Hurst Financial president charged with defrauding investors

August 18, 2011

Kelly Gearhart and Jay Miller


The U.S. attorney Los Angeles office today filed federal fraud and money laundering charges against the head of an Atascadero financial company alleging that he bilked investors in Central Coast real estate projects. The money was ultimately siphoned off for other purposes, the U.S. attorney’s office said in a press release.

A 2008 CalCoastNews’ investigation revealed James Hurst Miller and former north county developer Kelly Gearhart allegedly swindled some 1,200 investors out of more than $100 million in a lending scheme involving hard money.

Hard money lenders specialize in short term, high interest construction loans that are often used as bridges to help a developer finish a project. Loans are based on the value of the underlying asset rather then the borrower’s credit rating. These kinds of loans are primarily funded through private investors.

Miller, 63, the former president of the Atascadero-based Hurst Financial Inc. (HFI), was charged in a four-count criminal information filed in United States District Court. It charges Miller with mail fraud, wire fraud, money laundering, making a false statement to a bank and aiding and abetting Gearhart in making other false statements in seeking funding.

Miller’s charges came as part of a larger organized crime investigation that includes Gearhart, according to a federal seizure warrant for the proceeds from the sale of Miller’s home in 2009.

The charges allege that Miller solicited investments in the Beacon Road and Vista Del Hombre real estate development projects in Paso Robles, as well as the Salinas River real estate development project in Templeton, and that his actions were fraudulent because the funds were not used to develop those projects. After obtaining investors’ funds, Miller and Gearhart used most of the money for other purposes.

The torturous path of monies invested in the Beacon Road Project provides insight on how Miller ran his hard money lending company.

Miller solicited and collected money from eight investors between Dec. 3, 2007 and Feb. 26, 2008, ostensibly to provide construction funding for the commercial park on Beacon Road. However, the money quickly went in a much different direction.

Within a week after the first investor’s money went into the Beacon Road Project fund, HFI was apparently writing checks to itself, allegedly to pay interest to a variety of other investors on previous loans for unrelated projects. As additional investment money came into the fund, additional interest payments were made by Miller to, among others, developers on Hurst-funded projects such as David Graves and Royce Eddings, and to projects such as “Navidad” and “Las Tablas,” two local construction projects.

The payment procedures often came close to depleting the fund. And just three and a half months after the first investment, the fund had been drained. Nearly $360,000 had been paid out of the Hurst loan escrow account in recorded interest payments.

As of June 17, 2008, the fund contained $198.12. Virtually none of the fund’s proceeds have gone toward construction of the Beacon Road Project, Miller’s own records obtained by CalCoastNews indicate.

Shortly after the fund shriveled, Miller informed investors they would no longer receive interest payments due to them, citing their agreements with Hurst Financial.

In another example of Miller’s lending practices, Hurst doled out approximately 8,000 percentage ownership in the planned Paso Robles 32-building development known as Vista del Hombre.

A CalCoastNews investigation, using title documents, discovered that investors held more than 200 percent interest in each structure.

“It’s the lender’s responsibility to make sure beneficial interest adds up to 100 percent,” said one local escrow officer who declined to be identified. “You see a lot of this with Hurst and Estate Financial title reports.”

Miller also filed documents through Cuesta Title that loans on projects had been repaid to the investors even though they had not. With a clear title, Miller would then put a second and sometimes a third loan funded by investors on the same property.

For example, Gearhart got his first loan for Vista del Hombre’s purchase and initial infrastructure construction in May 2006 from HFI, in the amount of $15 million. Miller in turn had secured that money from private investors lured by promises of high interest returns and placated by Miller’s pledge of a loan-to-value ratio of 44 percent, according to one loan agreement obtained by CalCoastNews.

Translation: the hard money loan could fund no more than 44 percent of the project’s total value. That initial loan was slated to mature in late 2006, but Hurst has not reimbursed investors and ceased providing interest payments.

But by then, Hurst had already lent Gearhart another $11,850,000 for the Vista del Hombre development – raising Gearhart’s annual interest payments to $4 million. That pact was signed on June 22, 2007, after Hurst attracted more than 100 investors with the same loan-to-value promise.

Those investors received interest payments for only six months before the payments abruptly ceased.

Gearhart told CalCoastNews in a 2008 interview that his Vista del Hombre project was worth between $100 and $150 million. However, a 2008 Heritage Oaks Bank appraisal put the property’s value at $4.5 million.

Today’s charges also allege that Miller aided and abetted false statements for Kelly Gearhart to Heritage Oaks Bank relating to collateral for a loan application on Vista del Hombre.

Miller is one of a number of persons targeted in the federal investigation. The list includes developers, lenders, title officers, lawyers and public officials.

