Dustin Johnson changes course in lawsuit against adviser, attorneys
December 10, 2014 by Alan Blondin, The Sun News (Myrtle Beach, S.C.)
Dec. 10–Dustin Johnson’s lawsuit against a longtime trusted adviser and his law partners has taken a peculiar turn.
The PGA Tour member and Coastal Carolina alumnus has filed an amended suit to the one he originally filed on Nov. 3 in Georgia attempting to recoup$3 million that he says was scammed from him.
Attorney Nathan ‘Nat’ Hardwick, who Johnson describes in the suit as an officer in his corporation and one of the primary advisers in his pro golf career, still is listed as a defendant.
But he is now portrayed in Johnson’s suit as a “pawn” that was used by his former law partners to secure Johnson’s $3 million for their gain, with no intentions of repaying it, before they managed to oust Hardwick from the Atlanta-based firm.
In the original suit, Johnson alleged Hardwick and his two equity partners in the Morris Hardwick Schneider law firm, brothers Mark and Gerard ‘Rod’ Wittstadt, conspired to bilk him of $3 million with a fabricated investment opportunity to cover shortages in the operating and trust accounts of their firm and an affiliated real estate title company.
Hardwick is accused, in a separate suit, by his former partners of creating the shortages by embezzling at least $30 million.
Johnson’s amended suit paints a different picture, and provides Hardwick’s side of the story reportedly through a sworn affidavit provided to Johnson’s attorneys by Hardwick and referenced in court documents..
The suit states: “The Wittstadts voluntarily and intentionally devised and participated in a scheme to defraud Johnson out of money. … Hardwick was used as a pawn by the Wittstadts to get Johnson’s money because Hardwick played a particularly unique and significant role of trust and confidence [to Johnson].”
In an emailed response toThe Sun News from a representative, the Morris Schneider Wittstadt law firm said: “The Wittstadt Defendants continue to stand fast in their positions. Mr. Johnson, on the other hand, has changed his story — last week Mr. Hardwick was a ‘racketeer’ and now he is but a ‘pawn.’ We remain confident that the facts outlined in the Wittstadt Defendant’s motion to dismiss will debunk Mr. Johnson’s latest spin and clearly set the record straight.”
Hardwick, who according to court documents was a 55.6-percent majority partner in the real estate law firm Morris Hardwick Schneider as well as chairman and chief executive officer of LandCastle Title, apparently resigned from both positions shortly before the Wittstadts filed a suit against him — listing the law firm and LandCastle as plaintiffs — on Aug. 25 alleging the $30 million embezzlement from the businesses and trust accounts.
Johnson levies a total of 11 counts against defendants Hardwick, the Wittstadts and the law firm, now called Morris Schneider Wittstadt, in the amended suit filedNov. 17 in theU.S. District Court for the Northern District of Georgia.
Johnson’s amended suit repeatedly qualifies his claims throughout with the phrase “upon information and belief,” apparently to depict his faith in Hardwick’s affidavit.
In summary, Johnson’s amended suit claims:
[OnJuly 11, Hardwick was informed by a firm partner of an altered bank record for one of the firm’s escrow accounts for real estate clients, and onJuly 18 he discovered LandCastle’s chief financial officer had altered a bank statement and improperly moved funds to the law firm’s operating account.
Upon the CFO’s admission, the nearly$700,000 was moved back to the escrow accounts. An internal investigation at Hardwick’s direction fromJuly 18-28 uncovered additional escrow account shortfalls and he informed the Wittstadts.
Hardwick then hired outside auditors and legal counsel to conduct an additional investigation throughAug. 6 that uncovered an approximate$6.5 million total shortfall in multiple accounts, and the firm began notifying state bar offices of the shortfalls and the investigation.
The three equity partners agreed that Hardwick would personally loan$1.4 million and attempt to obtain loans to cover the additional$5 million. He did so in the form of$3 million from Johnson and$2 million fromGeorgia residentJames Pritchard, who has filed a suit similar to Johnson’s seeking repayment for his alleged outstanding loan of$2 million.
Unbeknownst to Hardwick, the Wittstadts were simultaneously negotiating with Fortune 500 companyFidelity National Title Group to bail the company out of its debt. Needing to become majority shareholders to finalize Fidelity’s deal, the Wittstadts convinced Hardwick to resign on Aug. 18.]
The Fidelity agreement was announced onAug. 25, the same day the Wittstadts sued Hardwick, claiming a $30 million embezzlement for personal expenses that included private jet service, gambling debts, failed investments, a lavish condo and payments to his ex-wife. A statement from Hardwick’s attorney states Hardwick believed any money he received was properly allocated to him as a share of the firm’s profits.
The business website Housingwire.com reports that Fidelity’s quarterly filing with the Securities and Exchange Commission show it acquired a 70 percent ownership in LandCastle to fund any shortages in escrow accounts, which had already reached approximately $19 million as of Nov. 10. Fidelity stated in the filing it expected to eventually add another $10 million to the total.
