Golf

Dustin Johnson reaches settlement in attempts to recoup $3 million

Dustin Johnson tees off on the 15th hole during the second round of the Memorial.
Dustin Johnson tees off on the 15th hole during the second round of the Memorial. AP

Dustin Johnson has reached a settlement in his attempt to recoup $3 million he claims he was duped into giving his former attorney Nathan “Nat” Hardwick and his law partners, and will receive at least a $2 million payment if his settlement agreement is approved by a bankruptcy court.

The Coastal Carolina University alumnus and PGA Tour star filed a lawsuit against Hardwick, partners Mark Wittstadt and brother Gerard Wittstadt, and their Atlanta-based law firm in October 2014.

Johnson, 31, initially claimed in the suit that the defendants 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. The shortages were allegedly caused by misappropriations.

Hardwick was indicted and arrested by federal authorities in February on multiple charges including fraud and conspiracy in connection with his alleged theft of more than $20 million from the accounts of Morris Hardwick Schneider and the affiliated LandCastle Title company.

The firm, renamed Morris Schneider Wittstadt after Hardwick resigned his positions as CEO of LandCastle and managing partner of the firm in late August 2014 – a couple weeks after Johnson’s loan was secured – filed for Chapter 11 bankruptcy protection last July.

Johnson’s settlement is part of a bankruptcy plan that must be approved by the court, and will be paid through the law firm’s insurance policy with Endurance American Specialty Insurance Co.

Payments will be made through a liquidating trust and creditors have until July 21 to vote to accept or reject the plan. A plan confirmation hearing is expected on Aug. 2.

Johnson may have an opportunity to recoup his entire $3 million through the settlement. The $2 million payment is part of a $3 million unsecured claim that he is entitled to. His entitlement is in the highest classification of unsecured claims, but is part of more than $19 million in Allowed General Unsecured Claims, which are secondary to the payment of Allowed Administrative Claims, Allowed Secured Claims and Allowed Priority Claims in the case.

Johnson’s settlement was reached through mediation that took place on March 15. Johnson’s agent, David Winkle of Hambric Sports Management, said he would have no comment, calling the settlement a “private matter.”

Lawsuits dropped

As a result of the settlement, Johnson is dropping two lawsuits connected to his loan.

His first lawsuit will be dismissed pending bankruptcy plan approval.

A second suit filed in September 2015 against his former accountant and financial advisor Roy Anthony “Tony” Adams and his employer, Alliance of Financial Professionals LLC of Alpharetta, Ga., for $4 million was dismissed on May 16 with prejudice, meaning the dismissal is final and Johnson can’t file another lawsuit based on the same grounds.

Johnson’s suit had accused Adams of breaching his fiduciary duty as Johnson’s paid financial adviser and creating a conflict of interest by representing both Johnson and the law firm simultaneously, and advising Johnson to loan the $3 million despite knowing the firm was in financial distress because of an alleged misappropriation of funds.

In his initial 2014 lawsuit, Johnson laid much of the blame for the alleged scam on Hardwick, who was accused by his former partners in a separate suit of creating the shortages by embezzling tens of million of dollars. Johnson had described Hardwick as a trusted advisor who was also listed as a member of the board of directors of Johnson’s charitable foundation.

But in an amended suit filed in November 2014, Johnson portrayed Hardwick as a “pawn” that was used by his former law partners to secure Johnson’s loan because of his trusted relationship with the golfer, for their gain with no intention of repaying it, before they managed to oust Hardwick from the firm. Hardwick remained a defendant in Johnson’s amended suit, however.

Johnson’s amended suit was apparently based on a Hardwick affidavit provided to Johnson’s attorneys by Hardwick and referenced in court documents.

The Wittstadts used mocking golf metaphors throughout their motion to dismiss Johnson’s amended complaint, with language such as “Johnson’s mulligan fares no better than his first whiff,” and documents have gone missing “like a ball shanked out of bounds.”

Johnson was seeking a $4 million payment, reflecting a total built into the contract if payments were late, and none were ever made.

Hardwick’s legitimate income could not keep pace with his lavish lifestyle, which included private jet travel; multi-million dollar homes; high-end retail goods and services; gambling at casinos in Louisiana, Mississippi, New Jersey, and Nevada; and payments to bookies and girlfriends.

U.S. Attorney’s Office release

The Morris Hardwick Schneider firm, which once employed 150 lawyers and 700 staff members in 50 offices in 13 states, no longer provides legal services to clients, according to Seth Mills with the Mills Paskert Divers law firm of Tampa and Atlanta, who is representing the Wittstadts in the bankruptcy case.

The Wittstadts state in court documents that their firm was unable to survive the loss of the profitable LandCastle Title business, which was taken over by an affiliate of Fidelity, and the negative publicity of the “false allegations” levied against the Wittstadts by Johnson’s counsel.

Businessman James Pritchard, another Adams client whom Adams referred to Hardwick for a $2 million loan in early August 2014, has also reached a settlement as part of the firm’s bankruptcy plan.

Hardwick awaits trial

Prior to his February arrest in Atlanta, Hardwick had been living primarily at a home in the Myrtle Beach area, his attorney Ed Garland said during Hardwick’s bond hearing.

The judge granted Hardwick $1 million bond and home detention at his parents’ house in Dunwoody, Ga. Hardwick’s pretrial conference is scheduled for June 24 in U.S. District Court for the Northern District of Georgia.

According to a federal indictment and a release from the U.S. Attorney’s Office for the Northern District of Georgia, Hardwick and Asha Maurya, the firm’s former chief financial officer, are being accused of conspiring to defraud the law firm and title company, resulting in Hardwick’s alleged theft of over $20 million from attorney escrow accounts and operating accounts.

In addition to assisting Hardwick, Maurya is accused of embezzling approximately $900,000 from the firm’s accounts to pay her own personal expenses.

“The indictment alleges an embezzlement scheme dating back years,” said U.S. Attorney John Horn in the release. “Along the way, Mr. Hardwick is alleged to have repeatedly lied to his clients, law partners, banks and others.”

The U.S. Attorney’s Office release states “Hardwick’s legitimate income could not keep pace with his lavish lifestyle, which included private jet travel; multi-million dollar homes; high-end retail goods and services; gambling at casinos in Louisiana, Mississippi, New Jersey, and Nevada; and payments to bookies and girlfriends.”

During Hardwick’s contentious six-hour bond hearing on Feb. 25, Garland accused Maurya of single-handedly embezzling from the firm without Hardwick’s knowledge, according to coverage of the bond hearing by the Daily Report website.

The website reported that prosecutors initially opposed Hardwick receiving bond, arguing he was a flight risk, possibly with secretly stashed cash and friends with access to private planes to flee the country.

According to the Daily Report, the portrayal was largely based on information provided by Hardwick’s estranged fiancée and mother of his young child, Heather Inman, who was not present at the hearing. Inman told prosecutors that Hardwick often talked about fleeing to avoid prosecution, that she helped Hardwick and his mother pack nearly $200,000 into a Lululemon shopping bag, and that he also had a luxury watch collection.

Garland described Hardwick as “broke,” according to the Daily Report, and presented nasty emails from Inman to Hardwick that U.S. Magistrate Judge Justin Anand said showed “enormous personal animus.”

Hardwick has an electronic monitoring device and is subject to arrests if he goes within 100 yards of an airport.

According to the prosecutors, Hardwick, 50, could be facing between 27 to 34 years in prison.

Alan Blondin: 843-626-0284, @alanblondin

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