1021-00006 · Client 1021 · Depositions

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MEMORANDUM

TO: Yuki Nakamura, Lead Associate

FROM: Carlos Espinoza, Associate

DATE: February 17, 2023

RE: Deposition Summary — Nolan Prescott (February 10, 2023)

MATTER: Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC et al., Case No. 1021-00006, Circuit Court of the 17th Judicial Circuit, Broward County, Florida

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney work-product doctrine and the attorney-client privilege. It was prepared in anticipation of litigation and reflects the mental impressions, conclusions, and legal theories of counsel. It is not to be disclosed to any person or entity outside the litigation team without the prior written authorization of lead counsel.

I. Overview and Purpose

This memorandum summarizes and analyzes the deposition testimony of Nolan Prescott, taken on February 10, 2023, at the offices of Whitfield, Barrow & Crane LLP, 1221 Brickell Avenue, Suite 3000, Miami, Florida 33131. The deposition was recorded by certified court reporter and videographer in accordance with the parties' stipulation entered on October 14, 2022.

Prescott was examined by Priya Anand of our firm for approximately five and one-half hours over the course of a single day. Gabriela Montes of Whitfield, Barrow & Crane LLP appeared as defending counsel on behalf of Coastal Palms Franchise Holdings LLC and its affiliated entities. Ethan Doyle, also of Whitfield, Barrow & Crane, was present throughout the examination but did not pose any questions or raise objections on the record.

Prescott is a 25% equity holder and Member of Coastal Palms Franchise Holdings LLC. He holds his interest as a passive investor and has no operational role in any Coastal Palms entity. He is a retired commercial real estate developer, age 67, residing in Naples, Florida.

The deposition focused on four primary areas of inquiry: (1) Prescott's knowledge of the revenue-reporting practices employed by Coastal Palms and its affiliates in submitting Gross Room Revenue ("GRR") figures to Verimark Hospitality Group Inc. ("Verimark"); (2) his awareness of the operations of Suncoast Room Management Inc. ("Suncoast"), the entity through which direct-booking revenues were collected and, as alleged in the Complaint, systematically excluded from franchise-reported GRR; (3) his receipt of financial information from Randall Brecker, the Managing Member and controlling principal of Coastal Palms; and (4) his understanding of the Franchise License Agreements ("FLAs") governing the relationship between Coastal Palms' property-level entities and Verimark.

Key Takeaway: Prescott maintained throughout the deposition that he had no meaningful knowledge of how Gross Room Revenue was calculated, compiled, or reported to Verimark. He consistently characterized himself as a purely passive investor who deferred all operational and compliance matters to Randall Brecker, portraying himself as a silent-partner figure with no involvement in or awareness of the revenue-reporting mechanics at issue in this litigation. However, as detailed in Section IV below, produced documents reveal significant and, in several instances, deeply damaging inconsistencies with this claimed ignorance. The documentary record demonstrates that Prescott received regular financial reports that explicitly separated Suncoast-collected revenues from franchise-reported GRR, was directly informed that different revenue figures were provided to Verimark and to the properties' commercial lender, and referenced "the Suncoast stuff" in the specific context of a potential franchise audit — all of which fatally undermine his asserted lack of knowledge.

II. Witness Background and Role in Coastal Palms

A. Personal Background

Prescott testified that he is a retired commercial real estate developer who spent the bulk of his career acquiring, developing, and managing commercial properties — primarily retail centers and mixed-use developments — in Southwest Florida. He stated that he began winding down his active development business around 2008 and was "essentially retired" by 2010, though he continued to maintain passive investment positions in several ventures. (Tr. 12:1–14:8.)

Prescott testified that he first invested in Coastal Palms Franchise Holdings LLC in approximately 2009, at a time when Randall Brecker was in the process of expanding beyond the original Naples property. The first Franchise License Agreement between a Coastal Palms affiliate and Verimark had been executed on June 15, 2007, for the Verimark Suites property in Naples, and by 2009 Brecker was acquiring additional hotel properties in Southwest Florida and seeking additional capital to fund the expansion. (Tr. 14:12–16:3.)

Prescott acquired his 25% equity interest in Coastal Palms through a combination of direct cash investment and guaranty support on early property-level financings. He testified that the cash component was "in the low seven figures" but could not recall the precise amount, and he noted that the guaranty component was significant because it enabled Coastal Palms to secure favorable lending terms from Ironclad National Bank at a time when the commercial real estate lending market was still recovering from the 2008 financial crisis. (Tr. 16:8–18:14.)

Prescott stated that he has known Randall Brecker since approximately 2005. The two met through mutual contacts in the Southwest Florida commercial real estate community. Prescott described their pre-investment relationship as "friendly but not close" — they had attended some of the same industry events and had been introduced by a mutual acquaintance whose name Prescott could not recall. (Tr. 18:18–20:6.)

B. Role as Member

Prescott described his role within Coastal Palms as entirely passive. He testified that he contributes capital when called upon (though he noted that no capital calls have been made since the initial investment period), receives quarterly distributions based on his 25% ownership interest, and has no involvement whatsoever in the day-to-day operations of any Coastal Palms hotel property. He stated: "I write a check when it's time to write a check, and I get a distribution when it's time to get a distribution. That's the extent of my involvement." (Tr. 22:4–23:1.)

Prescott confirmed that he does not hold, and has never held, any officer or director position in any Coastal Palms property-level entity. Specifically, he confirmed that he has no role in Gulf Breeze Hospitality LLC, the Florida limited liability company that operates six Verimark Suites–branded hotel properties in Southwest Florida, or in Savannah Lodging Partners LLC, the Georgia limited liability company that operates four Verimark Suites–branded hotel properties in coastal Georgia. (Tr. 23:6–24:14.) He also confirmed that he holds no position in any of the other property-level LLCs through which Coastal Palms operates the remaining twelve properties in its portfolio across Florida, Georgia, and South Carolina. (Tr. 24:18–25:9.)

Prescott stated that he has never held any position — whether as officer, director, employee, consultant, or otherwise — with Suncoast Room Management Inc., the Florida corporation of which Randall Brecker serves as President. Prescott claimed to have only a limited understanding of Suncoast's function within the Coastal Palms organizational structure, a claim that is addressed and challenged in Section IV below. (Tr. 25:14–26:8.)

When asked about his governance rights, Prescott acknowledged that he signed the Coastal Palms operating agreement at the time of his initial investment and that he has signed various amendments thereto over the years, though he could not recall the specific number or dates of any amendments. He further acknowledged that he has signed personal guaranties in favor of Ironclad National Bank, the commercial lender that holds approximately $94 million in first-lien mortgage loans on eighteen of the twenty-two hotel properties in the Coastal Palms portfolio. Prescott testified that he understood his guaranty obligations to be "significant" and that he was "on the hook" if the properties underperformed and could not service the debt. (Tr. 26:12–28:16.)

C. Relationship with Randall Brecker

Prescott characterized his relationship with Brecker as one of trust and deference. He described Brecker as the "hands-on guy" who ran all aspects of the hotel business and stated that he relied on Brecker to manage the hotel operations competently and honestly. Prescott testified: "Randy was the operator. He knew the hotel business inside and out. I was a real estate guy — I understood property values and financing, but I didn't know the first thing about running a hotel. That was Randy's department." (Tr. 20:8–21:3.)

