PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
DEPOSITION OUTLINE — RANDALL BRECKER (DAY 2)
ATTORNEY WORK PRODUCT — PRIVILEGED AND CONFIDENTIAL
This document is protected by the attorney work-product doctrine and the attorney-client privilege. It reflects the mental impressions, conclusions, opinions, and legal theories of counsel. Do not distribute or disclose outside the litigation team.
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I. PRELIMINARY NOTES AND DAY 1 RECAP
A. Purpose of Day 2 Examination
Day 1 of the Brecker deposition was conducted on January 9, 2023, at the same location and before the same court reporter. Day 1 covered the following subject-matter areas in substantial detail:
1.  The formation and organizational history of Coastal Palms Franchise Holdings LLC, including the operating agreement, the allocation of equity interests among the three members (Brecker at 60%, Prescott at 25%, Theresa Brecker at 15%), and the scope of Brecker's authority as Managing Member.
2.  The franchise relationship between Coastal Palms and Verimark Hospitality Group Inc., including the execution of twenty-two (22) Franchise License Agreements ("FLAs") covering eighteen (18) Verimark Suites properties and four (4) Verimark Select properties across Florida, Georgia, South Carolina, and Alabama.
3.  The establishment of Suncoast Room Management Inc. as a Florida corporation in or about late 2012 or early 2013, and its commencement of operations no later than January 2013.
4.  The creation and operation of the gulfcoastrooms.com website as an unbranded, direct-booking channel operated by Suncoast.
5.  Gross Room Revenue ("GRR") reporting practices at the property level, including the flow of information from property-level controllers to Coastal Palms' corporate office and then to Verimark.
6.  Brecker's knowledge of FLA § 4.1, which defines Gross Room Revenue, and his interpretation of the language "regardless of the entity collecting such revenue."
7.  Brecker's communications with property-level controllers, including specific instructions regarding the treatment of Suncoast-collected revenues in GRR reports submitted to Verimark.
Day 2 will focus on the following areas that were not fully explored on Day 1 and that are critical to establishing the scope, methodology, and quantification of the underreporting scheme:
1.  Suncoast Financial Details and Management-Fee Structure: The detailed financial operations of Suncoast Room Management Inc., including bank accounts, fund flows, the 12% management-fee arrangement, annual revenues from 2013 through 2021, and the tax treatment of Suncoast income.
2.  OTA Net-Rate Netting Methodology: The methodology by which Coastal Palms classified online travel agency ("OTA") net-rate payments and excluded the OTA commission component from reported GRR, resulting in a second independent stream of underreporting distinct from the Suncoast direct-booking diversion.
3.  Communications with Nolan Prescott Regarding Franchise Reporting: The content and frequency of financial reports and communications between Brecker and Prescott, Coastal Palms' 25% passive equity holder, to establish that Prescott received more complete revenue information than Verimark and to lock in Brecker's account of Prescott's knowledge before Prescott's own deposition.
4.  Revenue Figures and Quantification Topics: A systematic walk-through of the royalty, marketing-fund, and technology-fee underpayment calculations, including the application of FLA § 4.6 late-payment interest, to test Brecker's knowledge of and response to the damages figures.
The estimated duration of Day 2 is seven (7) hours of examination time, which is the maximum permitted under Florida Rule of Civil Procedure 1.310(b)(4). Counsel should be mindful of time allocation and prioritize Sections II through V below as the highest-value areas.
B. Key Admissions from Day 1 to Build Upon
The following admissions were secured during Day 1 and form the foundation for Day 2's examination. These admissions should be referenced at the outset of relevant topic areas to anchor Brecker and prevent retreat:
Admission 1 — Direction to Exclude Suncoast Revenue from GRR Reports: Brecker admitted under oath that he personally directed property-level controllers to exclude all revenues collected through Suncoast Room Management Inc. — including revenues from gulfcoastrooms.com direct bookings, walk-in guests processed through Suncoast's merchant-processing system, and corporate-direct contracts routed through Suncoast — from the monthly GRR reports that Coastal Palms submitted to Verimark. He acknowledged that this direction was communicated verbally and, in certain instances, via email to the relevant controllers. See Day 1 Transcript, pp. 187:14–189:22; 194:3–196:8.
Admission 2 — Sole Architect of the Suncoast Arrangement: Brecker acknowledged that he was the sole individual who conceived of, established, and implemented the Suncoast booking-channel arrangement beginning no later than January 2013. He confirmed that neither Prescott nor Theresa Brecker was involved in the decision to create Suncoast or to route certain guest-room revenues through it. See Day 1 Transcript, pp. 142:11–144:5; 148:19–150:3.
Admission 3 — Familiarity with FLA § 4.1 GRR Definition: Brecker conceded that he was familiar with the FLA § 4.1 definition of Gross Room Revenue, including the phrase "regardless of the entity collecting such revenue." However, he claimed that he interpreted this language as not applying to an affiliated management company that collected revenues on behalf of the property and remitted the net amount to the property-level LLC. He characterized this as a "reasonable business interpretation." See Day 1 Transcript, pp. 221:6–224:18; 228:1–230:14.
Impeachment Note: If Brecker attempts to retreat from any of these positions during Day 2, counsel should immediately direct the court reporter to mark the relevant Day 1 transcript pages and read the prior testimony into the record. Copies of the Day 1 rough transcript have been obtained from the court reporter on an expedited basis and are available in the deposition binder. Cross-references to specific page-and-line citations are set forth in Appendix B to this outline.
C. Exhibits Pre-Marked for Day 2
Approximately thirty-five to forty (35–40) exhibits have been pre-marked for use during Day 2 of the deposition. These exhibits are organized by topic area as follows:
•  Suncoast Financials (Exhibits 47–62): Articles of incorporation, annual reports, bank statements, general ledger entries, management agreements, federal and state tax returns (2013–2021), and financial statements.
•  OTA Records (Exhibits 63–74): OTA platform agreements, settlement statements, sample monthly GRR reports showing netting methodology, and reconciliation work papers.
•  Prescott Communications (Exhibits 75–83): Quarterly financial summary reports emailed from Brecker to Prescott, emails between Brecker and Prescott referencing Suncoast or franchise reporting, and Coastal Palms member-meeting records (if any).
•  Revenue Reconciliation (Exhibits 84–91): Property-by-property GRR comparison schedules, Ridgeline Forensic Advisory calculations, Thornbury & Associates audit work papers, and Ironclad National Bank loan-covenant compliance certificates.
•  FLA Provisions and Correspondence (Exhibits 92–96): Relevant FLA excerpts, the February 28, 2022 Whitfield letter, franchise-application documents, and the Verimark Notice of Material Breach.
