Contract analysis

I. Executive Summary This memorandum presents the results of the investigation team's analysis of three entities that received payments from Verimark Coastal Resorts LLC ("VCR"), a wholly owned subsidiary of Verimark Hospitality Group Inc. ("VHG"), under purported capital-improvement contracts during the period from approximately July 2021 through June 2023. The Audit Committee retained Calderwood & Harkness LLP on J

II. Scope and Methodology A. Scope of Analysis The analysis set forth in this memorandum covers all payments from VCR to GSC, CDC, and SPS from the earliest identified payment (on or about July 14, 2021, when VCR issued its first payment to GSC in the amount of $32,500) through the end of the investigated period (June 30, 2023). The investigated period was defined by the Audit Committee in consultation with Calderwoo

1. Florida Division of Corporations filings. Articles of organization (for GSC and SPS, as limited liability companies) and articles of incorporation (for CDC, as a Florida corporation), annual reports, and registered agent designations for all three entities. These filings were obtained directly from the Florida Division of Corporations' Sunbiz online portal and verified against certified copies obtained by Crestlin

2. VCR accounts payable records, purchase orders, and vendor master file entries. The investigation team obtained a complete extract of VCR's vendor master file as of August 1, 2023, as well as all purchase orders, invoices, and payment records associated with GSC, CDC, and SPS. These records were extracted from VCR's Hollowell & Co. system by VHG's information technology department under the supervision of VHG Chief

3. Bank account records. Records for accounts held by GSC, CDC, and SPS at the following financial institutions were obtained through a combination of subpoena and voluntary production: (a) GSC maintained a commercial checking account at Gulf Coast National Bank (account ending in -4738), opened on or about March 22, 2021. (b) CDC maintained a commercial checking account at Coastal Heritage Credit Union (account endi

4. Email communications. The investigation team collected email communications from eight of eleven identified custodians as part of the broader document collection conducted in this investigation. The overall collection encompassed approximately 1.2 million documents. Following de-duplication, de-NISTing, and a TAR 2.0 predictive-coding workflow conducted by Triton discovery Solutions Inc. (project manager Kai Nakam

5. Witness interview transcripts and memoranda. The investigation team conducted witness interviews of the following individuals relevant to this memorandum: (a) Ryan Mateo Serrano, VCR Controller. First interview: September 27, 2023 (counsel Marco A. Ruiz of Coletti & Ruiz PA present). Second interview: December 5, 2023, conducted pursuant to a cooperation agreement executed on November 15, 2023 (counsel Marco A. Ru

6. Forensic tracing analysis prepared by Crestline Forensic Advisory LLC. Crestline was retained by Calderwood & Harkness LLP at the direction of the Audit Committee to perform forensic accounting and tracing analysis in connection with the investigation. Crestline's engagement (number CFA-VHG-2023-0089) is led by engagement partner Douglas Reinhardt, CPA, CFF, and senior manager Priya Venkatesh, CPA. Crestline's for

III. Entity-by-Entity Analysis A. Gulf Standard Contracting LLC ("GSC")

1. Formation and Corporate Structure. GSC is a Florida limited liability company formed on March 12, 2021, as reflected in articles of organization filed with the Florida Secretary of State (Document No. L21000112847). The stated purpose of the entity in its articles of organization was "general contracting and construction services." The entity's initial and only registered agent was Ryan Mateo Serrano, the VCR Cont

2. Transactional History. GSC submitted a total of nineteen (19) invoices to VCR over the investigated period. These invoices resulted in aggregate payments from VCR to GSC totaling $812,400. The first invoice was submitted on or about July 9, 2021, approximately four months after GSC's formation. The first payment, in the amount of $32,500, was processed by VCR on or about July 14, 2021, and deposited into GSC's Gul

3. Fund-Flow Analysis. Crestline Forensic Advisory LLC conducted a detailed tracing of funds deposited into GSC's commercial checking account at Gulf Coast National Bank (account ending in -4738) following receipt of VCR payments. The tracing covered all deposits and disbursements during the life of the account and identified the following principal categories of disbursements: Residential renovation expenditures. Cr

1. Formation and Corporate Structure. CDC is a Florida corporation incorporated on June 4, 2021, as reflected in articles of incorporation filed with the Florida Secretary of State (Document No. P21000048923). The stated purpose of the corporation in its articles of incorporation was "interior design consulting and furnishing procurement services." As with GSC, the registered agent was Ryan Mateo Serrano, with his pe

2. Transactional History. CDC submitted a total of sixteen (16) invoices to VCR over the investigated period, resulting in aggregate payments from VCR to CDC totaling $587,600. The first invoice was submitted on or about September 22, 2021, approximately three and one-half months after CDC's incorporation. The corresponding first payment, in the amount of $28,500, was processed by VCR on or about September 29, 2021.