Prescott stated that his communications with Brecker were relatively infrequent. He estimated that they spoke by telephone approximately once per month, usually for no more than ten to fifteen minutes, and that these calls were generally initiated by Brecker. The substance of these calls, according to Prescott, was limited to high-level updates on portfolio performance, any upcoming capital needs, and the status of loan obligations to Ironclad National Bank. (Tr. 21:6–21:22.)

In addition to the monthly phone calls, Prescott testified that he met with Brecker in person on a quarterly basis for what he described as "update meetings." These meetings took place at Coastal Palms' principal office at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108. Prescott stated that the quarterly meetings typically lasted between one and two hours and involved a review of financial performance, distribution calculations, and any strategic issues such as potential property acquisitions or dispositions. He could not recall whether any other individuals — such as controllers, accountants, or other Coastal Palms personnel — attended these quarterly meetings. (Tr. 21:24–22:3.)

III. Prescott's Claimed Lack of Knowledge Regarding Revenue Reporting

A central theme of Prescott's testimony was his asserted ignorance of virtually every aspect of Coastal Palms' revenue-reporting obligations to Verimark. This section summarizes the substance of those claims; the documentary contradictions are addressed in Section IV.

A. GRR Reporting to Verimark

Prescott testified that he was not familiar with the term "Gross Room Revenue" as a defined term under the Franchise License Agreements. When asked whether he understood what GRR meant, he responded: "I know what room revenue is in a general sense — it's what the hotel takes in from renting rooms. But I didn't know there was a specific defined term for it in the franchise agreements." (Tr. 62:8–63:4.)

He stated that he had never reviewed any of the monthly GRR reports that Coastal Palms' property-level entities submitted to Verimark and was unaware of the specific mechanics by which revenue was calculated, compiled, and reported. He testified that he did not know who was responsible for preparing those reports, whether they were submitted electronically or by mail, or what documentation was required to accompany them. (Tr. 63:8–65:2.)

Prescott claimed that he did not know the royalty rate applicable to Coastal Palms' franchise agreements with Verimark, which is 5% of GRR as specified in Section 4.1 of the FLAs. He similarly claimed no knowledge of the marketing-fund contribution rate of 2.5% of GRR required under FLA Section 4.2 or the per-room technology fee of $12.50 per room per month mandated by FLA Section 4.3. He stated that he understood "in a general sense" that Coastal Palms paid franchise fees to Verimark but had no knowledge of the specific rates, amounts, or calculation methodology. (Tr. 65:6–67:14.)

B. Knowledge of FLA Terms

Prescott testified that he had never read any of the twenty-two individual Franchise License Agreements in their entirety. He acknowledged that copies of the FLAs may have been provided to him at various points but stated he had no recollection of receiving them and, if he did, he never reviewed them. (Tr. 67:18–69:12.)

He further acknowledged that he understood, at a general level, that Coastal Palms operated hotels under Verimark's brand flags — specifically, the Verimark Suites and Verimark Select brands — and that franchise fees of some nature were paid to Verimark in connection with the use of those brand names. However, he disclaimed any knowledge of the specific contractual obligations imposed by the FLAs beyond this general understanding. (Tr. 69:16–71:8.)

When asked about specific FLA provisions, Prescott stated he had no familiarity with any of them, including:

• The audit provisions of Section 8.2, which grant Verimark the right to audit the franchisee's books and records and specify that underreporting in excess of 2% of reported GRR triggers reimbursement of Verimark's audit costs;

• The cure provisions of Section 14.1, which provide a thirty-day cure period for specified defaults;

• The "incapable of cure" language in Section 14.2(c), which provides that systematic or intentional underreporting of GRR constitutes a default that is "incapable of cure" and entitles Verimark to immediate termination of the franchise;

• The liquidated-damages formula in Section 15.3, which provides for damages equal to three times the trailing-twelve-month royalties per property in the event of termination for cause.

Prescott testified that he had never discussed any of these provisions with Brecker, with counsel, or with anyone else. (Tr. 71:12–79:8.)

C. Knowledge of Suncoast Room Management Inc.

Prescott's testimony regarding Suncoast Room Management Inc. began with a claim of near-total unfamiliarity. When first asked whether he was familiar with Suncoast, he testified: "I may have heard the name. It sounds vaguely familiar. But I couldn't tell you what it does." (Tr. 143:6–143:14.)

As the examination continued and Prescott was confronted with documents referencing Suncoast, his position shifted from claiming unfamiliarity to claiming a lack of detailed understanding. This evolution is discussed further in Sections IV and V below.

In his initial testimony, Prescott stated that he did not know that Suncoast was the entity through which direct-booking revenues — including walk-in guests, corporate-direct contract bookings, and bookings made through the gulfcoastrooms.com website — were collected and processed. He stated he was unaware of the gulfcoastrooms.com website and did not know that Coastal Palms maintained any booking channel outside of the Verimark central reservation system and third-party online travel agencies. (Tr. 143:18–145:2.)

Prescott further denied knowing that Suncoast retained a 12% "management fee" on direct-booking revenues before remitting the balance to the property-level LLCs. He testified that he had no understanding of the fee structure or financial arrangements between Suncoast and the Coastal Palms property-level entities. (Tr. 145:6–145:22.)

Most critically, Prescott denied any knowledge that revenues collected by Suncoast were excluded from the GRR reports submitted to Verimark. He testified that he had no awareness of a dual-channel revenue structure in which franchise-reported GRR reflected only a portion of actual room revenue while Suncoast-collected revenues were kept separate and unreported. (Tr. 145:24–146:18.)

D. Knowledge of Underreporting

Prescott categorically denied any knowledge of revenue underreporting. His testimony on this point was emphatic:

> "I had no idea there was any problem with how revenue was being reported until I got a call from Randy telling me we'd been sued. That was the first I ever heard of it." (Tr. 170:2–170:8.)

Prescott stated that he first learned of the allegations in this case when Brecker contacted him by telephone shortly after the Complaint was filed on March 7, 2022. He testified that Brecker told him Verimark had filed a lawsuit alleging that Coastal Palms had underreported revenue, and that Brecker characterized the suit as "baseless" and assured Prescott that Whitfield, Barrow & Crane would handle the defense. Prescott stated that he did not ask Brecker any follow-up questions about the substance of the allegations at that time. (Tr. 170:12–171:6.)

Prescott further denied any knowledge of Janet Kerrigan, the former Regional Controller for the Coastal Palms Southeast region who served as the whistleblower in this matter. Kerrigan contacted Verimark's compliance hotline on November 8, 2021, and reported that Coastal Palms was systematically excluding Suncoast-collected revenues from its GRR reports. Prescott testified that he had never met Kerrigan, had never spoken with her, and did not learn of her existence until after the lawsuit was filed. He also stated he was unaware that Kerrigan had been terminated from Coastal Palms in October 2021, approximately two weeks before her whistleblower complaint. (Tr. 171:10–172:4.)

