LOS ANGELES—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 investigation.
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