LOS ANGELES – A real estate developer who formerly resided in Atascadero plead guilty today to federal fraud and money laundering charges for bilking investors who put money into Central Coast real estate projects, officials said.
Kelly Gearhart, 53, who currently resides in Wadsworth, Ohio, plead guilty to two counts of wire fraud and one count of money laundering.
In a plea agreement, Gearhart admitted that he made misrepresentations and omissions relating to the Vista Del Hombre real estate development project to dupe victims into giving him their money.
Gearhart was initially charged in a 16-count indictment returned by a federal grand jury in 2012.
The indictment alleged that Gearhart told investors that their investments – which he called loans and promised would be paid back with interest – were secured by specific lots.
However, officials said Gearhart admitted in court today that he sold lots associated with the Vista Del Hombre real estate development project, even though those lots were being used to secure others’ loans.
Gearhart further admitted that he used those same lots to obtain bank financing.
Gearhart is scheduled to be sentenced on December 29.
The 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.
During today’s hearing, prosecutors said they intend to seek a sentence of more than 11 in prison, while Gearhart’s attorney said he will not seek a sentence of less than four years and nine months. However, the judge can sentence Gearhart to as much as 50 years behind bars.
The plea agreement permits prosecutors to seek restitution for victims of the Vista Del Hombre real estate development project, as well as any other project in which there was fraud, a figure that may be as high as $20 million, officials said.
It is unclear if there is any money available to repay victims, authorities maintain.
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 on September 8.
The cases against Gearhart and Miller are the result of an investigation by the FBI and IRS – Criminal Investigation.