As detailed in Section IV.E below, Prescott's claim that he first learned of any reporting issues only after the Complaint was filed is contradicted by text messages exchanged with Brecker on November 12, 2021 — nearly four months before the Complaint was filed.

IV. Inconsistencies Between Testimony and Produced Documents

This section identifies five categories of produced documents that contradict or materially undermine Prescott's claimed lack of knowledge regarding the revenue-reporting practices at issue in this litigation. Each inconsistency is documented with specific Bates-number references and corresponding deposition transcript citations. The documents are presented in order of their probative significance, concluding with the two most damaging items.

A. Quarterly Financial Summary Reports

Document: Quarterly financial summaries emailed by Randall Brecker to Nolan Prescott at Prescott's personal email address (nprescott.naples@[redacted].com). These documents were produced by Coastal Palms in the supplemental document production served on November 18, 2022, which comprised approximately 312,000 documents including Suncoast Room Management records produced pursuant to this Court's order on Verimark's motion to compel dated October 3, 2022.

Bates Range: CP-SUPP-0087432 through CP-SUPP-0087561 (covering Q1 2015 through Q3 2021, a span of twenty-seven quarters).

Content: The quarterly financial summaries are typically four to six pages in length and provide a consolidated revenue breakdown for the entire Coastal Palms portfolio. They include property-by-property revenue figures, aggregate portfolio metrics, and key performance indicators such as occupancy rates, average daily rate, and revenue per available room. Critically, beginning with the Q1 2015 report, each quarterly summary contains a line item variously labeled "Suncoast Mgmt Revenue" or "Suncoast Direct-Booking Revenue," which is listed separately from and in addition to "Franchise-Reported Revenue" (i.e., the GRR reported to Verimark). The two revenue streams are then combined into a "Total Portfolio Revenue" figure. This two-line revenue presentation is consistent across all twenty-seven quarterly reports in the Bates range.

Specific Example: The Q4 2020 quarterly financial summary (CP-SUPP-0087518) presents the following revenue breakdown on its first page:

This document shows that in Q4 2020 alone, $7.4 million in room revenue collected through Suncoast was not included in the GRR reported to Verimark, representing approximately 21.6% of total portfolio revenue for that quarter.

Deposition Testimony: Prescott was shown CP-SUPP-0087518 (marked as Deposition Exhibit 3) and acknowledged that his email address appeared in the "To" field of the transmitting email. He initially stated that he "didn't recall" receiving the document. When pressed, he conceded that he "probably received it" given that his email address was listed, but he claimed he "never opened the attachments" or, alternatively, that if he did open them, he "didn't pay attention to the details." He testified: "I might have glanced at it, but I was looking at the bottom line — what my distribution was going to be. I wasn't analyzing revenue categories." (Tr. 112:4–113:18.)

When asked specifically whether the line item labeled "Suncoast Direct-Booking Revenue" would have caught his attention, Prescott responded: "I don't know. Maybe it should have. But I didn't focus on it. I trusted Randy to handle all of that." (Tr. 114:2–114:8.)

Significance: These documents demonstrate that for a period of at least six and one-half years — from Q1 2015 through Q3 2021 — Prescott received quarterly reports that explicitly separated Suncoast-collected revenue from franchise-reported GRR. The reports were sent directly to his personal email address, and the two-channel revenue structure was not buried in footnotes or appendices but was presented on the first page of each report as the primary revenue summary. Prescott's claim that he was unaware of Suncoast's role in collecting revenue or that a separate revenue stream existed outside franchise-reported GRR is rendered implausible by the consistent presentation of this information in documents he acknowledges receiving over a multi-year period.

B. Annual Distribution Memoranda with Revenue Breakdowns

Document: Annual distribution memoranda from Randall Brecker to all Members of Coastal Palms Franchise Holdings LLC. The three Members and their respective equity interests are: Randall Brecker (60%), Theresa Brecker (15%), and Nolan Prescott (25%). Each annual memorandum summarizes yearly performance across the full portfolio and calculates the distribution payable to each Member.

Bates Range: CP-00045210 through CP-00045247 (covering fiscal years 2014 through 2021, eight annual memoranda).

Content: Each annual distribution memorandum includes a one-page summary presenting "Total Revenue" as the sum of two components: "Verimark-Reported Revenue" and "Suncoast-Managed Revenue." Below the revenue summary, the memoranda deduct operating expenses, debt service, reserves, and management fees, arriving at a "Distributable Cash" figure that is then allocated among the three Members according to their ownership percentages. The terminology used in the annual memoranda — particularly the distinction between "Verimark-Reported Revenue" and "Suncoast-Managed Revenue" — is arguably even more explicit than the terminology used in the quarterly summaries, as it directly invokes Verimark in labeling the franchise-reported revenue figure.

Specific Example: The 2021 annual distribution memorandum (CP-00045244, marked as Deposition Exhibit 4) presents the following revenue summary:

The $112.4 million "Verimark-Reported Revenue" figure matches the aggregate full-year 2021 GRR reported by Coastal Palms' property-level entities to Verimark, as reflected in Verimark's own records. The $31.6 million "Suncoast-Managed Revenue" figure represents revenue collected through direct-booking channels that was not included in franchise-reported GRR.

Note on Consistency with Forensic Analysis: The $31.6 million Suncoast figure for 2021 is slightly below the forensic estimate prepared by Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, who estimated $33.2 million in underreported GRR for fiscal year 2021 (based on an estimated true GRR of $145.6 million minus $112.4 million in reported GRR). The $1.6 million discrepancy may reflect revenues that flowed through channels other than Suncoast (e.g., certain cash transactions or miscategorized ancillary revenue) or minor differences in allocation methodology. Nonetheless, the distribution memorandum figure is broadly consistent with and corroborative of Ridgeline's forensic reconstruction, as approximately 95% of the estimated underreported revenue is accounted for by the Suncoast-Managed Revenue line item.

Deposition Testimony: When confronted with CP-00045244, Prescott acknowledged receiving the 2021 annual distribution memorandum and admitted that he reviewed it. However, he attempted to cabin his review by stating that he "only looked at the bottom line" — specifically, the distributable cash figure and his 25% share — and that he did not focus on where the revenue came from or how it was categorized. He testified: "When I got the distribution memo, I looked at what my check was going to be. That's what I cared about. I didn't analyze the revenue breakdown. That was Randy's department." (Tr. 134:8–136:22.)

When asked whether the label "Verimark-Reported Revenue" suggested to him that a different figure was being reported to Verimark than the total revenue generated by the properties, Prescott paused and then stated: "I don't know what it suggested. I didn't think about it that way." (Tr. 137:4–137:10.)

Significance: Prescott conceded both receiving and reviewing documents that present a separate Suncoast revenue stream alongside — and distinguished from — revenue reported to Verimark. His concession that he reviewed these memoranda, even if only to determine his distribution amount, directly contradicts his claim that he was unaware of Suncoast's function or the existence of a dual-revenue structure. A reasonable reader of these memoranda would necessarily have understood that the total revenue earned by the Coastal Palms properties was substantially greater than the amount reported to Verimark, and that the difference was attributable to revenues managed by Suncoast. Prescott's insistence that he reviewed these documents without noticing or comprehending the most prominent feature of the revenue summary strains credulity.

