Gearhart indicted, facing 300 years in federal prison

July 5, 2012

Kelly Gearhart and James Hurst Miller

Update: Under the original story.

Onetime Atascadero “Person of the Year” and prominent North County land developer Kelly Gearhart has been indicted by a federal grand jury and faces 16 charges of mail fraud, wire fraud, and money laundering. Investigators are calling it a “multi-million-dollar case.”

Assistant United States Attorney Stephen I. Goorvitch of the Major Frauds Section said in a statement that the charges revolve around accusations of Gearhart’s “bilking of investors who put money into Central Coast real estate projects – money that was siphoned off for other purposes, including maintaining a lavish lifestyle.” If convicted, Gearhart could face as much as 300 years in federal prison.

Gearhart’s questionable financial dealings were brought to light in a lengthy, ongoing series of articles by CalCoastNews starting in 2008. The developer threatened to sue the news website following the publishing of articles outlining his questionable investment activities in one particular project, the Vista del Hombre golf and business park located on the outskirts of Paso Robles. That lawsuit never materialized, although the website received letters from Gearhart’s attorneys, as well as Gearhart’s personal denial and threats voiced on Dave Congalton’s Home Town radio show on KVEC920.

Gearhart, 50, currently resides in Wadsworth, Ohio. He has not been arrested, federal agents said.

Investments in specific real estate development projects were fraudulently solicited by Gearhart, promising development but never delivering. He failed to disclose “a number of things,” said Goorvitch, “specifically that he was using victims’ funds to pay for his and his wife’s lavish living expenses, that he was using their money to develop different real estate projects than those intended by the victims, and that he was using victims’ money to make interest payments to other investors.”

He also sold various properties to numerous victims, the indictment alleges, without owning clear title to the properties.

Gearhart’s primary hard money lender, James Hurst Miller, already is under indictment on related charges.

UPDATE: Gearhart is slated to be arraigned in federal court in Los Angeles on August 13.

The government is alleging that Gearhart used victims’ funds intended for specific real estate projects to develop different projects. He also allegedly used those same funds to make interest to other investors in the real estate projects.

As part of his scheme to defraud, Gearhart also “concealed his material misrepresentations and omissions from victims, and lulled… victims into maintaining their loans” with Gearhart, according to the indictment.

Mail fraud allegations stem from a variety of checks mailed during 2007-08 from Hurst Financial Corp. (HFC), Miller’s company, to a group of individuals identified in the indictment only by their initials.

He also wired money with intent to defraud, federal authorities allege. On Oct. 5, 2007, he electronically wired $1.5 million from one local bank account to another in three separate communications. He followed that with a transfer of $1 million on Aug. 21, 2007. all of those funds went into City National Bank in San Luis Obispo.

One of the two money laundering charges derives from a payment of $25,600 to Pe-Ji-Ho-La, LLC.

Marion Warner, Gearhart’s common-law stepmother of 35 years, told CalCoastNews that Gearhart had boasted of his master plan for financial freedom. He planned to build his empire on borrowed money stashing funds, properties and jewels until the perfect time to file bankruptcy.

A group called PMA, now Pe-Ji-Ho-Ta, entered into an agreement with the the Salinan Indian Nation. Gearhart and his partners projected the agreement would result in earnings of approximately $600 million in profits over the next 50 years, according to Pe-Ji-Ho-Ta records.

Amidst assurances that then President George W. Bush was poised to sign off on the first step towards the development of an Indian owned casino in Paso Robles, the Salinan Indian Tribal Council entered into an agreement with PMA.

Gearhart was one of the members of PMA, along with attorney Grigger Jones, Chris Molina and Dan Phillips, to signed a contract with the tribe located in San Luis Obispo and Monterey counties in order to speed the tribe’s application for federal recognition – all with the goal of eventually building a large Indian gambling casino on the northeast side of Paso Robles.

Molina, one of four men who told the tribe they could secure federal recognition, boasted his group had a politician poised to fast-track their plans. Without a member of Congress or a U.S. president pushing for approval, the procedures required to procure federal recognition for an Indian tribe usually takes about 20 years, according to tribal council meeting minutes.

Although no federal official was publicly linked to the project, Molina, who is also a tribal member, used former President Bush’s name in promoting the project before Bush left office.

In March 2003, Molina introduced attorneys Tom Tellefsen and Jerry Levine to the tribal council as two men who could shorten the timeline for federal recognition from 20 or more years to a few months because of their ties to the Bush administration.

Tellefsen and Meg Whitman were former Massachusetts Gov. Mitt Romney’s national finance co-chairs during his 2008 presidential run. Levine is a business and litigation attorney with the Los Angeles based Holland & Knight law firm.

“Mr. Tom Tellefsen is exactly who he says he is, and is in the position to compress the timeline for completion of the task,” tribal confidential documents say. “The law firm that has been chosen for us is not only one of the largest in the world, but it is politically aligned with the current administration. Phil Hogan was Jerry Levine’s partner until the appointment to the National Indian Gaming Commission by President Bush; Tom Tellefson is a close friend of George W. Bush.”

