UFC Champ Seeks $2 Million in Trial

     SAN LUIS OBISPO (CN) – Former ultimate fighting champ Chuck Liddell claims an escrow company conspired with a developer to defraud him of $2 million, in a civil trial that begins Thursday.
     Attorneys for the escrow firm say loan officers acted appropriately and that Liddell should have known that lending “hard money” is a risky investment.
     Liddell, who is credited with bringing mixed martial arts to the mainstream, was one of 500 plaintiffs to sue Kelly Gearhart, a once-prominent developer and former Atascadero Citizen of the Year. The plaintiffs claimed Gearhart defrauded investors millions of dollars in a Ponzi scheme.
     Gearhart, who pleaded guilty to federal charges of fraud and money laundering, is to be sentenced June 1, according to U.S. Attorney’s Office in Los Angeles.
     Because Gearhart has declared bankruptcy, the plaintiffs have focused their lawsuits on Cuesta Title, which handled Gearhart’s escrows. They claim that Melanie Schneider, a Cuesta Title loan officer, conspired to help Gearhart.
     Schneider, who handled much of Gearhart’s escrows, stayed in Gearhart’s guest house, traveled with Gearhart and his wife on his private jet and became romantically involved with Gearhart’s brother, plaintiffs have repeatedly claimed at trial and in court documents.
     The lawsuits in San Luis Obispo Superior Court also name Stewart Title of California, which acquired Cuesta Title, and Stewart’s sister company, Stewart Title Guaranty, as defendants.
     Most plaintiffs – referred to as the Alpert plaintiffs – were represented by the San Diego firm Kirby, Noonan, Lance & Hoge, according to motions from Liddell attorneys. In 2013, eight Alpert plaintiffs were involved in a bellwether trial that would help attorneys foresee how the other plaintiffs might fare.
     When the jury ruled for the defendants, most of the remaining plaintiffs settled, leaving roughly 30 plaintiffs.
     “The bellwether trial lasted over nine weeks because the Alpert plaintiffs put enormous resources into it, in a failed effort to establish a precedent they could use for the rest of the Alpert plaintiffs,” Nicole Ryan, representing the defendants for law firm Sidley Austin, wrote in one document.
     Despite the outcome of the Alpert trial, Liddell has pursued a separate trial, saying his case is different. The other plaintiffs, he claims, used a loan broker to represent their interests and had no direct contact with Cuesta Title.
     “Cuesta Title Company made misrepresentations to Liddell directly and failed to disclose adverse facts to him,” according to a declaration filed by Liddell attorney Adam Stirrup of the Fresno-based law firm Baradat & Paboojian.
     Jay Miller, a loan broker used by many of the other plaintiffs, pleaded guilty in 2011 to four counts of fraud and money laundering related to the Gearhart case, according to the San Luis Obispo Tribune.
     Criminal and civil cases involving Gearhart and Miller charged that Gearhart enticed hundreds of investors to give Gearhart money for proposed developments, chief of which was a Paso Robles development called Vista del Hombre. That project was to include commercial buildings, residential lots and a golf course.
     Most of the plaintiffs paid for construction loans, Liddell’s attorneys claim, but Liddell – who is joined by three other plaintiffs in his trial – purchased four lots, each for $500,000, opening escrows with Cuesta Title. However, he contends, without his knowledge, Cuesta Title released his money before the close of escrow without transferring title to the properties.
     “Liddell did not agree to release funds prior to the close of his escrows and believes his signatures on the addendums and additional escrow documents that released his funds before escrows closed were either forged or obtained by Cuesta Title Company’s fraud,” one Liddell document claims.
     Liddell claims that no Cuesta Title employee, including Schneider, saw him sign the documents.
     But Larry Stewart, a handwriting analyst, is expected to testify for the defense that the signatures are Liddell’s.
     “In late 2007, prior to the close of escrow, [Liddell] signed amendments to the escrow instructions which expressly authorized the conduct that they are suing on: authorizing the escrow holder to release … funds to Gearhart immediately and prior to the consummation of escrow without their receiving title to the property,” a defense document states.
     According to defense documents, two witnesses in the Liddell trial are expected to testify that Cuesta Title was “compliant with applicable standards” in its work with Gearhart’s investors. And a certified financial planner is expected to testify about the inherent risks of hard-money lending.
     During the bellwether trial, defendants’ attorneys argued that the escrow employees merely followed instructions, and did not know Gearhart was committing fraud. No fraud money, they argued during the trial, was ever traced to Cuesta Title.
     Liddell, known for his knockout power, is a former light heavyweight champion in the UFC. When he retired he became an executive with the UFC and began to focus on acting. He recently appeared in a series of Duralast commercials and is set to appear in the movie “War Pigs” with Mickey Rourke.
     While Liddell moved from San Luis Obispo County to Los Angeles, the Tribune reported, Gearhart moved to Ohio.

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