C. Email Exchange Regarding Ironclad National Bank Loan Refinancing (2018)

Document: Email chain among Randall Brecker, Nolan Prescott, and Devon Schultz (Senior Vice President, Commercial Real Estate Lending, Ironclad National Bank) regarding the refinancing of mortgage loans on several Coastal Palms hotel properties.

Bates Range: CP-SUPP-0112887 through CP-SUPP-0112894.

Content: The email chain spans approximately one week in June 2018 and relates to a refinancing package that Coastal Palms was submitting to Ironclad National Bank for mortgage loans on five properties in Southwest Florida. The chain includes discussions of financial documentation, appraisals, and guaranty requirements.

The critical email in the chain is dated June 22, 2018 (CP-SUPP-0112890), in which Brecker writes to Prescott:

> "Nolan – Devon at Ironclad wants to see full revenue numbers for the refi package. I'm sending him the combined figures including Suncoast. Just a heads up since you're guaranteeing the loans – the bank sees total revenue, not just what we report to Verimark."

Prescott's reply, sent the same day (CP-SUPP-0112891), states:

> "Got it. Makes sense to show the bank the full picture. Let me know if Devon needs anything else from me on the guaranty."

Deposition Testimony: Prescott was confronted with this email exchange during what proved to be the most contentious portion of the deposition. Upon being shown CP-SUPP-0112890, Prescott paused for a lengthy period — the video record reflects approximately forty-five seconds of silence — before Gabriela Montes requested a break for the witness to confer with counsel. The break lasted approximately twelve minutes. (Tr. 155:1–156:2.)

Upon returning, Prescott stated that he "didn't focus on the distinction" between what was reported to Verimark and what was shown to the bank. He characterized his reply email as a reflexive response to Brecker's message rather than a considered acknowledgment of the reporting differential. He testified: "I was just responding to Randy's email quickly. He said the bank needed full numbers. I said fine. I didn't sit there and parse the difference between what went to Verimark and what went to the bank. I was focused on getting the refinancing done." (Tr. 156:3–159:14.)

When Priya Anand pressed further, asking Prescott whether the phrase "not just what we report to Verimark" communicated to him that the figures reported to Verimark were different from — and less than — the total revenue generated by the properties, Prescott responded: "I can see how it reads that way now, sitting here. But at the time, I just didn't think about it." (Tr. 158:6–158:14.)

Significance: This email exchange is the single most damaging document for Prescott's credibility. It demonstrates, in Prescott's own words, that he was explicitly informed by Brecker that Coastal Palms reported different revenue figures to Verimark than to Ironclad National Bank — that the bank received "total revenue" including Suncoast figures while Verimark received something less. Prescott's reply — "Makes sense to show the bank the full picture" — reflects not only his understanding of the distinction but his comfort with the arrangement. His response does not contain any expression of surprise, confusion, or concern about why Verimark would be receiving different revenue figures than the bank. To the contrary, he treats the arrangement as unremarkable.

This document directly and unambiguously contradicts Prescott's deposition testimony that he had no knowledge of how revenue was reported to Verimark, that he was unaware of Suncoast's role in the revenue structure, and that he did not know the franchise-reported GRR excluded certain revenues. A jury evaluating Prescott's credibility will likely find it impossible to reconcile his professed ignorance with this contemporaneous email exchange.

Moreover, this exchange has potential implications beyond impeachment: it suggests that Ironclad National Bank was provided with revenue figures that included the Suncoast-diverted revenues — figures that may have been material to the bank's underwriting decisions for the refinancing. This issue may warrant further investigation in coordination with Verimark's potential cross-claims or third-party contribution analysis.

D. Operating Agreement Provisions Regarding Member Reporting Rights

Document: Coastal Palms Franchise Holdings LLC Operating Agreement (CP-00001015 through CP-00001089), marked as Deposition Exhibit 1.

Content: Two provisions of the operating agreement are relevant to Prescott's claimed ignorance:

Section 7.4 — Inspection Rights: Provides that all Members "shall have the right, at any reasonable time and upon not less than ten (10) business days' prior written notice to the Managing Member, to inspect and copy the Company's books and records, including without limitation all financial statements, tax returns, bank statements, accounts receivable and payable records, and franchise-related documents."

Section 7.6 — Quarterly Reports: Requires the Managing Member (Brecker) to "furnish to each Member, within thirty (30) days following the end of each calendar quarter, a financial report setting forth in reasonable detail the revenues, expenses, and net income of the Company and its subsidiaries for such quarter, together with a balance sheet as of the end of such quarter."

Deposition Testimony: Prescott acknowledged signing the operating agreement and confirmed that he understood, at a general level, that it set forth the governance and financial-reporting framework for Coastal Palms. However, he stated that he had never exercised his inspection rights under Section 7.4 and had relied entirely on the quarterly financial reports that Brecker sent him, which he characterized as compliance with Section 7.6. He testified: "I never asked to go in and look at the books. I didn't think I needed to. Randy sent me the quarterly reports, and that was enough for me." (Tr. 78:12–79:8.)

Significance: While these provisions are not directly inconsistent with Prescott's testimony — he does not deny the existence of his inspection rights, but merely states he did not exercise them — they are relevant for two reasons. First, they establish that Prescott had contractual mechanisms available to him that would have provided full visibility into the revenue-reporting practices of Coastal Palms and its affiliates. He could have, at any time, requested access to the franchise-related documents, including the GRR reports submitted to Verimark, and compared them against the total revenue figures reflected in the internal records. Second, they confirm that the quarterly financial reports Prescott received from Brecker — the very reports that explicitly separated Suncoast revenue from franchise-reported GRR — were provided pursuant to a contractual obligation, not as informal courtesy communications. This underscores that Prescott was expected to review these reports as part of his governance rights as a Member, making his claim that he "didn't pay attention to the details" all the more damaging.

Taken together with the quarterly summaries and annual distribution memoranda discussed above, the operating agreement provisions paint a picture of a Member who had both the contractual right and the practical means to understand exactly how revenue was being reported but who chose not to look — or, more likely, who looked and understood but now claims otherwise.

E. Text Messages Referencing "Franchise Audit"

Document: Text message exchange between Nolan Prescott and Randall Brecker, dated November 12, 2021. The messages were produced from Brecker's cellular phone in the supplemental document production of November 18, 2022.

Bates Range: CP-SUPP-0198445 through CP-SUPP-0198449.

Content: On November 12, 2021 — four days after Janet Kerrigan contacted Verimark's compliance hotline on November 8, 2021, and six days before Verimark engaged Thornbury & Associates CPAs LLP on November 22, 2021 to conduct a forensic compliance audit — Brecker initiated the following text exchange with Prescott:

Brecker (11/12/2021, 3:47 PM): "Heads up – Verimark might want to do an audit. Could get messy. Don't worry, I'll handle it."

Prescott (11/12/2021, 4:02 PM): "What kind of audit? Is this about the Suncoast stuff?"

Brecker (11/12/2021, 4:08 PM): "Yeah. Just stay quiet and let me deal with it."