Specific exhibit numbers and Bates-stamp references are identified throughout the sections below. All exhibits have been Bates-stamped and are included in the deposition binder. Copies have been provided to the court reporter and to defense counsel in accordance with the parties' agreed-upon exhibit protocol.
II. SUNCOAST ROOM MANAGEMENT INC. — FINANCIAL OPERATIONS
A. Suncoast Corporate Structure and Governance
The objective of this section is to firmly establish that Suncoast Room Management Inc. was a shell entity controlled entirely by Brecker, with no independent operations, no independent employees, and no business purpose other than diverting guest-room revenues away from the GRR calculations that determined Coastal Palms' franchise-fee obligations to Verimark.
Line of Questioning:
1.  Confirm that Randall Brecker is the sole officer of Suncoast Room Management Inc. Specifically, confirm that he holds the title of President and that there are no other officers — no Vice President, no Secretary, no Treasurer, and no Chief Financial Officer.
2.  Confirm that Brecker is the sole director of Suncoast Room Management Inc. and that the board of directors has consisted of Brecker alone since the date of incorporation.
3.  Confirm that Suncoast Room Management Inc. is a Florida corporation incorporated with the Florida Department of State, Division of Corporations, and obtain the date of incorporation for the record (believed to be on or about November 14, 2012, based on the articles of incorporation in the production).
4.  Confirm Suncoast's principal office address and registered agent address. Establish that Suncoast's principal office is located at the same address as, or in immediate proximity to, Coastal Palms Franchise Holdings LLC's corporate office at 9500 Gulf Shore Drive, Suite 450, Naples, FL 34108. Probe whether Suncoast ever maintained a separate office space at any time.
5.  Establish that Suncoast has no employees independent of Coastal Palms. Probe whether every individual who performed work on behalf of Suncoast — including accounting personnel, front-desk staff processing Suncoast bookings, IT personnel maintaining gulfcoastrooms.com, and sales staff managing corporate-direct accounts — was employed by Coastal Palms or one of the property-level LLCs rather than by Suncoast itself. Ask Brecker to identify by name every individual who performed substantive work for Suncoast at any point during the 2013–2021 period.
6.  Probe the overlap of staff, office space, and accounting personnel between Suncoast and Coastal Palms. Establish that the same bookkeepers and controllers who maintained the books and records of Coastal Palms and the property-level LLCs also maintained the books and records of Suncoast. Ask Brecker to identify specifically who maintained Suncoast's general ledger and who prepared Suncoast's financial statements.
7.  Probe whether Janet Kerrigan, during her tenure as regional controller for Coastal Palms, performed accounting work for Suncoast. If so, establish the nature and scope of her involvement with Suncoast's books and records and the time period during which she was involved. This line of questioning is important for two reasons: (a) it further establishes the complete overlap between Coastal Palms and Suncoast; and (b) it lays the foundation for the Kerrigan whistleblower discussion in Section VIII below.
8.  Confirm that Suncoast had no independent business purpose other than collecting and processing certain hotel guest-room revenues for properties in Coastal Palms' portfolio. Ask Brecker directly: "Did Suncoast Room Management Inc. provide management services to any hotel or hospitality property that was not part of the Coastal Palms portfolio?" If the answer is no, establish that Suncoast existed solely to serve as a revenue-collection vehicle for Coastal Palms properties. If Brecker resists this characterization, probe what other functions Suncoast performed and who benefited from those functions.
9.  Establish that Suncoast did not hold any franchise licenses, did not operate any hotels, did not own any real property, and did not maintain any property-management systems independent of those used by Coastal Palms and the property-level LLCs.
Exhibits:
•  Exhibit 47: Suncoast Room Management Inc. — Articles of Incorporation, filed with the Florida Department of State, Division of Corporations (Bates Nos. CPFH-SUP-000114 through CPFH-SUP-000119). This exhibit should confirm Brecker as the sole incorporator and initial registered agent.
•  Exhibit 48: Suncoast Room Management Inc. — Annual Reports filed with the Florida Department of State (2013–2022) (Bates Nos. CPFH-SUP-000120 through CPFH-SUP-000143). These reports should confirm Brecker as the sole officer and registered agent for each year of operation.
B. Suncoast Bank Accounts
The objective of this section is to trace the flow of guest-room revenues through Suncoast's bank accounts, establish the 12% management-fee retention, and identify where the remaining 88% was remitted — and ultimately where the retained 12% ended up.
Line of Questioning:
1.  Ask Brecker to identify all bank accounts maintained by Suncoast Room Management Inc. at any time during the period from January 2013 through the present. For each account, obtain: (a) the name of the financial institution; (b) the account type (checking, savings, money market, etc.); (c) the account number (or last four digits if Brecker claims confidentiality concerns — note that full account numbers are already in the production); (d) the date the account was opened; and (e) the date the account was closed, if applicable.
2.  Probe whether any Suncoast bank accounts were maintained at Ironclad National Bank. This is significant because Ironclad National Bank is Coastal Palms' primary lender, holding approximately $94 million in first-lien mortgage loans on eighteen (18) of the twenty-two (22) properties in the portfolio. The relationship manager for the Coastal Palms account at Ironclad is Devon Schultz. If Suncoast maintained accounts at Ironclad, probe whether Schultz or anyone else at Ironclad was aware of Suncoast's revenue-collection activities, and whether Ironclad's knowledge of Suncoast revenues is reflected in any loan documentation or correspondence.
3.  Establish the flow of funds from guest payments through Suncoast to the property-level entities:
a. Guest makes a payment (via credit card, debit card, cash, or corporate-direct invoice) through a Suncoast-controlled booking channel (gulfcoastrooms.com, walk-in processed through Suncoast's merchant-processing system, or corporate-direct contract routed through Suncoast).
b. Payment is deposited into a Suncoast bank account.
c. Suncoast retains a 12% management fee from the gross amount collected.
d. The remaining 88% is remitted to the property-level LLC (e.g., Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, or one of the other property-level entities).
4.  Confirm the frequency of remittances from Suncoast to the property-level LLCs. Was the remittance cycle monthly, bi-weekly, weekly, or on some other cadence? Ask Brecker whether the remittance schedule was documented in any written agreement.
5.  Probe what happened to the 12% management fee retained by Suncoast. Specifically:
a. Did the retained fees remain in Suncoast's bank accounts as operating capital or reserves?
b. Were the retained fees subsequently distributed to Brecker personally? If so, how frequently and in what amounts?
c. Were the retained fees distributed to Coastal Palms Franchise Holdings LLC? If so, were they reflected in Coastal Palms' books and records?
d. Were the retained fees used to pay any expenses? If so, what expenses did Suncoast incur, given that it had no employees and no independent office space?
