Dustin Johnson files second lawsuit, now implicates former financial adviser
Dustin Johnson has filed a second lawsuit in his attempt to recoup $3 million he says was bilked from him, this one involving his former accountant and financial adviser.
The PGA Tour golfer and Coastal Carolina alumnus is suing Roy Anthony “Tony” Adams and his employer, Alliance of Financial Professionals LLC of Alpharetta, Ga., for $4 million.
I just want my money back. I would like to have my money back.”
golfer Dustin Johnson
Johnson claims in the federal suit that Adams advised Johnson to loan $3 million to the Morris Hardwick Schneider law firm in August 2014 despite knowing the Atlanta firm was in financial distress because of an alleged misappropriation of funds.
Johnson also claims in the suit that Adams was representing both Johnson and the law firm at the time of the loan without notifying Johnson, thereby creating a conflict of interest and breaching his fiduciary duty as Johnson’s paid financial adviser.
The suit was filed Sept. 16 in U.S. District Court in Atlanta.
In an email to The Sun News, the attorney representing Adams and Alliance of Financial Professionals (AFP) disputed Johnson’s claims.
“Mr. Johnson loaned $3 million for a law firm managed by his friend and advisor, Nat Hardwick,” said Mark Lefkow of the Nall & Miller LLP law firm of Atlanta. “While Mr. Johnson claims that he received advance approval of the loan by Mr. Adams, the documents attached to Mr. Johnson’s Complaint as proof are all dated months after the loan.
“Mr. Adams and AFP look forward to further facts coming out in this case, facts which will clear them of any wrongdoing.”
Lefkow said he is in the process of formulating responsive pleadings to the court.
I don’t typically comment on pending litigation, but it’s unfair to my client to have all these allegations out in the media before we’ve responded to the litigation. We’re at the preliminary stages of the case.”
Mark Lefkow of the Nall & Miller LLP law firm of Atlanta
“I don’t typically comment on pending litigation, but it’s unfair to my client to have all these allegations out in the media before we’ve responded to the litigation,” Lefkow said. “We’re at the preliminary stages of the case.”
Johnson said last week that he’s not angry at or disappointed in the people he entrusted that he’s alleging have betrayed his trust and scammed him. “I just want my money back,” Johnson said. “I would like to have my money back.”
Johnson fired Adams and AFP in January and has hired another financial and accounting firm based in Dallas.
Johnson’s initial $4 million lawsuit against the Morris Hardwick Schneider law firm – now named Morris Schneider Wittstadt (MSW) – was filed last Nov. 3.
In the original suit, Johnson alleged Nathan “Nat” Hardwick IV 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.
In an amended suit filed Nov. 17, Johnson portrayed Hardwick as a “pawn” that was used by his former law partners to secure Johnson's $3 million loan because of his trusted relationship with the golfer, for their gain with no intentions of repaying it, before they managed to oust Hardwick from the firm. Hardwick remains a defendant in Johnson’s amended suit, however.
The $4 million total Johnson is seeking was built into the contract if payments were late. He says in court documents that no payments have been made and the law firm guaranteed the loan through Hardwick.
Morris Schneider Wittstadt filed for Chapter 11 bankruptcy protection from its creditors July 5 in U.S. Bankruptcy Court in Richmond, Va., and an article on the filing in the Atlanta Journal-Constitution stated the firm has multiple lawsuits filed against it across the country.
The AJC said the once-prominent real estate law firm grew to have offices in 13 states with 150 lawyers and 700 staffers, and the firm and affiliated LandCastle Title handled tens of thousands of transactions annually.
It has been embroiled in legal action since Hardwick’s former partners accused him in a lawsuit filed Aug. 25, 2014, of creating shortages by embezzling at least $30 million from escrow and other accounts controlled by the firm and LandCastle Title.
Hardwick, who according to court documents was the majority partner in the law firm as well as chairman and chief executive officer of LandCastle Title, has denied the accusation. He resigned from all positions shortly before the Wittstadts filed a suit against him.