Deposition Testimony: When shown these text messages (marked as Deposition Exhibit 6), Prescott was visibly uncomfortable. He was asked to explain what he meant by the phrase "the Suncoast stuff." He testified: "By 'the Suncoast stuff,' I meant just general management issues. Suncoast was part of the operation. I was asking if the audit was about management, about operations generally. I wasn't thinking about revenue reporting or anything specific." (Tr. 172:8–175:21.)

When pressed on why he used the specific phrase "the Suncoast stuff" in response to a warning about a potential franchise audit, rather than asking a more general question, Prescott became evasive and repeated variations of his initial explanation. He could not articulate what "general management issues" related to Suncoast he was referring to or why such issues would prompt a franchise audit. (Tr. 174:4–175:12.)

Significance: Prescott's use of the phrase "the Suncoast stuff" in the specific context of a potential Verimark franchise audit is powerful evidence that he had prior awareness of Suncoast's role in the revenue-diversion scheme. His immediate association between a franchise audit and Suncoast — without any prompting from Brecker beyond the word "audit" — strongly suggests that he understood Suncoast's operations were a source of franchise-compliance risk. His explanation that "the Suncoast stuff" referred to unspecified general management issues is implausible on its face: a franchise audit conducted by or on behalf of the franchisor would concern franchise-compliance matters (principally revenue reporting and fee payments), not general hotel-management operations.

Additionally, the temporal context is critical. These messages were exchanged on November 12, 2021 — nearly four months before the Complaint was filed on March 7, 2022. This directly contradicts Prescott's categorical testimony that he "had no idea there was any problem with how revenue was being reported until I got a call from Randy telling me we'd been sued." The text messages demonstrate that Prescott was aware of at least the possibility of a franchise audit — and immediately connected it to Suncoast — months before the lawsuit was initiated.

Brecker's final message in the exchange — "Just stay quiet and let me deal with it" — is also significant, as it suggests a coordinated effort to manage the response to the anticipated audit and to keep Prescott out of view. Whether this rises to the level of evidence of a conspiratorial agreement will require further analysis in connection with Count X.

V. Key Admissions and Concessions

Despite his general posture of claimed ignorance, Prescott made several notable concessions during questioning. These concessions, while individually limited in scope, collectively undermine the credibility of his broader narrative of passive, uninformed investment.

A. Receipt of Financial Reports

Prescott conceded that he received quarterly financial summaries from Brecker for the entire period of his membership in Coastal Palms, from approximately 2009 to the present. He acknowledged that these reports were sent to his personal email address on a regular basis and that he expected to receive them as part of his membership. (Tr. 108:3–109:11.)

He further conceded that he received and reviewed the annual distribution memoranda prepared by Brecker. Specifically, he acknowledged that his review of these memoranda was motivated by his interest in determining the amount of his quarterly or annual distribution — but he conceded that the memoranda contained revenue breakdowns that he at least had the opportunity to review. (Tr. 131:14–132:6.)

B. Knowledge of Suncoast's Existence

Despite his initial testimony that he "may have heard the name" Suncoast Room Management Inc. and was uncertain of its function, Prescott ultimately conceded — after being confronted with the quarterly summaries, annual distribution memoranda, and the June 2018 email exchange — that he was "generally aware" that Suncoast existed and that it was involved in some aspect of hotel operations within the Coastal Palms organizational structure. He maintained, however, that he did not understand the specifics of Suncoast's operations, its role in processing direct bookings, or its relationship to the franchise-reported revenue figures. (Tr. 146:22–148:3.)

This concession represents a significant retreat from his initial position and suggests that Prescott's strategy of denying all knowledge of Suncoast was untenable in the face of the documentary record. His fallback position — that he knew Suncoast existed but did not understand what it did — is itself difficult to credit, given the explicit presentation of Suncoast revenue data in the financial reports he received.

C. Guaranty Obligations

Prescott acknowledged that he personally guaranteed Ironclad National Bank's mortgage loans on multiple Coastal Palms hotel properties. He testified that he understood these guaranties exposed him to personal liability if the properties were unable to service their debt obligations. He further acknowledged that Ironclad National Bank evaluated the financial performance of the hotel properties — including their revenue — as part of the underwriting process for both original loans and refinancings, and that the revenue performance of the properties was directly relevant to his exposure under the guaranties. (Tr. 152:6–153:14.)

Significantly, Prescott acknowledged that he had a financial incentive to understand the revenue performance of the properties for which he was personally liable. When asked whether, as a guarantor, he had reason to pay attention to the revenue figures in the financial reports he received, he responded: "I suppose so, yes. But I relied on Randy for all of that." (Tr. 153:18–154:9.)

D. No Inquiry Despite Red Flags

Perhaps the most telling concessions relate to what Prescott did not do despite the information available to him:

• He conceded that he never asked Brecker why the quarterly financial summaries showed two separate revenue streams — one labeled "Franchise-Reported Revenue" and another labeled "Suncoast Direct-Booking Revenue" — or what the distinction between the two meant. (Tr. 118:4–119:22.)

• He conceded that he never asked Brecker why the revenue reported to Verimark was different from the total portfolio revenue shown in the financial reports. (Tr. 140:11–141:3.)

• He conceded that he never inquired into why separate line items existed for Suncoast-managed revenue or what purpose the Suncoast entity served within the organizational structure. (Tr. 147:2–148:3.)

These concessions establish that Prescott was presented with information that, on its face, should have raised questions about the relationship between franchise-reported revenue and total portfolio revenue — and he chose not to ask those questions. Whether this reflects willful blindness or actual knowledge is a factual question for the trier of fact, but in either case, the failure to inquire undermines his claim of innocent ignorance.

VI. Demeanor and Credibility Assessment

Prescott was generally cooperative and calm during the early portions of the deposition, answering questions about his background, his investment history, and his relationship with Brecker in a straightforward and conversational manner. He appeared at ease with the deposition process and did not exhibit signs of anxiety or defensiveness during the initial questioning.

His demeanor changed markedly, however, when the examination shifted to the produced documents. When confronted with documents contradicting his claimed ignorance — particularly the quarterly financial summaries, the annual distribution memoranda, and the June 2018 email exchange — Prescott became notably evasive. His answers became longer, more circuitous, and more heavily qualified. He frequently fell back on stock phrases including "I don't recall," "I didn't pay attention to that," "I relied on Randy for all of that," and "I just looked at the bottom line." These phrases were deployed with such regularity that they appeared to be rehearsed responses designed to avoid substantive engagement with the documentary evidence.

Several times during the document-focused portions of the examination, Prescott paused to confer with Gabriela Montes before answering questions. The most extended conferral occurred when the June 2018 email exchange with Brecker and Devon Schultz of Ironclad National Bank was introduced as an exhibit. Upon reviewing CP-SUPP-0112890, Prescott stopped, read the document twice, and then requested a break. The break lasted approximately twelve minutes. (Tr. 155:1–156:2.) While the substance of the conferral is, of course, privileged, the timing and duration of the break suggest that Prescott and his counsel recognized the significance of the document and needed time to formulate a response.