6.  Probe whether Suncoast ever commingled funds with Coastal Palms or any property-level LLC — i.e., whether Coastal Palms funds were deposited into Suncoast accounts or vice versa outside the normal course of the management-fee arrangement.
Exhibits:
•  Exhibit 49: Suncoast Room Management Inc. — Bank Statements, Ironclad National Bank (or other institution), January 2013 through December 2021 (produced in supplemental production, November 18, 2022, pursuant to Court order of October 28, 2022 granting Verimark's Motion to Compel). Selected representative months from each year. (Bates Nos. CPFH-SUP-014882 through CPFH-SUP-017441.)
•  Exhibit 50: Suncoast Room Management Inc. — General Ledger Entries, showing management-fee retention and remittances to property-level LLCs, selected months (Bates Nos. CPFH-SUP-022019 through CPFH-SUP-023106).
Note: These documents were part of the 312,000 additional documents produced on November 18, 2022, following the Court's October 28, 2022 order compelling production of Suncoast financial records. Coastal Palms' initial production of approximately 84,000 documents on August 22, 2022 did not include any Suncoast records, and counsel should note for the record if Brecker claims lack of familiarity with these documents.
C. Management-Fee Calculations
The objective of this section is to establish that the 12% management fee was not the product of an arm's-length negotiation, was not supported by any market analysis, and was designed to maximize the revenue diverted from GRR calculations.
Line of Questioning:
1.  Establish whether the 12% management-fee rate was documented in a written agreement between Suncoast Room Management Inc. and any of the property-level LLCs. If a written management agreement exists, identify when it was executed, by whom, and the material terms.
2.  If Brecker identifies a written management agreement, probe the circumstances of its execution:
a. Who negotiated the agreement on behalf of Suncoast? (Brecker, as Suncoast's sole officer.)
b. Who negotiated the agreement on behalf of the property-level LLC? (Brecker, as the controlling member of Coastal Palms, which in turn controls the property-level LLCs.)
c. Establish that Brecker was on both sides of the transaction — he set the management-fee rate as both the service provider and the service recipient.
3.  Probe the basis for the 12% rate:
a. Was any market analysis or benchmarking study performed to determine whether 12% was a fair, arm's-length rate for the services Suncoast purported to provide?
b. Did Brecker consult with any hospitality-industry consultant or advisor about the appropriate rate?
c. Was the rate approved by any governing body — the Coastal Palms members, the property-level LLC members, or any independent party?
d. Is Brecker aware that typical third-party hotel management fees in the industry range from 3% to 6% of gross revenue? If so, how does he justify a 12% rate for an entity that had no employees and provided no independent management services?
4.  Confirm whether the 12% was calculated on gross booking revenue (i.e., the full rate charged to the guest before any deductions) or on net revenue (after OTA commissions, credit card processing fees, travel-agent commissions, or other charges). This distinction is important because it affects the total quantum of fees retained by Suncoast.
5.  Establish the total management fees retained by Suncoast over the 2013–2021 period. Ask Brecker for his best estimate of the total dollar amount. Compare his estimate to the calculations performed by Dr. Sharon Kettlewell of Ridgeline Forensic Advisory, Verimark's forensic-accounting expert. Dr. Kettlewell's preliminary report estimates total Suncoast management-fee retention at approximately $19.1 million over the nine-year period.
6.  Probe whether the management fees retained by Suncoast were reported as expenses on the financial statements of Coastal Palms or the property-level LLCs that were submitted to Ironclad National Bank for loan-covenant compliance purposes. This line of questioning is designed to expose a potential inconsistency: if Suncoast management fees appeared as expenses in the financials submitted to the lender, then Ironclad was aware of Suncoast's revenue-collection role — yet Verimark was kept in the dark. Alternatively, if the management fees did not appear in the lender financials, the financial statements submitted to Ironclad may have been inaccurate.
Exhibits:
•  Exhibit 51: Management Agreement between Suncoast Room Management Inc. and Gulf Breeze Hospitality LLC (Bates Nos. CPFH-SUP-008714 through CPFH-SUP-008729). Probe date of execution, management-fee rate, term, and scope of services.
•  Exhibit 52: Management Agreement between Suncoast Room Management Inc. and Savannah Lodging Partners LLC (Bates Nos. CPFH-SUP-008730 through CPFH-SUP-008744).
•  Exhibit 53: Consolidated Financial Statements of Coastal Palms Franchise Holdings LLC and Subsidiaries, submitted to Ironclad National Bank in connection with annual loan-covenant compliance, fiscal years 2017–2021 (obtained via subpoena duces tecum served on Ironclad National Bank on August 8, 2022) (Bates Nos. INB-001204 through INB-001587).
D. Suncoast Revenue by Year (2013–2021)
The objective of this section is to walk Brecker through Suncoast's annual revenue figures year by year, using Suncoast's own tax returns and financial records, and to establish the magnitude of the underreporting by comparing Suncoast revenues to the GRR figures reported by Coastal Palms to Verimark.
Line of Questioning:
1.  Establish that Suncoast collected revenues from the following three categories of booking activity:
a. Walk-in guests: Guests who arrived at the property without a pre-existing reservation and paid at the front desk through Suncoast's credit-card merchant-processing system rather than through the property's PMS-integrated system.
b. Corporate-direct contracts: Negotiated-rate agreements with corporate accounts that were routed through Suncoast rather than through the property's reservation system. These contracts were executed in Suncoast's name and billed through Suncoast's accounts-receivable system.
c. gulfcoastrooms.com bookings: Reservations made through the unbranded gulfcoastrooms.com website, which was operated and maintained by Suncoast and which offered rooms at the Coastal Palms properties without prominently displaying the Verimark brand.
2.  For each fiscal year from 2013 through 2021, walk Brecker through the following data points using Suncoast's tax returns and financial statements:
a. Total gross revenues collected by Suncoast (from all three categories above).
b. Management fees retained by Suncoast (12% of gross collections).
c. Net amounts remitted by Suncoast to the property-level LLCs.
3.  For each fiscal year, compare Suncoast's total gross collections to the GRR reported by Coastal Palms to Verimark for the same period. Ask Brecker to confirm whether the Suncoast revenues were included in or excluded from the reported GRR figures. For each year where Brecker confirms exclusion, calculate the dollar amount of underreported GRR.
