The saga involving LandCastle Title, the law firm of Morris Schneider Wittstadt, Nathan (Nat) Hardwick, Mark Wittstadt, Gerard (Rod) Wittstadt, PGA golfer Dustin Johnson and Fidelity National Financial (FNF) began ominously, with Fidelity stepping in and acquiring a 70% ownership stake in LandCastle Title after “substantial escrow account misappropriations” were discovered within LandCastle’s parent company, the law firm of Morris Hardwick Schneider.
Since HousingWire first reported that Fidelity bailed out LandCastle Title two and a half months ago, the story has taken the kinds of twists and turns that one might expect to see in a Hollywood blockbuster, not in the annals of title company finance.
But what wasn’t known until now is just how much it cost Fidelity to acquire that 70% ownership stake in LandCastle Title.
The back story
It all started simply enough. First, a letter was posted on LandCastle’s website, stating that Fidelity’s acquisition of a 70% stake in the company was “precipitated by a significant shortage in the accounts of MHS and LandCastle, of which Fidelity became informed by the partners of MHS.
The letter disclosed that Nat Hardwick, who was the CEO of LandCastle Title and the managing partner of Morris Hardwick Schneider, the law firm that was LandCastle’s parent company, has resigned from his position with the firm and that Mark Wittstadt has been named managing partner of MHS.
Shortly after that letter was released, the firm and LandCastle Title sued Hardwick in Fulton County Superior Court, alleging that Hardwick embezzled at least $30 million from the companies’ own accounts and the companies’ trust accounts.
The lawsuit alleged that Hardwick used the money to pay for private jets, cover losses in real estate investments, cover millions in gambling debts and other investments.
Another lawsuit, filed two weeks ago in United States District Court for the Northern District of Georgia, detailed the events that allegedly took place after Hardwick’s supposed theft was disclosed.
PGA golfer Dustin Johnson filed a suit against Morris Hardwick Schneider, now known as Morris Schneider Wittstadt, Hardwick and Mark and Rod Wittstadt, who now have controlling interest in the law firm, claiming that they used their positions as Johnson’s “trusted advisors” to steal $3 million from him to cover shortages in the firm’s accounts created by Hardwick himself.
Johnson’s lawsuit states that Hardwick “played a particularly unique and significant role of trust and confidence” in Johnson’s life, serving as one of his primary advisors on all matters relating to his career as a professional golfer.
Johnson’s lawsuit alleges that before the allegations were made public, Hardwick approached Johnson about a “really good investment.” Hardwick allegedly advised Johnson that if he loaned the firm $3 million, the firm would pay him back $4 million in equal monthly installments over a 30-month term, beginning on Sept. 6 and secured by a promissory note.
Johnson’s lawsuit says that Hardwick concealed his alleged theft from Johnson. The lawsuit states that Hardwick, Mark Wittstadt, and Rod Wittstadt “entered into a conspiracy” to use the firm’s clients and Hardwick’s business contacts to misappropriate their money “under false pretenses” to fund the firm’s operations and cover the shortages in the company’s accounts.
The Wittstadts fired back at Johnson last week, saying that his lawsuit is without merit, devoid of facts, “patently false” and a “travesty to legal pleading.”
“Like many others, Dustin Johnson misplaced trust in Nat Hardwick, his close friend,” the Wittstadts’ motion to dismiss states. “But that doesn’t forgive the knowingly false conclusions Johnson throws at Morris Schneider Wittstadt, MSWLaw, Inc., Mark Wittstadt and Rod Wittstadt, in this lawsuit. Because they lack any factual support and are contrary to controlling law, the Court should dismiss with prejudice Johnson’s ‘shotgun’ claims leveled at the Wittstadt defendants.”
But wasn’t known until now is just how much it cost Fidelity to acquire that 70% ownership stake in LandCastle Title.
How much did it take?
According to Fidelity’s quarterly filing with the Securities and Exchange Commission, Fidelity acquired a 70% ownership interest in LandCastle in exchange for the company agreeing to fund any escrow shortages in the LandCastle’s escrow accounts.
In the SEC filing, Fidelity said that it has already contributed approximately $19 million to fund shortages in LandCastle’s accounts as of Nov. 10.
Fidelity also said that “based on our current understanding” the amount needed to fund the escrow shortages could increase by an additional $10 million, which would bring the total influx of funding into LandCastle’s accounts to $29 million.
"To allow LandCastle to fail would have been a calamity for the company’s employees, consumers, and the real estate industry, in general,” Fidelity said in a statement to HousingWire when the acquisition was first disclosed.
“As a result, we felt it was in the best interest of all parties to put the financial resources of FNTG behind LandCastle Title.”
As it turns out, the company has done just that, funding LandCastle to the tune of $19 million with potentially $10 million more on the way.
Fidelity's SEC filing can be read here.
