A real estate developer who formerly resided in Atascadero was indicted today on federal fraud and money laundering charges that accuse him of bilking investors who put money into Central Coast real estate projects—money that was siphoned off for other purposes, including maintaining a lavish lifestyle.
Kelly Gearhart, 50, who currently resides in Wadsworth, Ohio, was named in a
16-count indictment returned today by a federal grand jury. The indictment
charges Gearhart with 10 counts of mail fraud, four counts of wire fraud, and
two counts of money laundering.
The indictment alleges that Gearhart fraudulently solicited investments in
specific real estate development projects by falsely promising that he would use
the funds to develop those projects. Gearhart also told investors that their
investments—which he called loans and promised would be paid back with
interest—were secured by specific lots.
The indictment alleges that Gearhart failed to disclose a number of things to
investors, 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.
The indictment also alleges that Gearhart falsely promised that he would sell
specific lots underlying the real estate projects and then rent them back from
the purchasers. The indictment alleges that Gearhart did not tell victims that
he was selling the same individual lots to multiple purchasers and that he did
not intend to transfer the promised lots to them. The indictment further alleges
that Gearhart did not tell victims that he did not have clear title to the land
underlying the real estate projects.
In this multi-million-dollar case, the exact loss figure is expected to be
the subject of litigation. Because of this, the government is not alleging a
specific loss amount at this time.
An indictment contains allegations that a defendant has committed a crime.
Every defendant is presumed innocent until and unless proven guilty.
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. Therefore, if he were to be
convicted of all 16 counts in the indictment, Gearhart would face a maximum
sentence of 300 years in federal prison.
Gearhart will be summoned to appear for an arraignment in United States
District Court in the coming weeks.
The case against Gearhart is related to a case against James Hurst Miller,
Jr., the former president of the Atascadero-based Hurst Financial Corporation.
Miller pleaded guilty in September 2011 to four counts of fraud and money
laundering charges. Miller is currently scheduled to be sentenced on October 29
by United States District Judge Otis D. Wright, II.
The case against Gearhart is the result of an investigation by the Federal
Bureau of Investigation and IRS-Criminal Investigation. The San Luis Obispo
County District Attorney’s Office provided substantial assistance in the
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Friday, July 6, 2012
Former Atascadero Real Estate Developer Charged with Defrauding Investors in Central Coast Real Estate
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