Probation department seeking low sentence for Gearhart

May 16, 2015
Kelly Gearhart

Kelly Gearhart


With just two weeks until Kelly Gearhart’s sentencing hearing, his probation officer and federal prosecutors are disagreeing over the number of the defendant’s victims, a fact that partially determines sentencing guidelines.

While both sides agree on most information in the presentencing investigation report, prosecutors contend Gearhart had over 250 victims while the probation department says there were only 17 victims. The probation department considered only investors Gearhart spoke directly with as victims.

Gearhart concedes he should spend 57 months in prison, the probation officer is seeking an 87 month imprisonment and prosecutors are asking the court to sentence Gearhart to 135 months in federal prison.

Gearhart and James Miller, the former president of Hurst Financial, defrauded more than 1,200 investors of more than $100 million in an alleged Ponzi scheme. Gearhart bilked investors who put money into Central Coast real estate projects and then siphoned off the monies for other purposes.

Even though Gearhart defrauded hundreds of victims , the government based its case on several frauds including Gearhart’s largest, his Vista Del Hombre project in Paso Robles.

“The bulk of the government’s case focuses on Vista Del Hombre because there is the strongest evidence of fraud,” prosecutors said in court documents. “There are, however, other projects and victims at issue in this case.”

The probation officer composed the presentencing investigation report that finds that Gearhart had direct contact with 15 investors and two banks in the projects federal prosecutors focused on while making their fraud case.

“The presentencing investigation report finds that there were 10 victims (of Vista Del Hombre) who communicated directly with defendant and invested based upon his false promises,” the government’s sentencing position says. “For purposes of sentencing, the losses for these victims are $2,370,000.”

Gearhart got his first loan for Vista del Hombre’s purchase and initial infrastructure construction in May 2006 from Miller in the amount of $15 million. Miller in turn had secured that money from private investors lured by promises of high interest returns. That initial loan was slated to mature in late 2006, but Hurst did not reimbursed investors and in late 2007 Miller ceased providing interest payments.

But by then, Hurst had already lent Gearhart another $11,850,000 for the Vista del Hombre development. These investors received interest payments for only six months before the payments abruptly ceased.

Miller’s QuickBook records seized by federal agents show that of the $17,995,302 Miller doled out to Gearhart for Vista Del Hombre, Gearhart only spent $2,659,302 on developing the project with the remainder ending up in Gearhart and his wife’s bank accounts.

Kelly Gearhart and James Miller

Kelly Gearhart and James Miller

“Regardless of how he spent the money, defendant still ‘stole’ the lots securing the victims’ investments, sold them to different people, and then used them to obtain bank loans that he could not pay back,” according to the government’s sentencing position. “So, even if defendant spent every penny of the VDH money lawfully, there would still be fraud upon the over 250 VDH investors.

In an April 1, 2008 letter to investors, Gearhart admitted to some investors that he was financially strapped and unable to pay interest on many of his Hurst loans and detailed his plan for financial recovery:

“Obviously, I have formulated a detailed strategy to work my way through liquidating my large portfolios,” Gearhart wrote. “Several of my properties are in escrow at this time, and the sales of these properties will enhance my ability to move forward. I realistically see only these options at this time: 1. Elimination of interest payments, while I work to liquidate properties as fast as possible. 2. As offers are made on properties, I will notify you and we will make a joint decision as to whether we should accept the offers presented. 3. Foreclosure.”

According to prosecutors, the letter was an attempt by Gearhart to lull his victims and as such he should be found guilty of defrauding more than 250 investors.

“Defendant victimized all of the VDH investors because he ‘lulled’ them into maintaining their investments,” the government’s sentencing position says. “For example, defendant sent out a ‘lulling’ letter near the end of the fraud. Lulling conduct is part of the scheme charged in the indictment.”

In May 2014, Gearhart agreed to plead guilty to three charges in connection with the Vista Del Hombre project.

Gearhart’s sentencing hearing is scheduled for June 1 at 11 a.m. in Los Angeles.

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Kelly Gearhart  Court Documents by CalCoastNews

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Only 17 victims? This probation officer needs to be fired! I do think that Gearheart will probably spend only 3 years or so in prison and then free to go dig up his stash and live happily ever after. Justice is only for the poor.