4.  Highlight the most recent full fiscal year (FY 2021) as a specific example:
a. Reported GRR to Verimark: $112.4 million.
b. Estimated true GRR (including Suncoast-collected revenues): $145.6 million.
c. Difference attributable to Suncoast revenue exclusion: $33.2 million.
d. Ask Brecker whether he disputes these figures and, if so, on what basis.
5.  Present the counsel-prepared comparison chart showing Suncoast annual revenue alongside reported GRR and estimated true GRR for each year, demonstrating that the underreporting ranged from approximately 22% to 31% of true GRR depending on the year. Walk Brecker through the chart year by year and ask him to identify any figures he disputes.
Exhibits:
•  Exhibit 54: Suncoast Room Management Inc. — Federal Corporate Income Tax Returns (Form 1120 or 1120-S, as applicable), fiscal years 2013 through 2021 (Bates Nos. CPFH-SUP-031004 through CPFH-SUP-031287).
•  Exhibit 55: Suncoast Room Management Inc. — Florida Corporate Income Tax Returns, fiscal years 2013 through 2021 (Bates Nos. CPFH-SUP-031288 through CPFH-SUP-031402).
•  Exhibit 56: Comparison Chart — Suncoast Annual Revenue vs. Reported GRR vs. Estimated True GRR, 2013–2021 (prepared by counsel; to be marked as a demonstrative exhibit).
E. Suncoast Tax Reporting
The objective of this section is to establish the fundamental inconsistency between Brecker's treatment of Suncoast revenue for tax purposes (where the revenue was reported to the IRS) and his treatment of the same revenue for franchise-fee purposes (where the revenue was concealed from Verimark).
Line of Questioning:
1.  Confirm that Suncoast Room Management Inc. filed its own corporate income-tax returns as a separate entity with the Internal Revenue Service and the Florida Department of Revenue for each year of its operation. Establish whether Suncoast filed as a C-corporation (Form 1120) or as an S-corporation (Form 1120-S). If Suncoast elected S-corporation status, probe whether the income flowed through to Brecker's personal tax return (Form 1040, Schedule K-1).
2.  Confirm that the revenues reported on Suncoast's corporate tax returns for each year from 2013 through 2021 were not included in the GRR figures that Coastal Palms reported to Verimark for the same periods. Ask Brecker to acknowledge this fact directly.
3.  Probe whether Brecker understood that this created an inherent inconsistency: revenues that were real enough to be reported to the IRS and to generate tax liability were simultaneously treated as nonexistent for purposes of calculating franchise fees owed to Verimark. Ask Brecker to explain how he reconciled these two positions.
4.  Probe Brecker's reliance on any tax advisor, accountant, or CPA firm regarding the tax treatment of Suncoast's income:
a. Identify the firm or individual who prepared Suncoast's tax returns.
b. Establish whether the tax preparer was the same firm or individual who prepared Coastal Palms' tax returns and/or the GRR reports submitted to Verimark.
c. Probe whether Brecker ever discussed with the tax preparer the relationship between Suncoast's revenues and Coastal Palms' franchise-fee obligations.
d. Probe whether the tax preparer was aware that Suncoast's revenues were being excluded from GRR reports.
5.  Probe whether Brecker ever sought a legal opinion from any attorney regarding the tax or franchise-reporting implications of the Suncoast arrangement.
III. OTA NET-RATE NETTING METHODOLOGY
A. OTA Booking Channels Used by Coastal Palms
The objective of this section is to establish the full scope of online travel agency ("OTA") booking channels used by Coastal Palms' properties and to distinguish between the two principal OTA business models that are relevant to the GRR-reporting dispute.
Line of Questioning:
1.  Ask Brecker to identify all OTA platforms used by any of the twenty-two (22) Coastal Palms properties at any time during the 2013–2021 period. For each platform, obtain: (a) the name of the OTA; (b) the approximate date the property or portfolio began using the OTA; (c) the contractual rate structure (commission percentage or margin); and (d) whether the relationship was at the property level or negotiated at the portfolio level by Coastal Palms' corporate office.
2.  Establish the distinction between the two principal OTA business models:
a. Agency Model: Under the agency model, the hotel collects the full room rate from the guest (either at check-in, checkout, or through a pre-payment arrangement facilitated by the hotel's own merchant-processing system). The hotel then pays a commission to the OTA, typically ranging from 15% to 25% of the gross room rate. Under this model, the full room rate flows through the hotel's books as revenue, and the OTA commission is recorded as an expense.
b. Merchant Model / Net-Rate Model: Under the merchant or net-rate model, the OTA collects the full room rate from the guest. The OTA retains its commission (again, typically 15% to 25%) and remits only the net amount to the hotel. Under this model, the hotel receives a reduced payment from the OTA, and the OTA's commission is never recorded in the hotel's books as revenue or expense — it is simply the difference between what the guest paid and what the hotel received.
3.  For each OTA platform identified, ask Brecker to confirm which business model was used — agency, merchant/net-rate, or a combination — and whether the model changed over time. Obtain the commission percentages applicable to each platform and time period.
4.  Establish which of the twenty-two (22) properties used merchant/net-rate OTA arrangements and during which periods. Determine whether all properties used the same OTA platforms or whether there was variation across the portfolio.
Exhibits:
•  Exhibit 63: OTA Platform Agreements — Master agreements between Coastal Palms (or individual property-level LLCs) and the principal OTA platforms used by the portfolio, including rate addenda and commission schedules (Bates Nos. CPFH-000048712 through CPFH-000049283).
B. FLA § 4.1 GRR Definition and OTA Revenue
The objective of this section is to return to the FLA § 4.1 definition of Gross Room Revenue and to apply it specifically to OTA revenue, building on Brecker's Day 1 admissions regarding his familiarity with the definition.
Line of Questioning:
1.  Read the FLA § 4.1 definition into the record once again for context:
"'Gross Room Revenue' or 'GRR' shall mean all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue, but excluding applicable sales and occupancy taxes collected from guests on behalf of taxing authorities."
2.  Confirm that Brecker was aware of this definition throughout the 2013–2021 period, consistent with his Day 1 testimony.
3.  Direct Brecker's attention to the phrase "regardless of the entity collecting such revenue." Probe whether Brecker believed that this language applied to revenues collected by OTAs on behalf of the hotel under a merchant/net-rate model. In other words, when an OTA collected the full room rate from the guest and remitted only the net amount to the hotel, did Brecker understand that the "revenue" for GRR purposes was the gross amount charged to the guest (i.e., the full room rate) or only the net amount received by the hotel?