The alleged criminal acts include operating an alleged Ponzi scheme, falsifying title documents and falsifying  inspection reports, acts uncovered in a CalCoastNews investigation.

The FBI investigation has taken almost four years because of the large number of people involved in the alleged criminal acts.

Early on, coverage of the alleged fraud was largely limited to CalCoastNews. The San Luis Obispo Tribune has run pieces critical of CalCoastNews for its reporting on Miller and Gearhart, a former Atascadero “Man of the Year.” Several lawsuits threats were brought by Gearhart against CalCoastNews in an attempt to stifle the reporting.

The mail fraud and wire fraud charges each carry a statutory maximum penalty of 20 years in federal prison, the money laundering count carries a statutory maximum penalty of 10 years in federal prison, and the charge of making a false statement to a bank carries a statutory maximum penalty of 30 years in federal prison.

Therefore, if he were to be convicted of all four counts listed in the charges, Miller would face a maximum sentence of 80 years in federal prison.

Nevertheless, under an alleged plea agreement discussion Miller agreed to testify against other persons being investigated by the FBI. In return, Miller has requested prosecutors reduce the four counts to one and allow him to serve a reduced prison sentence in the minimum-security federal correction facility located in Lompoc Calif.

Miller is likely to be arrested in the next two to three weeks during his first appearance at the federal courthouse in Los Angeles.

The case against Miller is the result of an ongoing investigation by the FBI and IRS. The San Luis Obispo County District Attorney’s Office provided assistance in the investigation.

Since Miller stopped making interest payments to investors, several of the victims have died, more have lost their homes and some have been forced to abandon their retirements and return to work.

Rita, 68,  is a former Cambria resident who suffers from multiple sclerosis and can no longer walk. Her husband placed the couple’s savings, $830,000, with HFI prior to his death from a long term illness, thinking he had guaranteed his wife’s financial security.

“I need 24-hour care,” Rita explained in 2008. “Without my interest and possibly my investment, I’m not going to be able to afford my caregivers and I will have to sell my house. I don’t know where I will end up. I am scared.”

According to Rita, Miller failed to return numerous calls she placed to him requesting information. In the midst of the financial turmoil, Miller took a 10-day trip to Hawaii.

“I am appalled that they would leave their business in the state it was in,” Rita added. “How do they dare go on a vacation? It shows they have no concern for their investors’ situations.”

Because of Miller and Gearhart’s fraudulent scheme, Rita was forced to sell her home and currently resides in an assisted living facility in San Luis Obispo.


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Today, August 19th, the Tribune finally ran this story of Jay Miller being indicted; section 3, below the fold, in the “County Roundup” column, with absolutely no mention of Kelly Gearhart. There was, of course, no mention of Cal Coast News or Karen Velie as the original story source. Nice job Tribune; keep your head in the sand as long as you can ….

The Tribune has plenty to be ashamed of. How do you run a front page story without reminding the public of how wrong you were? If you recall, Karen was actually ostracized by the Tribune and they went so far as to insinuate that her reporting was nothing more than hurtful “rumors” that had caused the money lenders business to suffer. The Tribune even reassured everyone that the projects weren’t being completed because of a downed real-estate market and not because of any wrong doing . Lon Allen even said that Karen was destroying the name of a good man (Gearhart). The Tribune has mud on their face. They were a shill to the Good Ole Boy’s and still are. They will print any spin that the right person asks them to.

This line says it best for me………….

“Miller is one of a number of persons targeted in the federal investigation. The list includes developers, lenders, title officers, lawyers and public officials”.

The S**T has hit the fan and is going to land ALL over a bunch of people. It’s about TIME!!! I get the feeling there will be many a good story coming from Cal Coast on others in the next 30 days.

One last. 4 years to investigate. Goes to show how convoluted this whole thing as been, that was put together by Jay and Kelly.

BTDT, you write,”One last. 4 years to investigate. Goes to show how convoluted this whole thing as been, that was put together by Jay and Kelly.”

Can you tell me who you suspect as the leader or mastermind behind this entire scam?

Nor Jay or Kelly has enough brains to stay out of jail, for four years!

It is going to be quite interesting to see who the Attorney General indicts, and who gets a free pass, there are many people who should be put away for a long time, tell you something I am actually a kind- hearted surfer/concrete finisher, not even a college graduate or lawyer and I was able to successfully write file and litigate a lawsuit against the crooks as you know, my next hearing on this matter is 9/28/11 in the Paso court, and Jay or his lawyer will not be there.

As I see it, I should win by Default Judgment and Miller will be ordered to pay restitution.