Molina assured the tribal council that Levine was there to represent the tribe and not PMA, even though PMA would cover all attorney fees, according to the minutes of a March, 2003 tribal council meeting. It was an assurance the tribal leaders said he failed to follow through on.

In October 2003, PMA changed its name to Pe-Ji-Ho-Ta Consultants LLC and had Joe Diehl of the San Luis Obispo law firm of Diehl and Rodewald file a lawsuit against the Salinan Tribe, claiming fraud, breach of contract, and intentional misrepresentation for canceling their agreement to give Gearhart, Molina, Jones and Phillips a cut of future casino revenue in exchange for helping the tribe receiving federally recognized. The suit asked the tribe to return $20,000 in expenses as well as $2.5 million for lost revenue to Pe-Ji-Ho-Ta.

The tribe later agreed to reenter into an agreement with Pe-Ji-Ho-Ta Consultants LLC.

Pe-Ji-Ho-Ta and the Salinan Tribe’s plans call for building a 250,000-square-foot gaming casino, homes for about 400 people, a school, a hospital and a “green” energy plant on 2,500 areas they plan to purchase in either North San Luis Obispo County or South Monterey Counts, according to their business plan.

Because of Gearhart’s bankruptcy and other problems with authorities, the U.S. Bankruptcy Court now owns Gearhart’s 25-percent share in Pe-Ji-Ho-Ta’s portion of future casino profits.

This article will be updated as more information becomes available.


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Gsan

It would be nice to have some pictures of the people of interest so one can greet them as we might see those folks around town: Jones, Phillips, Molina, McKinney,Clay, O’Malley, Fonzi, Barard, …


Nancimeek

Go to my web site we created out of frustration over Grigger Jones NOT commu icating with us after our father died. And instead of acting on behalf of our father’s trust he switched over helping our stepmother sell properties, forged our father’s signatures and most everyone else knows the rest of the story I said it wasn’t over


http://imokproductions.com/home


BeenThereDoneThat

I think this article is interesting in another way to. Notice the other article posted on CCN yesterday before this about the shreeder. In essence it is another attack (in my opinion) on CCN about unsubstantiated reporting.


When this whole Kelly thing started four years back with CCN breaking this, I have to say I use to be one of those on the other side of the fence about CCN. I came here way back then because of the reporting on Kelly. I had, had some business dealings with him and had know him for quite some time and was in the corner of thought that, these guys here at CCN don’t know him and this just isn’t true.


Well it wasn’t long before reading of others dealings here and also others I’d bump into on the street, that we were all duped and CCN was looking at it all right.


So I stuck around to see what else CCN had to say. Well from then till now it has been an interesting trip. I have seen them uncover a lot of things that people say aren’t true. I’ve seen Mr. Sewer gas over at the Trib as recently as earlier this year attack posters here, to later have CCN be right.


I’m not saying that CCN can or will always be right but if they hadn’t been around, would the Trib have uncovered this? I know the answer, so I don’t need a reply. If CCN hadn’t been around would Kelly and Jay still be bilking new people, on top of past, out of their money?


Again as I said earlier I started out with a very standoffish attitude towards CCN but they have amazed me again and again in what they uncover. To all the naysayers from other news outlets locally I say, why don’t you start doing your job. Why don’t you put your ass out there and take a chance and then report back to us the readers. For throwing as many stones as you do, you have done NOTHING!!


slodowntown

Let’s hope that the Feds do a better job than the DA’s office did with Karen Guth and Josh Yaguda. He’s been out of prison since the end of February after serving less than half of his 8 year sentence. Karen is still in – serving time at a facility that teaches you how to put out fires (and she’s what? 65 or 70 years old?) No doubt she’ll be out soon too. Pity. They should have gotten the same 300 hundred year sentences. Wonder WHY the DA let them plead out to 8 and 12 years???????? Bet the Feds wouldn’t have.


BeenThereDoneThat

Well here is why I think it has taken so long to get Kelly and Jay. Yes as you stated Josh is already out. What was the difference between that case and this? That was rushed to investigation and then trial. This one has been a slow process. I believe that is to make sure that all the i’s are dotted and the t’s are crossed, so that you don’t have a situation like Guth and Unguth.


Nancimeek

I agree The longer and more substantial the investigation the better your case will hold up in court. And of course taking the situation away from a corrupt local court in SLO with ties to Grigger Jones and other’s is SUCH A GOOD idea.


http://imokproductions.com/home


Nancimeek

WE HAD TO BEG YOUR DA in SLO to pay attention to the criminal charges for forgery filed against Grigger Jones. and only after we kept making noise did the FBI take over the case taking it from the DA in SLO to pursue it at a higher level. Thanks for nothing Jerrett Gran. Maybe now you will pay better attention to the criminal investigation and forged signatures preented to you by Detective Fred Pflum from Atascadero PD.


I don’t doubt NOW that alot of people who assumed they had clout and power will realize that doing the right thing and being a stand up person is the way to go.


Thanks Karen for great reporting.


mbactivist1

I have read reports, right here in Cal Coast News, that the District Attorney failed to take any action against Gearhart when alleged illegalities were first pointed out. If that is so, why have the investigators not looked into that problem?


