Stewart Title settles with Gearhart investors
March 7, 2011
By KAREN VELIE
Stewart Title settled with investors of former North County developer Kelly Gearhart for approximately 27 percent of their investments in seven lots off Highway 41 near U.S. Highway 101 in Atascadero.
Stewart Title paid investors in the five residential lots and two condos on Tecorida Avenue $460,000, the current value of the property.
Information that Cuesta Title was working with Gearhart to allegedly defraud investors was explained in several 2008 CalCoastNews exclusives.
In an odd twist, Melanie Schneider, an ex-employee of Cuesta Title, who was a key person in the majority of HFI transactions, reportedly moved to Colorado with Kelly Gearhart’s brother Doug Gearhart.
Gearhart fled to Wadsworth, Ohio, in Nov. 2008 following threats of physical violence by an angry investor. A few months later, he filed a bankruptcy petition in the Northern District of Ohio U.S. Bankruptcy Court claiming more than $45 million in personal debt.
HFI lent Gearhart and his holdings more than $70 million, the bulk of which went to Gearhart through his corporations and was not included in his bankruptcy filing.
In June 2009, more than 300 investors filed a lawsuit through the San Diego based attorney firm of Kirby, Noonan, Lance and Hoge which says Stewart Title aided and abetted and/or conspired with HFI in defrauding people through illegal investment schemes.
On Jan. 25, a U.S. bankruptcy court judge ordered that the Tecorida Avenue properties could be sold with the proceeds being held by the bankruptcy trustee until all seven properties have transferred ownership.
After commissions and property sales costs are paid, the court has ordered the trustees to pay the law firm of Kirby, Noonan, Lance and Hoge $70,000 plus one half of the net proceeds exceeding the $460,000 already paid by Stewart Title.
Any extra monies will remain part of the bankruptcy estate.
More than 1,200 investors, primarily seniors, invested in excess of $100 million with HFI that is currently unaccounted for. During the past three years, Gearhart and HFI president Jay Miller have been the subjects of a federal investigation into racketeering, money laundering and mail fraud.