Prescott's explanation of the November 2021 text message exchange — specifically his contention that "the Suncoast stuff" referred to general management issues rather than revenue-reporting concerns — was delivered haltingly and without conviction. His voice dropped in volume, he avoided eye contact with examining counsel, and he repeated the same formulation multiple times without elaboration when pressed for specifics. The overall impression conveyed by his testimony on this topic was that the explanation was prepared in advance and did not reflect his genuine contemporaneous understanding.

Overall, Prescott presented as a witness who was comfortable reciting his prepared narrative of passive investment and deference to Brecker but who lacked the ability to maintain that narrative convincingly when confronted with specific documentary evidence. His credibility on the central issue of his knowledge of revenue-reporting practices is, in my assessment, significantly compromised by the documentary record. A jury viewing the video of this deposition would likely perceive a substantial disconnect between Prescott's professed ignorance and the contemporaneous documentary evidence.

VII. Relevance to Pending Claims

A. Civil Conspiracy (Count X)

Prescott is not individually named as a defendant in the Complaint. Count X of the Complaint alleges civil conspiracy and names only Randall Brecker and Suncoast Room Management Inc. as defendants in that count, alleging that they agreed to and participated in the scheme to divert revenues from franchise-reported GRR through the Suncoast direct-booking channel.

However, the evidence developed through Prescott's deposition and the underlying documentary record may be relevant to the civil conspiracy claim in several respects. First, it may help establish the scope and nature of the conspiracy by demonstrating that the dual-revenue structure was not a closely guarded secret known only to Brecker but was apparent to other principals of Coastal Palms, including its primary passive investor. This undermines any defense that the revenue diversion was a rogue operation conducted by Brecker alone without the knowledge or acquiescence of any other member of the organization.

Second, Prescott's November 2021 text message — "Is this about the Suncoast stuff?" — followed by Brecker's instruction to "stay quiet and let me deal with it" — may be relevant to establishing a post-hoc effort to conceal the scheme in the face of a potential audit. While this single exchange may not be sufficient to establish Prescott's membership in the conspiracy, it provides contextual evidence that the scheme was known beyond Brecker and that there was an understanding among principals that the arrangement should be shielded from scrutiny.

We should evaluate whether the evidence supports a motion to amend the Complaint to add Prescott as a defendant on the conspiracy count or, alternatively, whether Prescott's knowledge and acquiescence are better deployed as evidence in support of the existing claims against Brecker and Suncoast.

B. Damages and Collectibility

As a personal guarantor of Ironclad National Bank loans aggregating approximately $94 million and as a 25% equity holder in Coastal Palms Franchise Holdings LLC, Prescott represents a significant potential source of recovery. His personal financial resources — derived from a career in commercial real estate development — may be substantial, though we have not yet obtained detailed asset discovery from Prescott individually.

The evidence of Prescott's knowledge and participation in (or willful blindness to) the revenue-diversion scheme is directly relevant to settlement negotiations. If Prescott is at risk of personal liability — whether through an amended conspiracy count, a piercing-the-veil theory, or through his guaranty obligations to Ironclad (which may have cross-default or fraud-carve-out provisions triggered by the underreporting) — that risk creates leverage to incentivize his cooperation in settlement discussions. Prescott may also have an interest in cooperating with Verimark if he perceives that Brecker's management of the defense is not adequately protecting his individual interests.

The settlement authority memorandum should account for the strength of the evidence against Prescott and should include an analysis of the potential recovery from Prescott individually, separate from the Coastal Palms entity-level exposure.

C. Impeachment Value

The documentary inconsistencies identified in Section IV provide strong impeachment material for use at trial. The June 2018 email exchange (CP-SUPP-0112890–91) and the November 2021 text messages (CP-SUPP-0198445–49) are the most powerful impeachment exhibits, as they contain Prescott's own words demonstrating awareness of the very matters he denied knowledge of under oath.

If Prescott is called as a witness at trial — whether by Verimark or by Coastal Palms as part of its defense — the cross-examination opportunities are substantial. The contrast between his deposition testimony of passive ignorance and the documentary evidence of active awareness will be immediately apparent to the jury and will undermine not only Prescott's individual credibility but the broader defense narrative that the revenue-reporting practices were an operational matter known only to a small group within Coastal Palms' management.

Even if Prescott is not called as a live witness at trial, his deposition testimony may be presented by designation, and the documentary impeachment materials can be offered independently as exhibits in Verimark's case-in-chief to establish the breadth of knowledge of the dual-revenue structure within the Coastal Palms organization.

VIII. Comparison with Other Witness Testimony

The Prescott deposition should be evaluated in the context of other depositions taken in this matter to assess both corroboration and gaps in the evidentiary record.

Randall Brecker (deposed January 9–10, 2023): Brecker was deposed over two days and admitted that he personally directed the controllers at Coastal Palms' property-level entities to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. Brecker characterized this practice as a "management decision" that he believed was permissible under the FLAs because, in his view, Suncoast-collected revenues were earned through independent booking channels outside the scope of the franchise relationship. This interpretation is, of course, inconsistent with the broad definition of Gross Room Revenue in the FLAs, which encompasses all room revenue regardless of booking channel.

Notably, Brecker did not specifically address what Prescott knew about the revenue-reporting practices. He was not asked directly whether he informed Prescott of the exclusion of Suncoast revenues from GRR reports. However, the documents in which Brecker communicated with Prescott — the June 2018 email regarding the Ironclad refinancing and the November 2021 text messages regarding the potential audit — speak for themselves and suggest that Brecker assumed Prescott's awareness of the arrangement. The June 2018 email, in particular, was written in a matter-of-fact tone that presupposed Prescott's understanding of the distinction between franchise-reported revenue and total revenue.

Janet Kerrigan (deposed January 27, 2023): Kerrigan, the former Regional Controller who served as the whistleblower, testified that she had no direct interaction with Prescott regarding revenue reporting or any other matter. She stated that all instructions to exclude direct-booking revenues from GRR reports came from Brecker personally or through Brecker's regional managers. She did not testify about Prescott's knowledge one way or the other, and she was not asked about Prescott during her examination.

Kerrigan's testimony is consistent with Prescott's characterization of his role as non-operational: Kerrigan's interactions were with Brecker and his operational team, not with passive investors. However, the absence of Kerrigan testimony regarding Prescott does not exculpate Prescott; it simply means that the evidence of Prescott's knowledge comes from documentary evidence and his own admissions rather than from the testimony of operational personnel.

Property-Level Witnesses (deposed January–March 2023): A composite summary of ten depositions of property-level managers and accountants has been prepared separately. The composite reflects consistent testimony that direction to route walk-in and corporate-direct bookings through Suncoast came from "corporate" — uniformly understood to mean Brecker and his central management team at the Naples office. None of the ten property-level witnesses identified Prescott as involved in any operational decisions, and none recalled interacting with Prescott in any capacity. This is consistent with both Prescott's testimony and Brecker's description of Prescott's role as a passive capital contributor.

IX. Recommendations

Based on the foregoing analysis, I recommend the following actions:

1. Preserve Impeachment Materials. The five categories of documents identified in Section IV — quarterly financial summaries (CP-SUPP-0087432–0087561), annual distribution memoranda (CP-00045210–00045247), the June 2018 Ironclad email chain (CP-SUPP-0112887–0112894), the Coastal Palms operating agreement (CP-00001015–00001089), and the November 2021 text messages (CP-SUPP-0198445–0198449) — should be flagged in the trial-exhibit database for use in impeachment and/or as exhibits in Verimark's case-in-chief. The June 2018 email exchange and the November 2021 text messages should be designated as priority trial exhibits given their exceptional impeachment value.