4.  Probe whether Brecker drew a distinction between the Suncoast arrangement (which he acknowledged on Day 1 was at least potentially covered by the "regardless of the entity collecting" language, even if he claimed his interpretation differed) and the OTA net-rate arrangement. If Brecker maintains that the OTA net rate was the proper GRR figure, ask him to reconcile this position with the contractual language of § 4.1, which defines GRR as "all revenues derived from or attributable to the rental of guest rooms" — not "all revenues received by the hotel."
5.  Establish the distinction between the gross room rate charged to the guest (which is the rate "derived from or attributable to the rental of guest rooms") and the net amount remitted by the OTA to the hotel (which is the gross rate minus the OTA's commission). The gross room rate is the GRR; the OTA commission is a cost of distribution, not a deduction from revenue.
C. Netting Methodology — How Coastal Palms Reported OTA Revenue
The objective of this section is to establish the specific accounting methodology by which Coastal Palms improperly netted OTA commissions against GRR, thereby reducing the reported GRR and understating franchise-fee obligations.
Line of Questioning:
1.  Establish that Coastal Palms classified merchant/net-rate OTA payments in its internal accounting as "commissions receivable" and netted the OTA commission component against GRR. In other words, when an OTA collected $150 from a guest for a room and remitted $120 to the hotel (retaining a $30 commission), Coastal Palms reported the GRR for that booking as $120 rather than $150.
2.  Probe who devised this classification methodology:
a. Was it Brecker's decision to classify net-rate OTA payments as "commissions receivable" and to net them against GRR?
b. Was this methodology developed by the property-level accountants or controllers?
c. Was an outside accounting firm or advisor involved in establishing this methodology?
d. Was the methodology documented in any written accounting policy or procedure?
3.  Probe whether the netting methodology was applied consistently across all twenty-two (22) properties or whether different properties used different approaches. If there was variation, identify which properties used gross reporting and which used net reporting for OTA revenue.
4.  Walk Brecker through a specific example using actual documents from the production:
a. Present a sample monthly GRR report submitted by Coastal Palms to Verimark for a representative property and month.
b. Identify the line item showing OTA revenue and the amount reported.
c. Present the corresponding OTA settlement statement for the same property and month, showing the gross booking value and the net remittance.
d. Calculate the difference between the gross booking value and the net remittance, and establish that this difference — the OTA commission — was improperly excluded from reported GRR.
5.  For representative properties, calculate the OTA commission percentages and the resulting GRR understatement. Establish that the typical OTA commission percentage across the portfolio was between 15% and 25%, meaning that for every $100 in OTA gross bookings, Coastal Palms reported only $75 to $85 as GRR.
6.  Probe whether Brecker sought guidance from Verimark or its franchise-operations team regarding the proper treatment of OTA revenue in GRR reports. Specifically:
a. Did Brecker ever contact Deidre Langston, SVP Franchise Operations, to ask how merchant/net-rate OTA revenue should be reported for GRR purposes?
b. Did Brecker ever attend any Verimark franchisee conference, webinar, or training session where OTA revenue reporting was discussed?
c. Did Brecker receive any written communications from Verimark — bulletins, FAQs, policy memoranda, or direct correspondence — clarifying that GRR must be reported on a gross basis for OTA bookings?
7.  If Brecker received such communications from Verimark, probe what he did in response. If he did not receive such communications, probe whether the absence of specific guidance justified reporting OTA revenue on a net basis given the plain language of FLA § 4.1.
Exhibits:
•  Exhibit 64: Sample Monthly GRR Report submitted by Coastal Palms to Verimark — representative property (Verimark Suites Fort Lauderdale North), September 2020, showing OTA revenue line and netting methodology (Bates No. CPFH-000027844).
•  Exhibit 65: Corresponding OTA Settlement Statement from the applicable OTA platform for Verimark Suites Fort Lauderdale North, September 2020, showing gross booking value vs. net remittance (Bates Nos. CPFH-000028101 through CPFH-000028109).
•  Exhibit 66: Additional sample GRR report and corresponding OTA settlement statement for a second representative property (Verimark Select Savannah Riverfront), March 2019 (Bates Nos. CPFH-000033417 and CPFH-000033502 through CPFH-000033508).
D. Magnitude of OTA Netting Impact
The objective of this section is to quantify the portion of the total GRR underreporting attributable to the OTA netting methodology, as distinct from the Suncoast direct-booking diversion.
Line of Questioning:
1.  Establish the total OTA revenue (on a gross-booking-value basis) across all twenty-two (22) properties for the 2013–2021 period. Ask Brecker for his best estimate. Compare to the figures calculated by Dr. Kettlewell and the Ridgeline Forensic Advisory team.
2.  Quantify the portion of the cumulative $197.8 million underreported GRR that is attributable to the OTA netting methodology. Dr. Kettlewell's preliminary calculations allocate the $197.8 million as follows:
a. Approximately $134.5 million attributable to Suncoast direct-booking revenue diversion.
b. Approximately $63.3 million attributable to OTA net-rate netting.
3.  Ask Brecker whether he disputes these figures and, if so, on what basis. Probe whether Brecker's defense expert, Professor Grant Hargrove of Hargrove Economic Consulting Inc., has provided an alternative allocation between the two sources of underreporting.
4.  Reference the preliminary audit findings of Thornbury & Associates CPAs LLP, which were commissioned by Verimark following the Janet Kerrigan whistleblower complaint. Thornbury's audit report, dated January 18, 2022, identified approximately 26% underreporting for the ten (10) properties audited during the 2019–2021 period. Probe whether Brecker agrees with the 26% underreporting figure for the audited properties and, if not, what figure he believes is accurate.
5.  Establish that the 26% figure identified by Thornbury is consistent with the 22%–31% underreporting range calculated by Dr. Kettlewell across the full portfolio and full 2013–2021 period.
Exhibits:
•  Exhibit 67: Thornbury & Associates CPAs LLP — Selected Work Papers, showing OTA revenue reconciliation for the ten audited properties (Bates Nos. VMK-000004218 through VMK-000004387).
•  Exhibit 68: Ridgeline Forensic Advisory — Preliminary Summary of Underreporting Sources (Suncoast diversion vs. OTA netting), prepared by Dr. Sharon Kettlewell (expert work product; to be marked as demonstrative exhibit for deposition purposes).
E. Inconsistency with Loan Reporting
The objective of this section is to establish the critical inconsistency between how Coastal Palms reported revenue to its franchisor (Verimark) and how it reported revenue to its lender (Ironclad National Bank). This inconsistency is powerful evidence of intent.
Line of Questioning:
1.  Probe whether the financial statements and loan-covenant compliance certificates that Coastal Palms submitted to Ironclad National Bank reported OTA revenue on a gross or net basis.