In the Wittstadts’ amended Motion to Dismiss filed Nov. 24, they state the alleged loan is Hardwick’s alone and they have no responsibility to repay it. Johnson says he has yet to receive any payments, which he alleges were supposed to begin in September.
Johnson says in the suit that to induce him to wire $3 million to the firm onAug. 6, Hardwick represented the loan as “a very good investment” with repayment terms totaling$4 million over 30 months. Hardwick said he executed a promissory note on behalf of the law firm as well as a repayment guarantee from the parent company as its CEO and sent both to Johnson’s financial advisor, Tony Adams.
But neither the note nor guarantee can be found.
Johnson’s suit claims he had a valid and binding oral and implied contract with the firm, its parent company and its three partners based on promises and representations Hardwick made to Johnson in his individual and business capacities.
The Wittstadts disagree and seem to make light of Johnson’s suit with the language in their amended motion to dismiss, using numerous mocking golf metaphors throughout their response.
The motion states: “Johnson’s mulligan fares no better than his first whiff,” … documents have gone missing “like a ball shanked out of bounds,” … “Johnson again tees up claims resting entirely on labels and conclusions,” … and “Despite now having taken two strokes, Johnson can do no more than spout inflammatory accusation and irrational conjecture.”
The motion continues: “Dustin Johnson’s first wild theory, that his friendNat Hardwick conspired with the Wittstadt Defendants to steal$3 million, was so ludicrous that he abandoned it. Johnson’s new yarn, that he and his friend are patsies in a complex, serpentine fraud scheme, would be even more laughable but for the damage that such patently false allegations cause to the reputations of good lawyers. … Johnson’s new fairy tale that the Wittstadts conspired to oust Hardwick and cause their own firm’s loss is preposterous, not plausible.”
The Wittstadts are asking for the suit to be dismissed with prejudice, which would produce a final judgment on the case.
Johnson also contends in his suit that in response to his demand for repayment, the Wittstadts threatened to disclose private and confidential information about Johnson they had obtained as his attorneys if he took further action to seek repayment.
Johnson produces both a letter confirming a relationship and an engagement letter with firm letterhead, each prepared inSept. 2011 by Hardwick, a South Carolina graduate who has family inLoris.
While acknowledging the letters, the Wittstadts contend that they are not and have never been Johnson’s attorneys and were unaware of the loan.
Their motion states: “The Wittstadt Defendants had no communications with Johnson regarding the supposed ‘loan,’ had no knowledge of it, were not present for any of the alleged communications between Johnson and Hardwick, and neither Mark nor Rod Wittstadt had an attorney-client relationship with Johnson at any time. … Johnson has no relationship whatsoever with the Wittstadts. None. He has never met or spoken to Rod and has had no more than a single, brief, social introduction to Mark.”
Johnson’s suit requests the $3 million be placed in a trust pending the outcome of the suit, or a receiver be appointed to take over the law firm’s financial affairs to ensure the $3 million is set aside before any profits are disbursed. He’s also seeking attorney fees and punitive damages.
Johnson’s attorney is David Cornwell, who is currently advising Florida State quarterback Jameis Winston and has previously represented several high-profile athletes and sports organizations including the NFL, quarterback Ben Roethlisberger and baseball player Ryan Braun.
Despite being in the midst of what Johnson said is an indefinite leave of absence from the PGA Tour “to seek professional help for personal challenges,” Johnson has managed to make recent news in addition to his lawsuit.
The Los Angeles Times reported he sold his waterfront house in the golf-centric community of Jupiter, Fla., for a reported $6.25 million. Johnson reportedly purchased the property in 2011 for $3.7 million. The Mediterranean-style home included a putting green, infinity pool, private dock for his boat, a billiards/game room, six bedrooms and eight bathrooms in 7,860 square feet of living space.
The South Florida real estate website “The Real Deal” identified the buyer as Alexandre Ismail, president and chief executive of Honeywell Automation and Control Solutions, and reported last week that Johnson purchased a new $3.3 million home in North Palm Beach, Fla.
On Oct. 28, Johnson reportedly shot a 61 at Sherwood Country Club in Thousand Oaks, Calif., to break Tiger Woods’ longstanding course record of 62 while playing in a group with future father-in-law Wayne Gretzky, who attested the score.
Johnson’s return to the PGA Tour could come at the Farmers Insurance Open from Feb. 5-8 at Torrey Pines outside San Diego, presumably after his fiancee, Paulina Gretzky, gives birth to the couple’s first child. She posted pictures on Instagram of a baby shower held Sunday and is rumored to be due in January.
Johnson has not played competitively since the RBC Canadian Open in late July.
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Contact ALAN BLONDIN at 626-0284 or on Twitter @alanblondin, or read his blog Green Reading at myrtlebeachonline.com