2. Leverage Prescott's Personal Guaranty Exposure in Settlement Discussions. Prescott's documented awareness of the dual-revenue structure significantly strengthens Verimark's position regarding Prescott's personal exposure — whether through his Ironclad National Bank guaranty obligations (which may contain fraud or misrepresentation carve-outs triggered by the provision of inflated revenue figures to the bank), through potential personal liability on an amended conspiracy count, or through general judgment-enforcement strategies against the Coastal Palms entity of which he is a 25% equity holder. In any settlement discussion, Prescott's individual exposure should be highlighted to incentivize his cooperation and to create a wedge between Prescott's interests and Brecker's interests in the defense.

3. Consider Supplemental discovery Targeted at Prescott Individually. We should evaluate whether to serve targeted interrogatories or requests for production on Prescott personally — not merely as a Member of Coastal Palms — regarding any additional communications about Suncoast, franchise reporting, or the potential Verimark audit that may not have been captured in Coastal Palms' document production. In particular, Prescott's personal email account, text messages, and any files maintained at his residence or personal office may contain additional relevant communications with Brecker or others. The supplemental discovery should also seek information regarding Prescott's knowledge of Janet Kerrigan or her termination, given the temporal proximity of the November 2021 text messages to Kerrigan's October 2021 termination and November 2021 whistleblower complaint.

4. Coordinate with Forensic Expert (Dr. Kettlewell). The annual distribution memoranda showing combined revenue figures should be provided to Dr. Sharon Kettlewell at Ridgeline Forensic Advisory LLC for integration into her forensic reconstruction of true GRR. The 2021 distribution memorandum figure of $144.0 million in combined revenue is broadly consistent with her independent estimate of $145.6 million in true GRR for fiscal year 2021, and the year-by-year distribution memoranda (2014–2021) may provide a useful cross-check against her property-level analysis for each year in the damages period. The distribution memoranda also provide an additional, independently prepared data source that corroborates the magnitude of the underreporting, which will be valuable for Dr. Kettlewell's testimony at trial.

5. Brief Priya Anand on Trial-Strategy Implications. The Prescott deposition supports and strengthens Verimark's trial narrative that the revenue-diversion scheme was not a rogue operation conducted in secret by Brecker alone but was a systematic arrangement that was known to — or, at minimum, willfully ignored by — other principals of Coastal Palms, including its primary passive investor and personal loan guarantor. This narrative is important because it rebuts the anticipated defense that Brecker acted unilaterally and that any damages should be assessed only against Brecker personally rather than against the Coastal Palms entities and their assets. Priya should incorporate the Prescott evidence into the trial-presentation strategy and consider how to sequence the presentation of Prescott's testimony relative to Brecker's testimony and the documentary evidence.

X. Appendix — Key Transcript Citations

The following table provides a quick-reference guide to the critical transcript page and line citations from the Prescott deposition, organized by topic. These citations should be used for motion practice, trial preparation, and cross-referencing with the deposition exhibits.

XI. Exhibit Index

The following exhibits were marked during the deposition of Nolan Prescott on February 10, 2023. All exhibits are maintained in the litigation document management system and in the physical deposition binder.

Please contact me with any questions or if you would like to discuss any of the foregoing. I am available to walk through the key transcript passages in detail at your convenience. A copy of the full deposition transcript and the video recording have been uploaded to the matter workspace.

Carlos Espinoza Associate

Line Item	Amount
Franchise-Reported Revenue (GRR)	$26.8M
Suncoast Direct-Booking Revenue	$7.4M
Total Portfolio Revenue	$34.2M
Suncoast Mgmt Fee (12%)	$888K
Line Item	Amount
Verimark-Reported Revenue	$112.4M
Suncoast-Managed Revenue	$31.6M
Combined Total Revenue	$144.0M
Topic	Transcript Citation	Summary
Background and role in Coastal Palms	Tr. 12:1–28:16	Personal history, investment in Coastal Palms, passive-investor characterization, guaranty obligations
Knowledge of FLA terms and GRR reporting	Tr. 62:8–79:8	Claimed unfamiliarity with GRR, royalty rates, FLA provisions; stated never read FLAs
Quarterly financial summaries	Tr. 108:3–119:22	Acknowledged receiving summaries; conceded "probably received" Q4 2020 report; claimed he "never opened attachments" or "didn't pay attention to details"; conceded never asking about dual revenue streams
Annual distribution memoranda	Tr. 131:14–141:3	Acknowledged receiving and reviewing distribution memos; claimed "only looked at the bottom line"; conceded never asking about Verimark-Reported vs. Suncoast-Managed Revenue distinction
Knowledge of Suncoast	Tr. 143:6–148:3	Initial claim of near-total unfamiliarity; evolved to "generally aware" of Suncoast's existence; denied understanding specifics of Suncoast's role
Ironclad refinancing email exchange	Tr. 152:6–159:14	Acknowledged guaranty obligations; confronted with June 2018 email; extended conferral with counsel; claimed he "didn't focus on the distinction" between Verimark and bank reporting
November 2021 text messages	Tr. 170:2–175:21	Categorical denial of prior knowledge of reporting issues; confronted with "Suncoast stuff" text; offered implausible explanation referencing "general management issues"
General demeanor and credibility	Noted throughout	Calm in early portions; evasive when confronted with documents; frequent use of stock phrases; extended pause and counsel conferral on June 2018 email; halting, rehearsed-sounding explanation of November 2021 texts
Exhibit No.	Description	Bates Range
Exhibit 1	Coastal Palms Franchise Holdings LLC Operating Agreement	CP-00001015 – CP-00001089
Exhibit 2	Quarterly Financial Summaries, Q1 2015 – Q3 2021 (27 reports)	CP-SUPP-0087432 – CP-SUPP-0087561
Exhibit 3	Q4 2020 Quarterly Financial Summary	CP-SUPP-0087518
Exhibit 4	2021 Annual Distribution Memorandum	CP-00045244
Exhibit 5	Email Chain re Ironclad National Bank Loan Refinancing (June 2018)	CP-SUPP-0112887 – CP-SUPP-0112894
Exhibit 6	Text Message Exchange, Brecker–Prescott (November 12, 2021)	CP-SUPP-0198445 – CP-SUPP-0198449