2.  If gross: Establish that Brecker reported the full gross room rate — including the OTA commission component — as revenue in the financial statements submitted to Ironclad, while simultaneously reporting only the net amount as GRR to Verimark. This means Brecker used one set of revenue figures for the lender (gross, to maximize apparent revenue and comply with debt-service-coverage-ratio covenants) and a different, lower set of revenue figures for the franchisor (net, to minimize royalty and marketing-fund obligations).
3.  Ask Brecker to explain this discrepancy. Probe whether he was aware of the inconsistency and, if so, whether he considered it problematic.
4.  If Brecker claims the financial statements submitted to Ironclad also used net OTA figures, probe whether this is consistent with generally accepted accounting principles and Ironclad's reporting requirements. Obtain the specific GAAP standard or reporting requirement cited by Brecker or his accountants for the loan reporting.
5.  Probe whether Devon Schultz, Ironclad's relationship manager, was aware of the Suncoast arrangement or the OTA netting methodology. If so, establish when Schultz became aware and whether Schultz raised any concerns.
Exhibits:
•  Exhibit 69: Ironclad National Bank — Loan-Covenant Compliance Certificates submitted by Coastal Palms, fiscal years 2018–2021 (obtained via subpoena duces tecum served August 8, 2022) (Bates Nos. INB-001588 through INB-001744).
IV. COMMUNICATIONS WITH NOLAN PRESCOTT REGARDING FRANCHISE REPORTING
A. Prescott's Role and Knowledge
The objective of this section is to establish Brecker's account of Prescott's knowledge and involvement before Prescott's own deposition, thereby locking in Brecker's version and creating potential for impeachment if the two accounts differ.
Line of Questioning:
1.  Confirm that Nolan Prescott holds a 25% equity interest in Coastal Palms Franchise Holdings LLC as a passive investor. Establish Prescott's age (67), his background (retired commercial real estate developer), and the approximate date he acquired his equity interest.
2.  Probe the frequency and nature of communications between Brecker and Prescott regarding Coastal Palms' financial performance. Specifically:
a. How often did Brecker communicate with Prescott about financial matters — monthly, quarterly, annually, or on an ad hoc basis?
b. What was the typical format of these communications — written reports, email updates, telephone calls, in-person meetings, or some combination?
c. Who initiated the communications — did Brecker proactively provide financial reports, or did Prescott request them?
d. Were these communications required by the Coastal Palms operating agreement, or were they voluntary?
3.  Establish that Prescott received regular financial reports from Brecker. Ask Brecker to describe the content of these reports in detail: Did they include revenue figures? Occupancy rates? Average daily rates? Cash-flow summaries? Capital-expenditure updates? Franchise-fee calculations?
4.  Important strategic note: Prescott's own deposition is currently scheduled for approximately February 6, 2023. It is essential to probe Brecker's account of Prescott's knowledge and involvement now, on the record, so that any inconsistencies between the two depositions can be exploited during trial. Defense counsel may instruct Brecker not to answer questions about attorney-client communications regarding litigation strategy, but questions about the factual content of financial reports and business communications with Prescott are fair game.
B. Financial Reports Sent to Prescott
The objective of this section is to establish that the financial reports Brecker sent to Prescott contained more complete revenue information than the GRR reports Coastal Palms submitted to Verimark — because Prescott, as an equity holder, needed the full picture, while the understated figures served Brecker's purpose of minimizing franchise fees.
Line of Questioning:
1.  Present the quarterly financial summary reports emailed from Brecker to Prescott that were produced in discovery. Walk Brecker through representative reports from multiple quarters.
2.  For each report, probe whether the revenue figures included:
a. Suncoast-collected revenues (walk-ins, corporate-direct, gulfcoastrooms.com bookings).
b. Gross OTA revenue (as opposed to net-rate OTA revenue).
c. A separate line item for Suncoast revenue or Suncoast management fees.
d. Total portfolio revenue that exceeded the GRR figures reported to Verimark for the same period.
3.  If the Prescott reports included Suncoast revenues or showed higher total revenue figures than the Verimark GRR reports, walk Brecker through a side-by-side comparison:
a. Present the Prescott quarterly financial report for a specific quarter (e.g., Q3 2020).
b. Present the contemporaneous monthly GRR reports submitted to Verimark for the same three months.
c. Calculate the discrepancy and ask Brecker to explain why Prescott received more complete revenue information than Verimark.
4.  If Brecker claims the Prescott reports showed the same revenue figures as the Verimark GRR reports, probe whether Prescott was aware of the Suncoast revenues at all. If Prescott was unaware, this suggests Brecker concealed information from his own equity partner. If Prescott was aware but received the same understated figures, the concealment extended to Prescott as well.
5.  Probe whether Prescott ever questioned the revenue figures in the reports Brecker provided — whether Prescott ever asked about the relationship between Suncoast revenues and the numbers being reported to Verimark, or whether Prescott ever raised concerns about franchise-compliance risk.
Exhibits:
•  Exhibit 75: Quarterly Financial Summary Report — Brecker to Prescott, Q3 2020 (email with attachment, dated October 14, 2020) (Bates Nos. CPFH-000062118 through CPFH-000062134).
•  Exhibit 76: Quarterly Financial Summary Report — Brecker to Prescott, Q4 2019 (email with attachment, dated January 22, 2020) (Bates Nos. CPFH-000058441 through CPFH-000058459).
•  Exhibit 77: Monthly GRR Reports submitted to Verimark for Q3 2020 (July, August, September 2020) — for side-by-side comparison with Exhibit 75 (Bates Nos. CPFH-000027790 through CPFH-000027862).
C. Prescott's Knowledge of Suncoast Arrangement
The objective of this section is to determine the extent to which Prescott was informed about the Suncoast structure and its implications for franchise reporting.
Line of Questioning:
1.  Probe whether Brecker discussed the establishment of Suncoast Room Management Inc. with Prescott before or after Suncoast was incorporated. Did Brecker seek Prescott's input, approval, or consent?
2.  Probe whether Prescott approved or was at least informed of the 12% management-fee arrangement between Suncoast and the property-level LLCs. Given that the management fee reduced the revenue flowing to the property-level entities (and thus indirectly reduced distributions to Coastal Palms members, including Prescott), Prescott would have had a financial interest in understanding the fee arrangement.