If anybody out there does not think this will happen, throw a blog up here, I am feeling much better this mourning for the first time in four years, I like others respect your opinion and are very glad to have you on this blog, me not so much, oh well I have always been one with a big mouth, never knowing when I should keep it shut, I put on a mask to surf in and a mask to write with.

To all of you who think I am bad or evil, I’m not, just tenacious and I never give up.

This lawsuit I wrote, should show the entire population that sometimes you don’t need a lawyer if you can read a book, although the system has made it quite difficult.

According to anonymous attorneys contacting me, I am in a good position for a recovery of some sort.

The whole lawsuit cost $50.00 and a nervous breakdown, two tons of paper and an 18 wheeler full of ink, all to prove what Miller has just confessed too.

This is my confession that I am not as I seem, those who know me, trust me and know that I do not lie and am not mean.

LOL,LOL, I’ve never thought for one second that you’re mean. I’ve always had the impression that you were, ripped off, pissed off, lied too and just plain damn outraged about the whole thing and rightfully so. The difference between you and the others is that you say exactly what you’re thinking and it can be pretty darn funny, “off with his head”.

Good Post by the way and best wishes to you on 9/28/11.

This just in …

” … Kelly Gearheart was reputedly watching the proceedings with interest from his hideout at the PR wastewater treatment plant …”

Funny channel six just said MILLER faces 80 years in prison, maybe Karen needs to teach a reporting class!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

KSBY just had a news brief and made no mention of Gearhart. I don’t think they can connect the dots.

So much for late breaking news.

The “rest of the story’ is what I’m waiting for. All those names.

They will connect the dots, or use double OT buck shot!

I literally just experienced a sigh of relief expressed from my lungs! My faith in the justice system has been somewhat restored with the publication of this article. I kept hearing that “it was so big” and “so many involved” and “it all takes time”. I started thinking that they just might actually get away with this.

Thank You Mr Attorney General of the State of California, the FBI and CCN for all their tenacity and not letting us down. Whatever role the SLO DA ‘s office played, I don’t know, however considering that CCN recognized them, I thank them also because somebody working there obviously did something to help out.

Now if we can just find a way to recover some reasonable funds for the bilked (ambushed sounds more like it) investors.

Just got the news in an E-mail, I want him to do the 80 years, seems the BK attorneys are sucking up all the money Gearhart has left, the rich get richer at the victim’s expense, they make tons of money off of these guy’s crimes, the system has failed us, one thing though, they are all going to hell, and it’s right here on earth, Miller you like Lompoc, I used to live there, lot of friends took the wrong road and are in where you want to be, screw dropping the soap better not shower, get some baby wipes, hiding from my lawsuit with a phony BK, wait until they, we the people indict your daughter for soliciting.

To Gearhart, your next my enemy, if you get capped they come straight to me, I deeply want to see you head on a post. And so do a hell of a lot of other people, you can run but you can’t hide.

Until death do us part, want to tease me again. And thanks Dieter, it’s about time.

I understand cheseburger, you’re still very angry but if Gearhart gets popped , I hope you have a good alibi. That’s all you’ll need because one thing for certain is that no one will be able to accuse you of having the money to pay a hit man! Still, sometimes it’s better to watch what we say in a public forum. It’s all about blowing off steam until something happends, uumm on the other hand there are so many people that want to kill the guy, it probably doesn’t matter what you say! ;)

Gearhart, if that slob get’s popped, I have two great alibi’s and why would I write this if I believed in MURDER, which unlike the conspirators, I don’t! Love you, though and believe me, I make a much better friend than an enemy. And this will draw the heat my way letting the 98 year old widow have her way with that fat faced liar, JOWLS Gearhart!

Jowls get ready to do the 80 years, bro Miller is ratting you and his daughter/ all his friends out, he is not the fall guy he is a scared little boy with no where to run.

Not fun huh? Jay, what the hell did you expect

, an eye for an eye, you don’t have 1200!

You are honest in your feelings (I feel as you do).

They are pretentious at other’s expense.

But don’t let your legitimate anger affect others who are non-partisian or self harm you.

If these guys see you in court and know your angry, their game starts using you against yourself (own worst enemy), they know lying and acting.

Who’s f**king lying or acting?


Gearhart, Miller and their attorneys,

Its always that way

Duh? I am loosing it , I thought you meant me. Gearhart get’s indicted next week, restitution, I know you are right and thanks for the tip. It has been a stressful few weeks with friends of mine dying of cancer at 45, we should all ell lucky we are still breathing, and the crooks should feel even, well luckier! Do you know some one hacked this sight and took 50 points from Mike Brenler and a bunch from me too, what’s up, or like the Hurst fraud everybody looks the other way without posting what really happened to all those points.

I think they should keep the Like button and do away with the red, they did away with my right to vote, can’t go either way or I’d give you a point!