3. Fund-Flow Analysis. Crestline's forensic tracing of CDC's bank account at Coastal Heritage Credit Union (account ending in -9152) identified the following principal categories of disbursements following the receipt of VCR payments: Personal credit-card payments. Crestline traced approximately $267,000 in payments from the CDC account to three personal credit-card accounts held by Nicole Prescott at Pinnacle Partne

1. Formation and Corporate Structure. SPS is a Florida limited liability company formed on November 18, 2021, as reflected in articles of organization filed with the Florida Secretary of State (Document No. L21000289514). The stated purpose of the entity in its articles of organization was "property maintenance, landscaping, and related services." SPS was the last of the three entities to be formed, approximately eig

2. Transactional History. SPS submitted a total of twelve (12) invoices to VCR over the investigated period, resulting in aggregate payments from VCR to SPS totaling $430,000. The first invoice was submitted on or about February 8, 2022, approximately three months after SPS's formation. The corresponding first payment, in the amount of $28,000, was processed by VCR on or about February 15, 2022. The last identified i

3. Fund-Flow Analysis. Crestline's forensic tracing of SPS's bank account at Harborview Financial (account ending in -6304) identified the following principal categories of disbursements: Transfers to Daskine's personal bank accounts. Crestline traced approximately $247,000 in transfers from the SPS account to personal checking and savings accounts held by Daskine at Ashgrove Savings Bank. These transfers were the pr

IV. Aggregate Summary of Fictitious Payments The following table consolidates the key data regarding all three entities analyzed in this memorandum: Several features of the aggregate data merit emphasis: Aggregate scope. The scheme resulted in $1,830,000 in total improper payments to three shell entities across 47 fictitious purchase orders over an approximately 24-month period (July 2021 through June 2023). This amo

V. Role of Each Individual Subject A. Garrett W. Daskine Garrett W. Daskine has been employed by VHG for approximately seventeen years. At the time of the events at issue, he held the position of Division President of VCR, with overall management responsibility for VCR's resort operations, capital-improvement programs, and financial performance. In his capacity as Division President, Daskine was the most senior VHG e

VI. Internal Control Failures The investigation identified several significant deficiencies in VCR's internal controls that enabled the shell-entity scheme to operate undetected for approximately two years. These deficiencies are summarized below. A comprehensive analysis of the control environment and detailed remediation recommendations will be set forth in a separate Remediation Recommendations Memorandum, current

VII. Key Documentary Evidence The following is a summary of the critical categories of documentary evidence supporting the findings set forth in this memorandum. This list is not exhaustive but identifies the principal evidentiary sources for each major finding.

1. Florida Secretary of State filings. Articles of organization for GSC (filed March 12, 2021, Document No. L21000112847) and SPS (filed November 18, 2021, Document No. L21000289514); articles of incorporation for CDC (filed June 4, 2021, Document No. P21000048923). Annual reports and registered agent designations for all three entities. These filings establish the formation dates, stated purposes, registered agents,

2. Operating agreements and bank signature cards. Operating agreements for GSC and SPS, identifying the beneficial owners. Bank signature cards and account-opening documentation for all three entities, confirming authorized signers and beneficial owners. These documents were obtained through a combination of voluntary production by Serrano's counsel, subpoena to the relevant financial institutions, and review of docu

3. VCR accounts-payable records. All 47 purchase orders from VCR's Hollowell & Co.-based accounts-payable system, each created under Serrano's user credentials (user ID: RMSERRANO). System audit logs reflecting the creation, approval, and payment processing of each purchase order. Vendor master file entries for GSC, CDC, and SPS, including W-9 forms and contact information submitted during the vendor-onboarding proce

4. Invoices. All 47 corresponding invoices issued by GSC (19 invoices), CDC (16 invoices), and SPS (12 invoices), including descriptions of purported services, amounts, and property attributions.

5. Bank records. Complete bank account records for: (i) GSC's account at Gulf Coast National Bank (account ending in -4738); (ii) CDC's account at Coastal Heritage Credit Union (account ending in -9152); and (iii) SPS's account at Harborview Financial (account ending in -6304). These records include deposit records confirming the receipt of VCR payments and detailed disbursement records showing subsequent transfers,

6. Email correspondence. Email communications between Daskine and Serrano discussing invoice amounts, invoice timing, cost-center coding, and other aspects of the scheme. Email communications between Prescott and Serrano regarding invoice processing and approval. These communications were captured from VHG corporate email accounts during the broader document collection and were identified through the TAR 2.0 predicti

7. Crestline forensic tracing reports. Detailed fund-flow analyses prepared by Crestline Forensic Advisory LLC tracing the path of funds from VCR's disbursement accounts through shell entity bank accounts to ultimate personal expenditures of Daskine and Prescott. These reports include fund-flow diagrams, which are attached