3.  Probe whether Prescott was aware that Suncoast revenues were being excluded from the GRR reports submitted to Verimark. Ask Brecker directly:
a. "Did you ever tell Nolan Prescott that Suncoast-collected revenues were not being included in the Gross Room Revenue figures reported to Verimark?"
b. "Did you ever tell Nolan Prescott that the Suncoast arrangement had the effect of reducing the franchise fees owed to Verimark?"
c. "Did Nolan Prescott ever ask you about the relationship between Suncoast revenues and franchise-fee calculations?"
4.  Probe whether Prescott ever questioned the GRR figures or the franchise-fee amounts being paid to Verimark. As a retired commercial real estate developer with business sophistication, Prescott would presumably have had a general understanding of franchise economics and the significance of revenue-based fee calculations.
5.  Establish whether any written communications between Brecker and Prescott reference Suncoast, direct bookings, the management-fee arrangement, or franchise-reporting methodology. If such communications exist in the production, present them and walk Brecker through the content.
Exhibits:
•  Exhibit 78: Emails between Brecker and Prescott referencing Suncoast or direct-booking revenue (to be identified from production and pre-marked; Bates numbers to be confirmed based on document review team's identification of responsive communications).
•  Exhibit 79: Coastal Palms Franchise Holdings LLC — Operating Agreement, relevant sections regarding member reporting obligations and managing-member authority (Bates Nos. CPFH-000000014 through CPFH-000000089).
D. Prescott's Awareness of OTA Netting
Line of Questioning:
1.  Probe whether Prescott was informed about the OTA net-rate netting methodology used in the Verimark GRR reports. Ask Brecker whether the quarterly financial reports sent to Prescott discussed OTA revenue on a gross or net basis.
2.  Establish whether Prescott, as a retired commercial real estate developer with business sophistication, ever raised concerns about the propriety of reporting OTA revenue on a net basis for franchise-fee purposes. If Prescott raised no concerns, probe whether that was because he was unaware of the methodology or because he did not perceive it as problematic.
3.  Probe whether Brecker and Prescott ever discussed the risk that Verimark could audit Coastal Palms' revenue figures discover the netting methodology.
E. Member Meetings and Resolutions
Line of Questioning:
1.  Probe whether Coastal Palms Franchise Holdings LLC held formal member meetings at any time during the 2013–2021 period. If so, obtain the dates of such meetings, who attended, and whether minutes were kept.
2.  Probe whether Coastal Palms adopted any formal member resolutions regarding:
a. Financial-reporting practices, including GRR reporting methodology.
b. The establishment of Suncoast Room Management Inc.
c. The management-fee arrangement between Suncoast and the property-level LLCs.
d. The OTA net-rate netting methodology.
e. Any other matter related to franchise compliance.
3.  If no formal meetings were held and no resolutions were adopted: Establish the informality of Coastal Palms' governance structure and the degree to which Brecker, as the 60% Managing Member, exercised unilateral control over all material financial and operational decisions without seeking the input or approval of the other members.
4.  Probe Theresa Brecker's knowledge as a 15% equity holder and Brecker's spouse. Specifically:
a. Was Theresa Brecker informed about the Suncoast arrangement?
b. Did Theresa Brecker participate in any discussions about franchise-reporting practices?
c. Did Theresa Brecker have access to the financial reports sent to Prescott or the GRR reports submitted to Verimark?
d. What was Theresa Brecker's role, if any, in the day-to-day operations of Coastal Palms or Suncoast?
5.  Note for counsel: Theresa Brecker's deposition is scheduled during the January–March 2023 deposition period. Probe Randall Brecker on these points now to establish his account before her testimony.
Exhibits:
•  Exhibit 80: Coastal Palms Franchise Holdings LLC — Member Meeting Minutes (if any exist in the production).
•  Exhibit 81: Coastal Palms Franchise Holdings LLC — Member Resolutions (if any exist in the production).
V. REVENUE RECONCILIATION AND FEE UNDERPAYMENTS
A. Royalty Underpayment Calculations
The objective of this section is to walk Brecker through the royalty underpayment calculation in a systematic, property-by-property manner and to test his knowledge of and response to the numbers.
Line of Questioning:
1.  Establish the basic royalty calculation under the FLAs: each FLA requires Coastal Palms to pay Verimark a royalty equal to 5% of Gross Room Revenue, payable monthly.
2.  Present the aggregate royalty underpayment calculation:
•  Total underreported GRR (2013–2021): $197.8 million
•  Royalty rate: 5%
•  Underpaid royalties: 5% × $197.8 million = $9.89 million
3.  For representative properties and years, present the following data in tabular format using the property-by-property GRR comparison schedule prepared by Dr. Kettlewell and the Ridgeline Forensic Advisory team:
a. The actual GRR reported by Coastal Palms to Verimark for the property and period.
b. The estimated true GRR for the same property and period (calculated by adding Suncoast-collected revenues and OTA commission amounts to the reported GRR).
c. The difference between the two figures (i.e., the underreported GRR).
d. The royalty owed on the reported GRR vs. the royalty owed on the estimated true GRR.
e. The royalty underpayment (the difference between d(ii) and d(i)).
4.  Walk Brecker through at least three to four representative properties to establish the pattern across the portfolio. Select properties of different sizes, brands (Verimark Suites vs. Verimark Select), and geographic markets to demonstrate that the underreporting was systemic rather than isolated.
5.  Ask Brecker whether he disputes the underlying revenue figures used in the calculation. If so, probe the specific basis for his dispute — does he challenge the Suncoast revenue figures, the OTA gross-booking-value calculations, or both? If Brecker cannot identify specific errors, establish that he has no factual basis to dispute the calculations.
Exhibits:
•  Exhibit 84: Property-by-Property GRR Comparison Schedule, 2013–2021, prepared by Ridgeline Forensic Advisory / Dr. Sharon Kettlewell (Bates Nos. VMK-EXP-000001 through VMK-EXP-000048).
B. Marketing-Fund Contribution Underpayment
Line of Questioning:
1.  Establish that each FLA requires Coastal Palms to contribute 2.5% of Gross Room Revenue to Verimark's systemwide marketing fund, payable monthly on the same schedule as royalties.
2.  Present the aggregate marketing-fund underpayment calculation:
•  Total underreported GRR (2013–2021): $197.8 million
•  Marketing-fund contribution rate: 2.5%
•  Underpaid marketing-fund contributions: 2.5% × $197.8 million = $4.945 million
3.  Probe whether Brecker understood that marketing-fund contributions, like royalties, were calculated as a percentage of GRR and were thus directly affected by the underreporting of GRR. Ask Brecker to confirm that every dollar of underreported GRR resulted in the underpayment of both royalties and marketing-fund contributions.
