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.


Inline Feedbacks
View all comments

Just heard news that Kelly has called local friends and told them he is to be indicted this week.

Kelly still has a local friend? They probably should be indicted also.

Like my Mom said, “If you lie down with dogs, you get up with fleas.”

I agree–perhaps at least a cursory review of income tax records should be done for Kelly’s friends.

Would ANYONE proclaim to be one of Kelly Gearhart’s friends? There would be a brave soul…!

All one had to do was go down to the recorders office and “connect the dots”.

There was no way this could have been executed w/o “all those names”………I too, am WAITING…

If this was such a big sweep where are the other arrests? Why did it take so long? Why is miller only charged with a few mickey mouse crimes? Why is this monumental psychopath allowed to plea bargain?

Miller, along with his crooked daughter Courtney Brard, should do life for the lives they have wrecked. As we all know our so called judicial system is a sad joke. The innocent are often swept into the bottomless pit, the guilty are treated with kid gloves.

Who are the public officials you speak of?

Does Gerhart Own Officials?

…which links to:

Cash-Rich Developer Spun Sticky Web

Part Two: A County Corrupted

I’d like an investigation of the pathetic piece of septic-tank effluent called “The Tribune.”

It’s bad enough that they refuse to report the news that people need to hear–like which companies may be scammers, so we can protect ourselves–but to then publish articles criticizing CCN, who DOES report the news we need to hear…I’m sorry, but it only takes two people to form a conspiracy, and I am betting, BIG TIME, that there are conspiracies between The Tribune (individuals or all principal players) and the corrupt power hogs in SLO.

Pismo, 4 felonies and 80 years, IMO, isn’t MickeyMouse, but I highly doubt that will be what the sentence is.

If even a lowly (and I mean, like WAY lowly) SLO City firefighter can wander around the city, attacking people whenever he wants, and gets away with it), then I have zero expectations that the likes of Gearheart will get anything close to 80 years in prison.

Why did it take the SEC so long (almost 10 years!) to get Bernie Madoff?

because their wives all went to the same hair salons the go to guy is GWB’s ambassador to Netherland

Bernie Madoff-lone wolf

Curious? Who was the attorney behind the lawsuit threats mentioned? If you had seen Robert Grigger Jones on the stand while I was questioning him….the way he looked at my father’s supposed 1st Amendment (the one with the forged signatures that Jones himself stated was signed in his office?) as if he had never seen it before……..the way he lied about my dad’s relationship with me and my brother………………….if lying could make someone shrink he would be 3 inches tall.

All I know about Gearhart is what I was told my his former secretary and others who stated he and Jones are “Thick as Thieves” and whereever Gearhart went so did Jones. What about the other two guys involved with the Pe Ji Ho Ta casino?

And FYI the CASINO is not going to happen I don’t care what BS lies the US attorney’s offices in Ohio are telling people. The one’s who lost money with Gearhart WILL NOT BE REIMBURSED> The Bankruptcy judgment is a smokescreen……………..ANYONE who wants to call me for more information please feel free (760) 413-5660 – nanci Meek

Bless your heart

I wake up every morning feeling helpless for what Grigger Jones did to our family Stealing is a crime whether it is with a gun or with a pen. Isolating someone’s father, taking advantage of a man who was declared 100% incapacitated, lying in court, going out of your way to paint an unattractive picture of your dead client’s children, selling a dead man’s property without asking his children if THEY would like to buy the proeprty, selling property that was in our family for over 100 years without asking us, selling property that didn’t belong to the estate because you are in such a hurry to dissolve someone’s estate………… yeah these are just a few of the things Robert Grigger Jones did. Of course it means nothing to anyone but our family. It hurts to look at pictures of ;my father holding me when I was a baby, holding my daughter (his only granddaughter) and knowing that Jones is telling people he didn’t care about us. THAT HURTS. How would Jones and his wife Alice feel if someone went around spreading lies about their relationship to their parents or children? KARMA baby…….I hope it happens.

I feel your pain Nancy. If I ever see Kelly again, I promise, I will ruin his day and more. That goes for Tamara also. They are thieves and they will get theirs.

I wanna watch.

Just his day, I say we take him three miles out in your boat and make him swim back, well make sure he get’s back safely by chumming the waters a head of him with pig blood from the slaughter house on Prado road.

But remember we can’t hurt the white sharks they are protected, by the bankruptcy laws.

Grigger Jones has it coming to him every which way. He is on the Atascadero Mutual Water Board and I was approached by residents last week that are organizing to remove the entire board. They have been illegally issuing shares of our water rights to parcel holders who have no water rights and no rights to any shares. If but for systematic dilution caused by the shares they illegally issued to projects like Kelly Gearhart a few others and now a deal with the pending Eagle Ranch development, we would have never had to put out the massive funds for the Nacimento Water Project.

The AMWC has been violating the agreement with EG Lewis for years and pulling the wool over the stockholders eyes. Grigger is dab smack in the middle of it all. I know the FBI has looked at some of it and the rest of the $hit will hit the fan in the next 12 months. Hang in there, his goose is cooked.

