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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He should have an open-ended sentence. He should have to stay in prison until ALL the people he ripped off have recovered ALL the money he stole.

Mitigating factor: A lot of these “investors” were caught up in their own greedy ambitions.

Agreed that some just wanted the money and don’t do their homework. I do not play that game and wonder about the people that just invest for a living but theives who use a fake business to extort funds from other is just wrong.

With this dilution of justice, by today’s practice to forgive, Hitler would get two years of probation with required public service. I’d suggest that Kelly do his public service in Atascadero.

Considering what a crook he was, and how he lived the high life for many years thanks to his crimes against others — to whom he blatantly lied and gladhanded — all of these sentences seem too small. Why is it a poor person who sells drugs goes to prison for longer than a rich guy who’s cheated the world?

The larger the take, the less the punishment. It it all about the upper income protecting their own. One day in custody for each $100.00 of loss seems fair to me.

Without swift justice, this is what we get and this too was intentional. Covering a crime with a crime is legal when the courts allow it. Again it is legal, having nothing to do with fare.

While serving as a Correctional Officer at the California Men’s Colony in San Luis Obispo CA. it certainly seems that Kelly Gearhart studied and learned his lessons very well from the criminal masterminds incarcerated there, whom he supervised for committing similar crimes.

Yet another example of people desperate to get a return on their money!

Savings/CDs pay NO interest to allow banks to give low interest rates to borrowers! (Seniors and low income ‘savers’ have been duped. There is no safe place to put money that returns any interest, so this current cycle to rich bankers not paying interest (although they received bail out money from the Feds and the Feds loaning money cheaply to give out to those who want to borrow.

It is a tax on seniors and poor savers that has been ignored by our government! We are easy to ignore! Sickening. Do the banks think we won’t notice when interest rates go from 15% to nothing?????? So cruel, but no one cares. Please write your congress and tell them this is unfair.

Expenses go up and interest rates tanked.

Thank you..

The federal reserve (the government) is responsible for the low interest rates, not the banks.

The Federal Reserve is a quasi-private invention composed of the big banks. It is not “the government”. They are shielded dictators that hold the country and the government hostage by threatening to blow up the economy unless they get their way.

I agree with the “quasi” but it as non-government as FNMA, FHLMC and GNMA. Congress created it, the president appoints the chairman and board of governors, the

government sets the salaries of the governors and the US Govt receives the profits.

They consider themselves an “independent” bank because they technically don’t answer to the president or congress, but they are the government.

This all happened before the low rates you talk about. Back then we could all get a good 5% FDIC insured CD.

I don’t know why anybody would lend anything they couldn’t afford to lose to an outfit like Gearhart’s or his financial fronts — it takes dumb not to understand that’s high risk. Nonetheless, risk is one thing, crooked operators something else.

How about making the punishment fit the crime. Have geahart work the rest of his life to pay back all of the principal to defrauded investors. He can earn his freedom when every investor is made whole. Along the way, he might even learn some humility and contrition.

Just make him relocate to Atascadero. I know I’d really like to see him again.

I have a few friends that I think would like to reconnect with him also.

This citizen of the year should go to the electric chair after having his ass whopped by Chuck