I’m so glad that your diligence paid off! I bet you feel a weight off your shoulders!

I wonder how wide the net will fly….I would really love it if Jon Seitz got caught in it. He spells for PR’s attorney (she is fresh from the attorney group that helped the thieves in the City of Bell City Council and city administration swindle the Bell residents and our government out of millions and millions of dollars) when she has other fish to fry, and is a big defender of her and the legal group she came from.


I feel the same way

It takes the Feds a little longer because they have the burden of proof that must stand up in a trial to the microcosm and clever of high paid and shrewd defense.

From the way I understand it, because of the amount of resources it takes to for the Feds to take on a big project like this Hurst debacle, they need to be sure before they go in with charges. Usually, when they charge someone with something, it sticks.

Cindy, good comment, but I would not be so quick with the effusions of thanks. The decisions about whom to prosecute, when, where, why, how, or even whether or not, are top secret and are not what they appear to be. Many more cockroaches are getting away with similar crimes scott free. For insight, go to:

But be careful when you read this. You may not like what you find.

The Gimlet Eye

That usually true.

These cockroaches in expensive sheep suits (victim’s expense) do what others don’t.

They lie to convince their attorneys (Powerful attorneys at victim’s expense), they lie, lie, lie.

They cleverly lie, this audacity to lie never fails to shock the honest victims.

You are on the right track, Willie, but it’s orders of magnitude worse than than that. Looks as if some in this forum cannot handle that uncomfortable truth. I can understand that. Who wants to admit that he lives in a gangster state? Nobody. How is a person supposed to sleep at night with that sort of nightmare hanging over his head? So, they hide their heads in the sand and pray for a bright and sunny tomorrow morning. Nevertheless, that’s the truth. For those who don’t acknowledge the facts, there is no hope. There is only hope for those who can face up to things like this:

Trillions of dollars are missing from the US government. What’s going on? Where is the money? How could this happen? Where are the checks and balances? How much more has gone missing? What would happen if a corporation failed to pass an audit like this? Or a taxpayer? Who is responsible for this? Would your banks continue to handle your bank account if you behaved like this? Would your investors continue to buy your securities if you behaved like this? Learn more in the articles below.

CBS News coverage of Donald Rumsfeld’s Pentagon speech on September 10, 2001

Watch the YouTube Video

Go down the list. Don’t try to read them all, or you’ll be at it all day. Just read 2 or three. Watch the video. Then take a good, long hard look at your government and your representatives. Meditate on it. Sleep on it. Above all, STOP BEING AFRAID.

I know about it, I can’t read it, it makes me too angry. I can’t say what I feel like doing about it in a public forum but it’s in line with calling for a friggin revolution.

About time. Start those dominoes falling guys!!!

Kelly hear those footsteps behind you? :)

Pssst….Atascadero City Council members? Many of you are next. I’d be seriously worried if I were you.

That’s it. I’m starting a burning-torch and pitchfork emporium, with a protest-sign annex.

For months people have asked me when do the dominos start to fall?

My reponse was fairly consistent, in that certain investigations can be complex and require a massive effort and you never know where the spider webs will lead.

My hat is off to the Feds and as a taxpayer I thank you for your dilligence in seeking justice.

Hopefully Miller and Gearhart will cooperate and point out what was going on at the Atascadero City Hall. Whats the old adage … “It takes two to tango.”

I want to thank you personally, for the heat on Grigger Jones, seems Detective Plumn and the FBI have had suspicions about this great lawyer, (gag), to bad you quit Grigger, what an IN Pro Per kicked your ass, or you knew or should of known your, friend/client was guilty as hell! Wait until my book comes out.

MikeBrennler, it looks great on the surface, but what made the feds move may not be what you think or assume.

Example: why did the SEC allow Bernie Madoff get away with his giant ponzi scheme for nearly 10 YEARS before they moved against him? Harroy Markopolos gave them everything they needed long before that. Five times he went to them with substantial and credible information, and they blew him off. The book: No One Would Listen: A True Financial Thriller (2010). Other prominent Wall Street big shots also knew that Madoff was cheating and stealing. Still, the government did nothing. THOUSANDS of people were ruined all over the world, making the Miller/Gearhart case look like child’s play.

Moral of the story: the government has its reasons, and those reasons may not have ANYTHING to do with what we assume.

Gross Universal Cash Heist the global corporate cartels have most of the abundant cash in the world GRUNCH

EXAMPLE THIS POST WAS AT A 50 GREEN AND TWO RED. GO BRENNELER. MINE WHICH HAS BEEN DELETED WAS AT A 22 GREEN AND 2 RED, thanks for the emailed apology CCN, this may open some eyes as to what people in the entire thread are talking about, Brenneler for county supervisor!

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