Monday, November 3, 2014

Civil Suit Alleges Law Firm Partner In Georgia Embezzled $30 Million In Client Escrow Funds

From Atlanta Business Chronicle on 8/27/14:


Nathan Hardwick IV, the managing partner of MHS [Morris Hardwick Schneider] and the chairman of the board and CEO of LandCastle [LandCastle Title LLC], has resigned from the law firm and Mark Wittstadt has been tapped as the managing partner of MHS.

In a civil lawsuit filed in the Superior Court of Fulton County on Aug. 5, MHS and LandCastle contend Hardwick “systematically depleted the firm's (MHS) accounts, including MHS Trust Accounts and MHS Operating Accounts for his personal benefit.”

The lawsuit alleges in order to “fill the gaps created by Hardwick’s misappropriation of funds” from MHS’ accounts, he siphoned funds from the LandCastle Escrow Accounts and LandCastle Operating Accounts into MHS’ accounts.

In total, MHS and LandCastle estimate Hardwick wrongfully directed more than $30 million in funds.

The lawsuit claims in or around June of 2014, Hardwick caused or directed the alteration of a bank statement to mask a $1.1 million shortages in an LandCastle Escrow Account.

Further, it alleges he altered MHS’ and LandCastle Title’s internal accounting records maintained in SoftPro (a real estate escrow accounting and closing production system) so their escrows accounts would appear to reconcile. For example, “in November 2013 alone, there were five transfers of escrow fund from a LandCastle Escrow Account to a MHS Trust Account totaling $1.25 million.

Additionally, MHS banking records reflect Hardwick directed nearly $6.3 million to Divot Holdings LLC, which was controlled solely by Hardwick, nearly $1 million to pay providers of private jet services, nearly $645,000 for payment of losses Hardwick suffered in connection with failed property investments, and nearly $4 million in wire transfers to casinos.

Hardwick misappropriated funds from MHS and LandCastle to fund a portion of his $3 million luxury condo in The Residences at The St. Regis Atlanta in February 2013. After having drained MHS’ Operating Accounts, Hardwick continued to take regular disbursements, but caused or directed those disbursements to be made from MHS Trust Fund Accounts. MHS and LandCastle have identified disbursements made from HS Trust Accounts directly to Hardwick between January 2012 and July 2014 for nearly $390,000.

Hardwick’s lawyer, Ed Garland of Garland, Samuel & Loeb P.C., released a statement saying the claims made against Hardwick "are false."

“Nat became aware of a problem with the accounting earlier this summer and immediately alerted his partners and initiated a review by outside auditors,” Garland wrote. “... He would never knowingly or intentionally take money he was not entitled to or harm the firm or its clients in any way. The law firm was profitable, and Nat believed that all of the money he received was properly distributed to him as his share of the profits of the firm.”

Read the whole story here.

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