Seems to me that the reports indicated that significant evidence of wrongdoing. In particular, I would like to point out the “Dumpster Chronicles” article written by Karen Velie and Dan Blackburn back in 2008. Part three of the series gives a good summary of Cal Coast News’ investigation: http://calcoastnews.com/2008/12/dumpster-chronicles-web-of-deceit/


Black_Copter_Pilot

Back when EFI was being investigated (2008?), I called the DA’s office to ask a few questions about EFI. I spoke to Steve Tooley who was an investigator for the SLO DA’s office. He told me that because of limited resiources, the SLO DA was going after EFI and the feds were going after Miller and Gearhart. This was an agreement between the two offices


For whatever reason, the Miller-Gearhart case has taken a long time to wrap.


I wouldn’t come down too hard on the SLO DA on this one, the feds were carrying the ball.


Jorge Estrada

mbactivist1, Would you beleive that Kelly Gearhart built a house for the father-in-law of the DA or was it the DA’s Chief Criminal Investigator? Now that is what I call building bridges, even better than the one he built over the railroad in North Atascadero. I think the DA is innocent or was it the Judge or the cop, I’m so confused?


standup

I witnessed first hand the secret meetings held in Dan Phiilips braber shop. Those guys are all trouble.


SmilingJack

Isn’t Dan Phillips a insurance agent, that Chris Molina works for? Maybe the State ought to look into his license. Like they did Terry Pipin’s State Appraisal license, as a result of his dealings with Gearhart.


danika

Yes, Dan Jr. is a “captive” insurance agent. His father, Dan Sr., is a barber. They share the same building, kind of like a commercial duplex.


salty

Gearhart, Jones, Phillips, Molina,…douche-bags all. What would some Native Americans have done to

one of their own (Molina) 200 years ago?….. time for the Council to strip him of his beads and ban him for life… Or horse-dragging?…….. what. phony!


dream_keeper

All of them should be arrested. All of them knew exactly what Gearhart was about before they brought him into dealings with the tribe. Chris told the tribe he didnt know he was crooked after the story first broke by CCN to the public that Gearhart was being investigated. Liar. And worse yet, they still have him around!


SmilingJack

This so-called tribal member sued the tribe in ’03, in order to intimidate them into agreeing to try to get federal recogniition, which the tribe didn’t want to do under their so called “guidance”.


Nancimeek

Go to our web site and on the HOME page read the letter which will be read on the senate floor mentions all the guys involved with Pe Ji Ho ta Gearhart, Jones etc. The letter will be read by Dianne Feinstein as soon as the bill is out of committee.


http://imokproductions.com/home


danika

I bet the Trib is very proud over this story now!


CHAMBER NAMES CITIZENS OF YEAR

Stephen Curran

The Tribune

Praising their years of philanthropic work, the Atascadero Chamber of Commerce on Saturday named prominent developer Kelly Gearhart and wife Tamara its Citizens of the Year.

Over the years, the Gearharts have donated more than $500,000 of their own money to Atascadero High School and nonprofit organizations including the North County Animal Shelter and Loaves and Fishes, chamber president Joanne Main said before the group’s 28th annual banquet at the Atascadero Lake…


Published on 2006-01-29, Page B1, Tribune, The (San Luis Obispo, CA)


cheseburger

Just submitted my the third attempt for the Default Judgment today, I would like to throw in, he doesn’t deserve the death penalty he needs to spend the next three hundred years in court, (unbearable fate), which he probably will, if he doesn’t run to the Bahamas where he stashed the money, WARNING HE WILL RUN!


And I/we shall follow and anything lawful shall be done to bring this criminal to Justice, especially the justice of the country he chooses to run to, he may not of bought that one yet. LOL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


Funny the clerk at the court house had, a twinkle in her eye at 2:45 P.M. today when I submitted my prove up documents for a hearing on July 10th, she was good a keeping secrets because it took another in pro per , who early in the game of trying to get back what was his was booted out of court, good try mate and thanks for the call. I sincerely hope every investor get’s back all, and you too, D.


And Gearhart, if you run, I run after you, don’t need no gun, this would be fun.

Check the pic, recent, want one of those up your nose, I have been waiting for this day to come. You alleged creepy slimy bum!


This one is on the trib will it be deleted here or there first?


Nancimeek

the following year Attorney Robert Grigger Jones, Gearhart partner and Jay Miller partner/attorney was named Man of the Year


SmilingJack

Chris Molina will also pay the price for using his own tribe as pawns to make money on, by lying to them about building hospitals, schools and homes for them. His only goal is to make money for himself. He should be taken off the base roll. He’s a disgrace to his tribe. He’s done nothing but bring bad publicity to them re; reburial at Camp Robert, with tv cameras summer soltice with tv cameras. Knowledge of Burch’s desecration of Morro Rock re; burying remains on the Rock. Sounds like the Tribal Council needs to be replaced. Since he is the P.R. guy for the Council he was the one inviting the cameras and making it into a circus, which should’ve been sacred.


danika

::::::snoopy dancing around the house:::::::


See? Now EVERYONE knows who and what YOU are, Kelly!