


oldatascadero

I feel so bad for you, you are a very angry person. Kelly had no money nor did his dad when this happened. Atascadero was a completley different place then, nobody covered anything up. you might be confusing this collision with a different one. I say this with respect to you. Please do not be consumed by this whole thing it will kill you….If you have a family enjoy them and love them you are fortunate that you are not like Kelly Gearhart alwasy having to look over your shoulder. I am not being rude I am really speaking from my heart.


Paul Anthony

To REALLY help Karen, donate money.


DO NOT click on the ads just to “make money” for Karen unless you really are interested in the ads. Don’t exploit these people who advertise here in good faith.


If the word gets out that if you advertise here, people will click deliriously, never buy, and cost you a ton of money. Then that advertising revenue will STOP.


Lose lose.


Stupid idea Cindy.


Cindy

So Noted, Your point is well made. The best way to help CCN is to donate and support the advertisers.


cheseburger

Take the Gun test! I passed and am still waiting for my free gift and my e-mail lessons!

This is a free country if you find something that might appeal to you click on it, that’s what it’s for, for you to view.


Cindy

Al, If you take another look, I think you’ll find that lot’s of her leads came from one basket but not the FACTS. She mentions many sources where she followed up on each item that was related to her and as a result, I don’t think there is anyone who can dispute any part of this story.


This certainly is an interesting and informative human interest story and offers some insight into who Kelly Gearhart is. He definitely had some difficult and even heartbreaking times as a kid. Loss of best friend, brother, mother and even the family home all by the age of 15 surely had it’s impact. Not to say that he wasn’t responsible for some of it but that car accident was one heck of a hard lesson for a kid, and kids do take their parents and friends cars for joy rides, although most never are involved in such a tragic outcome.


Regardless, Kelly Gearhart is now an adult and committed selfish, greedy and fraudulent acts against many many trusting and unsuspecting individuals. Deceiving so many people, especially the elderly and consequently draining all of their life savings and investments is unforgivable.


I understand that the FBI has until February 11, 2010 to indite him, otherwise any information that they have uncovered pertaining to where the missing funds might be will be past the statue of limitations for the investors that are claimants through the bankruptcy court in Ohio. I trust, in fact, I have full faith that the FBI will not let that dead line pass the investors by.


Kelly Gerahart, i can not feel any sorrow for you. There are 1200 innocent people who I feel sorry for and there isn’t enough grief to go around as it is.


willie

Wait a minute Cindy

Human nature is what it is.

There was a time when the powerful and the sleezy dismissed Karen as punny, even talk of suing.

When arrogant and the powerful underestimate their adversay, they switch their management mode.

I am not trying to deliberately be a cold blooded a*s*s, This is a normal in all levels. Kelly Gearhart is not the only child in the world who had problems.

They become negotiable, they go to appeal, they even go to pleading and begging behind the scene.

Do you think any of them would be so congenial if CNN had not aggressively broken them apart!

Essentially Karen is a better investigator than the FBI.

Sould the situation reverse itself, they would crush Karen or CCN without mercy or remorse as it has been in Kelly’s nature and pattern!

So sad, so very sad (what do you expect!) Where are the investor’s money!!!!!!!!!!!!!!!!!!!!!!


willie

Sunday School Lesson


Good morning to you 1200 investors that are still alive and sheltered.

Good morning to all you politicians and officials


Gearhart

Nice looking kid, has his own jet (Portraying symbols of wealth and power)

Then of course:

regularly dined with then (kiss butt) state Sen. Able Maldonado (R-Santa Maria)

had a direct line to County Tax Assessor Tom Bordonaro

and even dined with (paper tiger) Republican Gov. Arnold Schwarzenegger of California

(and other small fry officials in Atascadero)


Proverb 23: 1-3

In case you should sit down to feed yourself with a king, you should dilligently consider what is before you, and you must put a knife to your throat if you are the owner of soulful desire. Do not show yourself craving his tasty dishes, as it is the food of lies.

Proverb 23: 7-8

For as one that has calculated within his soul, so he is. “Eat and drink” he says to you. Your morsel that you have eaten, you will vomit it out, and you will have wasted your pleasant words (and money by investors and influence by politicians).


danika

I would like to see followup articles about those who assisted KG in his scheme. Particularly people who are still in power positions. We know who you are; we know what you’ve done. The frist domino has fallen. Your fall is coming…


Lilylu

So does anyone know what Kelly Gearheart’s living circumstances are now ? The last article I read was awhile ago and says he was living in a converted warehouse. Just exactly what is he doing? Is he still married to and living with his wife? Another article alluded to wheelings and dealings in Wadsworth Ohio and renovation projects there. I know more than one elderly woman who has lost hundreds of thousands, their security and retirement accumulated over a lifetime of hard work by they and their deceased spouse. The wheels of justice seem to be be turning ever so slowly. Are all these victims going to die before they see him convicted and sentenced? Has anyone from the local press actually gone to Wadsworth, Ohio and done some real investigative reporting in to his life there now? Inquiring minds want to know. Ms. Velie, have you ever been to Ohio? Maybe in the spring you should make a trip out there. It can be pretty that time of year.


BeenThereDoneThat

I like the idea of Karen going back there for some dirt. The only thing is I know that it would require some expenses for flight, car, hotel, etc. I for one would be willing to start a pool that we (posters here) could contribute to, to help fund the trip. Any takers? Karen would you do it?


cheseburger

She is a women who has had death threats and if I remember correctly was attacked,


I’LL GO TO WADSWORTH, WITH MY 1000 MILLIMETER CANON CAMERA, I’LL GO THROUGH HIS DUMPSTER TOO!


AND I’LL INTERVIEW HIM, WITHOUT HIS LAWYER, BECAUSE HE DOESN’T HAVE ONE ANYMORE, $73,000


TIME TO PAY UP, THREE YEARS IS LONG ENOUGH, BET HE WISHES NOW HE HADN’T UNDER ESTIMATED ME.


THROW SOME RED UP HERE GEARHART, I THRIVE ON IT!


“Have you commingled investor’s funds” Dave C. Show, Gearhart, “Your not a lawyer you can’t ask me that! Last time I heard from you you were looking for concrete work!”


Oh really, how do you feel about my abilities now, sir. Oh excuse me, “citizen of the year!”


BeenThereDoneThat

Well after two years of WAITING, I am hoping that 2011 is the year that Kelly is given a new view from behind bars. Let’s hope.


Kelly I know you lurk here on these boards. You did the crime, you need to do the time. It is time to pay your dues for your wrongs. You know it and I know.


Vagabond

I need to go take a shower now. What a slimeball.


Al

Tough love…

MLW LLC comes back to bite the hand that fed it. Lot of eggs from one basket Karen but I will give you the benefit of any doubt when it come to this story.


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