Heritage Oaks Bank settles with Gearhart investors

July 30, 2013

By KAREN VELIE

In a last minute decision, Heritage Oaks Bank agreed to settle with investors in Hurst Financial’s Vista del Hombre project in Paso Robles for a currently undisclosed amount of money, an investor said.

The settlement was agreed to two weeks after San Luis Obispo County Superior Court Judge Charles Crandall noted in a ruling that the bank was aware of former North County developer Kelly Gearhart’s wrongdoings.

“The matter has been resolved to the satisfaction of plaintiffs and the board,” Steven Sanchez, the plaintiff’s attorney, said. “We thank the bank for the professional way they approached the resolution.”

In 2009, more than 300 investors filed a lawsuit alleging Stewart Title, Cuesta Title and Heritage Oaks Bank aided and abetted and/or conspired with Hurst Financial and Gearhart in defrauding hundreds of seniors through illegal investment schemes.

The plaintiff’s attorneys, San Diego based attorneys Sanchez and David Noonan, of the law firm of Kirby Noonan Lance and Hodge, accused Heritage Oaks Bank officials of being aware of the Gearhart/Hurst scheme when they approved a $1.5 million loan which permitted the bank to obtain a priority secured interest in the Vista Del Hombre project, effectively wiping out the investors’ encumbrances.

Jay Miller, president of Hurst Financial, 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.

Gearhart got his first loan for the Vista del Hombre’s purchase and initial infrastructure construction in May 2006 from Hurst Financial, in the amount of $15 million. Miller had secured that money from private investors lured by promises of high interest returns.

The 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.

Those investors received interest payments for only six months before the payments abruptly ceased. Gearhart then applied and received several loans from Heritage Oaks Bank on the same property.

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

The civil trial slated to start Monday was continued to August 5 after Heritage Oaks Bank officials agreed to settle.