He is probably under pressure to minimize sentences to free up space in the prisons. Or he could be on the take. Who knows?

Let’s see if I have these numbers straight.

Gearhart stole $100M from 1,200 innocent victims.

The prosecutors only care about 250 of those victims who lost a little over $15M.

The probation officer only cares about 17 of these victims who lost a little over $2M.

Gearhart thinks his crimes are worth 4.75 years in prison, the probation officer, 7.25 years, and the prosecutor, 11.25 years.

Now go back to the first line and reconsider the total number of actual victims and amount stolen. I doubt I’m not the only person not understanding the fairness or equity here.

Now let’s compare. The Central Coast Bandit who had a handful of victim-banks and stole a few thousand dollars in order to move her daughter out of a crime-ridden neighborhood has so far been sentenced to 16 years with another 4 years expected to be added later.

Sorry, please disregard the extra “not” in the next to last paragraph. My tablet doesn’t let me see all of what I’m writing until it is published.

Mike, you are spot on with this one. I’m generally a law and order type guy, but the un-equal treatment of these “white collar” crimes is really atrocious.

The comparison is slightly flawed in that armed robbery, even if the proceeds is a slice of pizza is far more severe than gear harts crimes, because society cannot allow people to threaten the lives of others with weapons, And forcefully taking their property regardless of the “nobility” of their cause.

While geahart reaped more significant financial rewards than the armed robber you described, his victims volunteered their funds to him, albeit under false assertions.

Was she armed? I don’t recall. Woody Guthries’s The Ballad of Pretty Boy Floyd: “Some will rob you with a six gun, and some with a fountain pen.”

While I agree that robbery by threat of violence is worse in and of itself. The sheer scale of Gearhart’ operation in terms of number of victims and amount stolen makes his crimes worse.

The criminal justice system obviously disagrees, which is why people are upset, I guess. I would prefer to have my retirement savings pilfered then the experience of a loaded gun stuck in my temple,but I guess that’s just me.

She did use a gun and also rammed a police car with her vehicle while fleeing arrest earning her an assault with a deadly weapon charge. Poor woman, she did it all for love.

If one wants to be a successful crook , then you don’t rob a bank…you run a bank.

Article title: Probation department seeking low sentence for Gearhart

Title Translation: The Fix is in.

Money talks, and only a fool doesn’t salt away a few Maple Leafs under an oak tree somewhere during prosperous (legitimate or not) times. This guy will get a few months at some Club Fed like Lompoc or Boron, and go free to dig up his stash. Kelly, listen up, Costa Rica is lovely, tropical, and has numerous Colonias Americanas where you can blend in and speak English.

Rob a liquor store of $50 with a gun and go to prison for 20 years. Rob numerous people of millions with a pen and pencil and maybe get 8-10 years. There is something wrong with the system.

I am not a greedheart apologist, however, do you not see how far worse it is to point a gun at someone and threaten to kill them unless they turn over their property than to commit financial fraud- regardless of the spoils of the crime?

How many senior citizens do you think gave up on life after Gearhart and Miller robbed them? I know several who have. I would also suspect that some have even died an earlier death due to these crimes.

He did not rob them. Robbery involves force. He defrauded them – and frankly, for most who invested he played on their own greed.

Anyone who took the time to make any analysis of his schemes would have known it was too good to be true (12% guaranteed without risk and the only collateral being raw land that you own with 500 other people).

Caveat Emptor.

Like the rapist of a disabled child in Los Osos getting 1 year, SLO county is the place to commit your crimes!

Unfortunately, neither party seems to taking into account ALL the collateral damage and effects these crimes have had on not only the victims, but the economy as well. It’s certainly ALL relative as the financial dominoes fell. the two parties need to look at the big picture before sentencing consideration.


Sadly, as always, the time in white collar crime is relatively light. Hence no big loss and it will continue on. No pain, NO GAIN!!!

This soap opera needs to be over. I wish Chuck Liddell would drive down to LA and beat the hell out of Gearhart right on the courthouse steps…

Heck yea!!! Forget the lackluster Pay Per View Pac-Mayweather, here is one I would pay some good money to see!!

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