The Wittstadts filed a motion in November to dismiss Johnson’s suit, referring to it as a “fairy tale” and “preposterous.”
Mark Wittstadt claims in an affidavit that the loans Hardwick procured were part of Hardwick’s personal responsibility to replenish accounts that were short because of misappropriated payments to him, and the firm’s shareholders agreement prohibited Hardwick from obligating the firm to a guaranty of indebtedness without the express agreement of the Wittstadts.
James Pritchard, another Adams client whom Adams referred to Hardwick for a $2 million loan in early August 2014 that was nearly identical to Johnson’s in form and execution, received a summary judgment against MSW in June for more than $2.6 million.
In his decision, judge Melvin Westmoreland of Fulton County Superior Court ruled MSW ratified the guarantee given to Pritchard by Hardwick on behalf of the firm by not refunding the $2 million and using it.
Johnson does not have a copy of his loan document and guarantee, however. He believes the signed agreement was sent directly to Adams, but in an email dated Oct. 7, 2014, and submitted to the court by Johnson, Adams says he cannot find the documents. Johnson still asserts he had a valid and binding oral and implied contract with Hardwick and the firm.
Adams and AFP were brought into the Pritchard lawsuit through a third-party complaint filed by MSW, and a brief filed by Lefkow in the bankruptcy case states Mark Wittstadt had “personal responsibility” for the appropriation of the Pritchard and Johnson loan funds because he was in charge of escrow accounts at the time.
“Under Wittstadt’s watch, the firm used the Johnson and Pritchard money to satisfy the firm’s obligations to the firm’s clients on account of the firm pilfering their trust funds,” Lefkow wrote.
Citing a deposition of Mark Wittstadt, Lefkow’s brief also suggests the shortages may have occurred because of a glitch in a software program used to maintain escrow ledgers. The program may have erroneously transferred money to Hardwick.
Alan Blondin: 843-626-0284, @alanblondin
The lawsuit
In summary and taken directly from the lawsuit, Johnson’s new $4 million suit against accountant and financial adviser Tony Adams and Alliance of Financial Professionals LLC contends:
[Adams and AFP knew, at the time Mr. Johnson made the loan, that the Morris Firm was in severe financial distress and the loan was intended to replace funds that had been misappropriated from the Morris Firm’s escrow accounts. At the time Mr. Johnson made the loan, Adams had assisted the Morris Firm in investigating the scope of the deficiencies. Adams and AFP knew or should have known that the Morris Firm may not be willing or able to repay Mr. Johnson the $4 million he was promised as a return on the loan.
Adams and AFP never disclosed to Mr. Johnson that the Morris Firm was a client, nor did he disclose to Mr. Johnson that the loan was intended to assist the Morris Firm in responding to a significant financial crisis, which was caused in whole or in part by the misappropriation of millions of dollars from the Morris Firm’s escrow account. Adams independently reviewed the terms of the loan and the supporting documents and approved it. Mr. Johnson would not have relied on Adams’ approval had he known that Adams’ loyalties were divided among Mr. Johnson, Hardwick and the Morris Firm and its other owners, Mark and Gerard Wittstadt.
The American Institute of Certified Public Accountants standards require that an accountant be “impartial, intellectually honest and free of conflicts of interest.” In the event of a conflict of interest, the accountant “should disclose the nature of the conflict of interest to clients and other appropriate parties affected by the conflict and obtain their consent to perform the professional services.
On Oct. 2, 2014, Mr. Johnson emailed Adams asking him to “Please get my 3 million back from that investment call me if you have any questions.” Adams responded on Oct. 3, 2014, “Got it. I’ll do my best!”]
Johnson is also seeking punitive and special damages in an amount to be determined at trial.
This story was originally published October 3, 2015 at 8:54 AM with the headline "Dustin Johnson files second lawsuit, now implicates former financial adviser."