Thank you, Thank you, Thank you! The AMWC Board should have term limits and not a vote by “PROXY”. We need to oust the Board members who do not serve the public interest! It is an ego driven crew who do not look after the general public as “shareholders” but look after their own individual agenda.

NMEEK SAYETH: “He is on the Atascadero Mutual Water Board and I was approached by residents last week that are organizing to remove the entire board.

!!!!!!! Oh, DO let me know if they want any assistance.

Mary Malone?

Different Nanci/nancy I am Nanci Meek and the other is Nancy with a “Y” Just so you know I don’t live in Central California and don’t have access to the board. Hope this helps – NANCI (with an EYE)

When it comes to Kelly Gearhart, Robert Grigger Jones, I have done my part utilizing the internet making others aware of what these guys have done . How they have manipulated the laws made to protect us from fraud and forgery, stopping their PE JI HO TA indian casino venture, assisting Senator Feinstein in passing legislation to keep these creeps OUT OF THE casino business.

I am sure Grigger Jones and Kelly Gearhart are well aware that I have not been sitting on my you know what. Every day, phone calls are made, letters are written and follow ups are made in an effort to stop these guys as well as seeing to it that justice is served. If anything these guys won’t get away with anything ever again. They have tried too. But the power of the internet is nothing to scoff at. The responses I receive are overwheliming.

Jones and our stepmother manipulated the system, they committed fraud and forgery and LIED on the stand in court. I have the depositions and court transcripts. They would make your head spin.

I was told be patient because the investigations are happening and getting closer and closer to a sweep down every day. I have alot of patience. And apparently it is paying off. Finally.

Nanci Meek

(760) 413-5660

Lets try this point I made on the likes from another angle. I like to see how people respond to a posters comment. I will use as an example Danika’s way down in the post. As of now it is 4 and 4 respectfully. So you would assume people are pretty much 50/50 on this. Well origanally it was (before it changed) about 44 and 5. BIG difference.

Now how does it matter here? Well if people see a 50/50 they think, well maybe some people don’t see what Jay and Kelly did as a big deal so maybe this is all hype and overblown. But if you have it at about a 90/10 people will think wow maybe they did do something not to great to their investors.

And last to all who will jump in and say, this doesn’t matter I form my own opinions, a lot of people form opinions from reading others and seeing how things shape up. I ask those who disagree where did you get your opinions? Probably from reading both sides of an arguement and finding the one that is inline with your belief system.

BTDT, On a story such as this one, I have to agree with you. Even though the vast majority of readers don’t ever post or use thumbs, the one’s that do usually represent a fair sampling of public opinion.

However, when a “hot issue” arises with a political edge to it, the thumbs matter very little. We have seen more than once where an organization has swamped the threads with thumbs slanted all in the same direction accompanied by an unusual onslaught of high voting rates on a topic. All it takes is someone with a special interest to alert their 100 or 1000 FB friends, their union, their club, their church group, their co-workers etc and the opinion’s can become grossly skewed.

Thumbs are interesting but they can be completely unreliable and sometimes downright irritating, like the person who comes through here most every day and automatically gives everybody a thumbs down! Or the people who throw red against a perfectly sound post with no explanation.

Thumbs are funny and not to be taken too seriously unless they are making sense, whatever that means ;)

I know it is not the place to say this but in this case I think there should be a posted reason why. What is up that all the peoples likes reset?????????????

Yeah why do they have the stupid rating system anyway, who needs it, I am not running for public office!

They may have been hacked because, a strange pop up came on my computer when I just tried to read the posts requesting user name and password, I think the bad guys may be up to something or the thin skinned old ladies as booty ju ju used to say have messed up, where is the booty ju ju anyway, he quit too.

Booty hasn’t posted much since Vagabond caught him cribbing kunstler

Hi, there was no reset of votes. There was a server hiccup for a few minutes this afternoon that may be part of what you perceived. Fun fact there is no vote reset button, I would have to edit the database to change any of the votes.

If it happens again mail with time and thread etc.

So a update, There was a issue with the votes. The data was restored from a backup. We did loose some recent votes but the majority of past votes were restored. Our host is investigating.

Sorry for the trouble.


They’re all gone AGAIN!


It’s a plot to keep us all humble.

the word is “lose.”

I don’t understand what you’re talking about? I don’t have a clue. The reason why about what and what is reset?

Oh, judging by the reply from spork, (which wasn’t here when I placed my post) I take it that something happened with thumbs. Thanks for the thumbs down rather than an explanation, of course I should have known that answer automatically, yes that must be it.

There is no lower human life form than those that can only click a button rather than speak up with their own mind, I vote the like/dislike button off the site.

Hooray! the idiots have been banned!

Crap, it’s back

I promise as a logged in contributor to this site , that i will never click on a like/dislike button without a written explanation. To do so would disrespect the foundation of our country.

V, I think you’re taking this perhaps a bit too seriously.

The thumbs-up/down are just one of the gimmicks that are options on message-board software.

I don’t pay attention to the thumbs. Some nights I feel emotive and I’ll click on the thumbs, but usually–not.