4.  Probe the impact on Verimark's systemwide marketing programs. The marketing fund is used to finance advertising, digital-marketing campaigns, loyalty-program operations, and brand-development initiatives that benefit all Verimark franchisees. By underpaying its marketing-fund contributions, Coastal Palms effectively shifted its share of systemwide marketing costs to other franchisees. Ask Brecker whether he considered this impact when directing the underreporting.
5.  Probe whether Brecker has any basis to dispute the 2.5% rate or the calculation methodology. If Brecker claims that the marketing-fund rate changed over time, ask him to identify the relevant FLA provision and the applicable rate for each period.
C. Technology-Fee Underpayment
Line of Questioning:
1.  Establish that FLA § 4.3 requires Coastal Palms to pay a technology fee to Verimark calculated at $12.50 per available room per month, subject to annual CPI adjustment capped at 3% per year. The technology fee covers Verimark's central reservation system, property-management-system integration, guest-loyalty-program technology, and cybersecurity infrastructure.
2.  Establish that Coastal Palms added a total of 214 guest rooms across four (4) properties in the portfolio through renovation and expansion projects without notifying Verimark of the room additions, thereby avoiding the technology fees applicable to the additional rooms.
3.  Ask Brecker to identify the four (4) properties where rooms were added and the approximate dates of each expansion:
a. Property name, location, and brand (Verimark Suites or Verimark Select).
b. Number of rooms added.
c. Date of completion (certificate of occupancy or first date rooms were rented to guests).
d. Whether Verimark was notified of the expansion and, if so, when and by whom.
4.  Present the technology-fee underpayment calculation:
•  214 additional rooms
•  $12.50 per room per month (base rate, before CPI adjustment)
•  Average period of underpayment: approximately 47 months (varying by property based on completion dates)
•  Estimated underpaid technology fees: 214 rooms × $12.50/room/month × ~47 months = approximately $1.26 million
5.  Note that this calculation uses the base $12.50 rate without CPI adjustment. The actual underpayment may be higher when the annual CPI adjustments are applied. Ask Brecker whether he is aware of the CPI-adjusted rates for each year.
6.  Probe whether the failure to notify Verimark of the room additions was deliberate or inadvertent. Establish whether the FLAs required notification of room additions and, if so, the specific notice provision and timeline.
Exhibits:
•  Exhibit 85: Property-improvement records, certificates of occupancy, and/or building permits showing room additions at the four identified properties (Bates Nos. CPFH-000071402 through CPFH-000071588).
D. Total Direct Underpayments
Line of Questioning:
1.  Present the subtotal of direct underpayments (excluding interest) and ask Brecker to confirm or dispute each component:
2.  Ask Brecker whether he disputes any component of this calculation. If so, probe the specific basis for his dispute for each disputed component. If Brecker cannot articulate a factual basis for disputing the figures, note his inability to do so on the record.
3.  Ask Brecker whether his defense expert, Professor Grant Hargrove, has provided him with an alternative damages calculation. If so, probe the basis for any differences between the Hargrove and Kettlewell calculations. Note that Professor Hargrove's maximum estimate of damages is $6.2 million — roughly one-third of Verimark's direct underpayment calculation before interest — and probe whether Brecker can explain the principal sources of disagreement between the experts.
E. Late-Payment Interest (FLA § 4.6)
Line of Questioning:
1.  Establish Brecker's knowledge of FLA § 4.6, which provides for late-payment interest on underpaid franchise fees. Read the relevant provision into the record:
"Any amounts required to be paid by Franchisee to Franchisor under this Agreement that are not paid when due shall bear interest at the rate of one and one-half percent (1.5%) per month, compounded monthly, from the date such payment was due until the date of actual payment."
2.  Confirm that Brecker was aware of this provision during the 2013–2021 period.
3.  Probe whether Brecker understood the financial implications of compound interest at 1.5% per month — i.e., an effective annual rate of approximately 19.56% — accruing on unpaid franchise fees from the date each monthly payment was due.
4.  Present the late-payment interest calculation:
•  Verimark's damages model, prepared by Dr. Kettlewell of Ridgeline Forensic Advisory, calculates compounded late-payment interest on the $16.095 million in direct underpayments from the respective due dates of each monthly payment through the projected judgment date.
•  Total compounded late-payment interest: approximately $28.4 million.
5.  Ask Brecker whether he disputes the interest calculation. If so, probe whether he disputes the interest rate (which is contractual), the compounding methodology (which is specified in the FLA), or the time period.
6.  Probe whether Brecker had any communications with counsel, accountants, or other advisors at any point during the 2013–2021 period about the risk of compounding-interest exposure if the underreporting were discovered. This line of questioning is designed to establish whether Brecker was aware of the financial magnitude of the risk he was running.
7.  Establish the total claimed damages figure combining direct underpayments and late-payment interest: $16.095 million + $28.4 million = approximately $44.5 million (before liquidated damages under FLA § 15.3, which are addressed in Section VI.C below).
VI. BRECKER'S KNOWLEDGE OF FLA PROVISIONS — FOLLOW-UP FROM DAY 1
A. FLA § 8.2 — Audit Rights
The objective of this section is to establish that the Suncoast structure was designed, at least in part, to frustrate Verimark's contractual audit rights by routing revenues through a separate entity whose books and records would not be captured in a standard franchisee audit.
Line of Questioning:
1.  Confirm that each of the twenty-two (22) FLAs grants Verimark the right to audit the franchisee's books and records upon ten (10) business days' written notice to the franchisee. Read the relevant provision of FLA § 8.2 into the record.
2.  Confirm that FLA § 8.2 further provides that if an audit reveals an underpayment of franchise fees exceeding 2% of reported GRR for the audited period, the franchisee is required to bear all costs of the audit, including Verimark's reasonable accounting and professional fees.
3.  Probe whether Brecker was concerned about the possibility of a Verimark audit during the 2013–2021 period. Ask Brecker directly:
a. "Were you ever concerned that Verimark would exercise its audit rights under the FLAs?"
b. "Did you take any steps to prepare for the possibility of a Verimark audit?"
c. "Did the Suncoast arrangement make it more difficult for Verimark to detect the underreporting in the event of an audit?"
4.  Establish that because Suncoast revenues flowed through a separate entity with separate bank accounts and separate accounting records, these revenues would not have been captured in an audit limited to the property-level PMS/accounting systems and the Coastal Palms general ledger. A Verimark auditor reviewing the property-level books would see only the net remittances from Suncoast (the 88% passed through to the property LLCs), not the gross amounts collected by Suncoast from guests.
5.  Probe whether the separation of Suncoast's books and records from the property-level accounting systems was a deliberate design feature of the arrangement — i.e., whe