Central Coast Real Estate Developer Sentenced to 14 Years in Federal Prison for Scam that Cost Victims Millions in Lost Investments
LOS ANGELES—A former Central Coast real estate developer was sentenced this morning to 168 months in federal prison for his conviction on fraud and money laundering charges after bilking investors who put millions of dollars into Central Coast real estate projects.
Kelly Gearhart, 54, who previously lived in Atascadero and currently resides in Wadsworth, Ohio, was sentenced today by United States District Judge Otis D. Wright II. Gearhart was remanded into custody at the close of the sentencing hearing.
Gearhart, who was named Atascadero’s “Citizen of the Year” in 2006, pleaded guilty last year to two counts of wire fraud and one count of money laundering. When he pleaded guilty, Gearhart admitted that he knowingly and intentionally made misrepresentations and omissions relating to his Vista Del Hombre real estate development project to induce victims to part with their money. Gearhart admitted that he sold lots that were part of the Vista Del Hombre project in Paso Robles, even though those lots were being used to secure others’ loans. Gearhart admitted that he then used those same lots to obtain bank loans.
At sentencing, prosecutors introduced evidence that Gearhart also told investors that their investments—which he called “loans,” promising repayment with interest—would be used to develop the Vista Del Hombre project.
Judge Wright is scheduled to hold a restitution hearing on October 20. The plea agreement permits prosecutors to seek restitution for victims of the Vista Del Hombre real estate development project, as well as any other fraudulent conduct in which Gearhart may have been involved—a figure that may be as high as $20 million. However, it is unclear if there is any money available to repay victims.
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, who previously pleaded guilty to fraud and money laundering charges, is scheduled to be sentenced by Judge Wright on October 19.
The cases against Gearhart and Miller are the result of an investigation by the Federal Bureau of Investigation and IRS—Criminal Investigation. The San Luis County District Attorney’s Office provided assistance in the investigation.