Former San Luis Obispo County developer Kelly Gearhart was released from federal prison Wednesday, one year early. Gearhart was serving a nine-year sentence related to a lending scheme in which he and hard-money lender James Miller bilked investors out of millions of dollars. More than 1,200 investors, primarily seniors, placed nearly $100 million with Miller to fund construction loans. Instead of protecting investors by funding projects only as work was completed, Miller paid Gearhart in lump sums without any monitoring of the construction, a violation of the investor contracts. In July 2012, a federal grand jury indicted Gearhart on 16 charges of mail fraud, wire fraud, and money laundering.
In 2014, Miller pleaded guilty to charges of mail fraud, wire fraud, money laundering, and making a false statement to a bank under an agreement that his daughter not be prosecuted. In 2015, Miller was sentenced to seven years in federal prison.
Gearhart pleaded guilty in 2014 to two counts of wire fraud and one count of money laundering under an agreement that his wife not be prosecuted. A year later, he was sentenced to 14 years in prison, later reduced to nine years. Gearhart will now reside in Wadsworth, Ohio, under monitoring by the U.S. Probation Office, according to the U.S. Department of Justice.