On some websites ( you get brownie points for all the people who click on your post that they like your post, and then when you get enough posts. you get a special status–like any subject you introduce starts at the top and stays there for a certain amount of time before the numbers of post in the folder start driving it up or down.

I think that is stupid. CurrentTV (started by Al Gore, now hosting Keith Olbermann) is supposed to be for independent thinkers, yet they give bonus points to those who are so mealy-mouthed (as Scarlet O’Hara would say) that they never say anything with any emotion, passion, nor do they ever challenge another person’s nincompoopery.

Anyway, have a beer and ignore the thumbs for awhile.

P.S. I gave you a + thumb—LOLOLOL!

Is Miller in custody? Has bail been set?

As far as i can ascertain from the article, he still walks free.

Anyonre know?

I want to thank Karen Velie and all of the CCN staff who worked on this project. I’ve felt since I moved here that the building industry has far too much influence on our local government. CCN so often takes on the Big Boys that we forget there is always an inherent risk in doing so.

Having grown up in LA when the building boom in SF Valley and the Lancaster area was going full tilt, I learned the results of the building industry having too much influence on government planning decisions. While it was great when the boom was going, when it stopped suddenly–partly because of a recession but mostly because the builders over-extended themselves and assumed the boom would go on forever. When it didn’t, they started siphoning money from the funds that should have gone to pay investors and contractors.

My father’s brothers were all in the construction industry, all workers (framers and roofers). Their families were devastated when the work came to a screeching halt.

Like the greedy ***tards in LA, did our local greedy building and building lending industry ever stop to think the risk they were placing our community and its people in?

This is not going to help our local housing market OR our local economy. This will have ripple effects throughout the state, as well.

I’ve always had so much pride in my uncles because they built homes for families to live in. What can be better than that? Their hands built those homes board by board, nail by nail. Every home they built carried part of them with it.

Nobody deserves to be treated like this: not the LA carpenters when I was growing up, or the local ones now.

All of the rhetoric we hear at election time praising the workers who built America is bullshit. When it comes down to it, workers count for nothing anymore because those who employ them, excluding many small businesses, use they like they were worth nothing more than toiletpaper. And our government allows them to do it.

MaryMalone, the key part of your comment that I agree with is, “And our government allows them to do it.”


Why is $59 Billion Missing from HUD?

November 2000

First off there is no way that I can condone what these criminals have done. With that said though I think you are off a little bit in blaming developers for everything. If it were not for developers what would you have? Government builds nothing for the people but only for themselves. It’s unfortunate that developers have to wait years and years to obtain approval for projects. Because of that they have sometimes millions and millions of dollars invested in projects just to get approval. Within that time period the economy may have changed, as it has. At that point the developer has the tough question of losing everything he has put into the project and suffer the consequences or does he gamble and go ahead with the project.

This in no way endorses the actions that some have taken when they get the money and run. Then there are the other honest developers that try their best but due to a turn in the economic times come up losers as are the investors.

Thanks for your reply, Mr. H.

I don’t think I said “ALL” developers. If I did, I apologize.

Whether they have to wait years or not, when they overextend themselves such that they cannot handle a slow-down–or complete stoppage–in the home-building industry, even if they don’t do what Hurst et al. did, they end up putting workers out of jobs, and often–even the best developers–end up stiffing the vendors and suppliers.

I guess my outlook may be a bit different than yours. I believe that the employer(or contractor)-employee(or contractee) is one of a mutually respectful relationship. If you treat your employees/contractors well, most of the time it pays off in the long run. Same for the workers…if you do the best job you can and go the extra mile for your employer, chances are, in the long run, it will pay off, maybe not to the worker exclusively, but to the home-building industry.

Since offshoring of jobs created (using our government resources) started being shipped to other countries, there has been a gradual degradation of the attitude of many employers to employees. In addition, newer generations do not tend to have the loyalty to their employers that previous generations had.

I often say that my generation is the last one where each person defines themselves by the work they do. I hope that’s not true, but I fear it is. Having been an employer for 20 years, I know of what I write.

I don’t think that employees should suffer because now-days it is harder for developers to shove a project through the steps needed before they can drive the first nail in. This type of a new reality tends to be a kind of natural selection process for developers.

Some, like Trilogy in Nipomo, should never have been built. Closest to the ocean of the large developments in that area, somehow they “convinced” the Board that there is a special groundwater basin that lies, conveniently, right under where Trilogy wanted to build the homes. Well, that is bullshit. Trilogy will be the first to start sucking up saltwater. While having a sentinel development to be sacrificed so the rest of Nipomo knows that, yes, indeed, they are using too much danged water for the groundwater basin they built on, the destruction of a part of a groundwater basin thanks to the avarice and greed of that project’s developers and those in the County government that allowed it is not an acceptable trade-off.

It may be that developers need to change the way they approach building homes; doing smaller projects where, if–for whatever reason–the project falls into the toilet, it isn’t the end of the world for the developer (and, therefore, his/her employees).

MaryMalone, I think most of us know people in the construction industry who aren’t doing well in the current economy. Most of them were hard working folk who put out a good product.

Kudos to Karen and CCN for their coverage of the Gearhart mess. I had no idea what had happened until I read their coverage.