Exhibit 7

MEMORANDUM
TO: Yuki Nakamura, Lead Associate
FROM: Carlos Espinoza, Associate
DATE: February 17, 2023
RE: Deposition Summary — Nolan Prescott (February 10, 2023)
MATTER: Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC et al., Case No. 1021-00006, Circuit Court of the 17th Judicial Circuit, Broward County, Florida
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney work-product doctrine and the attorney-client privilege. It was prepared in anticipation of litigation and reflects the mental impressions, conclusions, and legal theories of counsel. It is not to be disclosed to any person or entity outside the litigation team without the prior written authorization of lead counsel.
I. Overview and Purpose
This memorandum summarizes and analyzes the deposition testimony of Nolan Prescott, taken on February 10, 2023, at the offices of Whitfield, Barrow & Crane LLP, 1221 Brickell Avenue, Suite 3000, Miami, Florida 33131. The deposition was recorded by certified court reporter and videographer in accordance with the parties' stipulation entered on October 14, 2022.
Prescott was examined by Priya Anand of our firm for approximately five and one-half hours over the course of a single day. Gabriela Montes of Whitfield, Barrow & Crane LLP appeared as defending counsel on behalf of Coastal Palms Franchise Holdings LLC and its affiliated entities. Ethan Doyle, also of Whitfield, Barrow & Crane, was present throughout the examination but did not pose any questions or raise objections on the record.
Prescott is a 25% equity holder and Member of Coastal Palms Franchise Holdings LLC. He holds his interest as a passive investor and has no operational role in any Coastal Palms entity. He is a retired commercial real estate developer, age 67, residing in Naples, Florida.
The deposition focused on four primary areas of inquiry: (1) Prescott's knowledge of the revenue-reporting practices employed by Coastal Palms and its affiliates in submitting Gross Room Revenue ("GRR") figures to Verimark Hospitality Group Inc. ("Verimark"); (2) his awareness of the operations of Suncoast Room Management Inc. ("Suncoast"), the entity through which direct-booking revenues were collected and, as alleged in the Complaint, systematically excluded from franchise-reported GRR; (3) his receipt of financial information from Randall Brecker, the Managing Member and controlling principal of Coastal Palms; and (4) his understanding of the Franchise License Agreements ("FLAs") governing the relationship between Coastal Palms' property-level entities and Verimark.
Key Takeaway: Prescott maintained throughout the deposition that he had no meaningful knowledge of how Gross Room Revenue was calculated, compiled, or reported to Verimark. He consistently characterized himself as a purely passive investor who deferred all operational and compliance matters to Randall Brecker, portraying himself as a silent-partner figure with no involvement in or awareness of the revenue-reporting mechanics at issue in this litigation. However, as detailed in Section IV below, produced documents reveal significant and, in several instances, deeply damaging inconsistencies with this claimed ignorance. The documentary record demonstrates that Prescott received regular financial reports that explicitly separated Suncoast-collected revenues from franchise-reported GRR, was directly informed that different revenue figures were provided to Verimark and to the properties' commercial lender, and referenced "the Suncoast stuff" in the specific context of a potential franchise audit — all of which fatally undermine his asserted lack of knowledge.
II. Witness Background and Role in Coastal Palms
A. Personal Background
Prescott testified that he is a retired commercial real estate developer who spent the bulk of his career acquiring, developing, and managing commercial properties — primarily retail centers and mixed-use developments — in Southwest Florida. He stated that he began winding down his active development business around 2008 and was "essentially retired" by 2010, though he continued to maintain passive investment positions in several ventures. (Tr. 12:1–14:8.)
Prescott testified that he first invested in Coastal Palms Franchise Holdings LLC in approximately 2009, at a time when Randall Brecker was in the process of expanding beyond the original Naples property. The first Franchise License Agreement between a Coastal Palms affiliate and Verimark had been executed on June 15, 2007, for the Verimark Suites property in Naples, and by 2009 Brecker was acquiring additional hotel properties in Southwest Florida and seeking additional capital to fund the expansion. (Tr. 14:12–16:3.)
Prescott acquired his 25% equity interest in Coastal Palms through a combination of direct cash investment and guaranty support on early property-level financings. He testified that the cash component was "in the low seven figures" but could not recall the precise amount, and he noted that the guaranty component was significant because it enabled Coastal Palms to secure favorable lending terms from Ironclad National Bank at a time when the commercial real estate lending market was still recovering from the 2008 financial crisis. (Tr. 16:8–18:14.)
Prescott stated that he has known Randall Brecker since approximately 2005. The two met through mutual contacts in the Southwest Florida commercial real estate community. Prescott described their pre-investment relationship as "friendly but not close" — they had attended some of the same industry events and had been introduced by a mutual acquaintance whose name Prescott could not recall. (Tr. 18:18–20:6.)
B. Role as Member
Prescott described his role within Coastal Palms as entirely passive. He testified that he contributes capital when called upon (though he noted that no capital calls have been made since the initial investment period), receives quarterly distributions based on his 25% ownership interest, and has no involvement whatsoever in the day-to-day operations of any Coastal Palms hotel property. He stated: "I write a check when it's time to write a check, and I get a distribution when it's time to get a distribution. That's the extent of my involvement." (Tr. 22:4–23:1.)
Prescott confirmed that he does not hold, and has never held, any officer or director position in any Coastal Palms property-level entity. Specifically, he confirmed that he has no role in Gulf Breeze Hospitality LLC, the Florida limited liability company that operates six Verimark Suites–branded hotel properties in Southwest Florida, or in Savannah Lodging Partners LLC, the Georgia limited liability company that operates four Verimark Suites–branded hotel properties in coastal Georgia. (Tr. 23:6–24:14.) He also confirmed that he holds no position in any of the other property-level LLCs through which Coastal Palms operates the remaining twelve properties in its portfolio across Florida, Georgia, and South Carolina. (Tr. 24:18–25:9.)
Prescott stated that he has never held any position — whether as officer, director, employee, consultant, or otherwise — with Suncoast Room Management Inc., the Florida corporation of which Randall Brecker serves as President. Prescott claimed to have only a limited understanding of Suncoast's function within the Coastal Palms organizational structure, a claim that is addressed and challenged in Section IV below. (Tr. 25:14–26:8.)
When asked about his governance rights, Prescott acknowledged that he signed the Coastal Palms operating agreement at the time of his initial investment and that he has signed various amendments thereto over the years, though he could not recall the specific number or dates of any amendments. He further acknowledged that he has signed personal guaranties in favor of Ironclad National Bank, the commercial lender that holds approximately $94 million in first-lien mortgage loans on eighteen of the twenty-two hotel properties in the Coastal Palms portfolio. Prescott testified that he understood his guaranty obligations to be "significant" and that he was "on the hook" if the properties underperformed and could not service the debt. (Tr. 26:12–28:16.)
C. Relationship with Randall Brecker
Prescott characterized his relationship with Brecker as one of trust and deference. He described Brecker as the "hands-on guy" who ran all aspects of the hotel business and stated that he relied on Brecker to manage the hotel operations competently and honestly. Prescott testified: "Randy was the operator. He knew the hotel business inside and out. I was a real estate guy — I understood property values and financing, but I didn't know the first thing about running a hotel. That was Randy's department." (Tr. 20:8–21:3.)
Prescott stated that his communications with Brecker were relatively infrequent. He estimated that they spoke by telephone approximately once per month, usually for no more than ten to fifteen minutes, and that these calls were generally initiated by Brecker. The substance of these calls, according to Prescott, was limited to high-level updates on portfolio performance, any upcoming capital needs, and the status of loan obligations to Ironclad National Bank. (Tr. 21:6–21:22.)
In addition to the monthly phone calls, Prescott testified that he met with Brecker in person on a quarterly basis for what he described as "update meetings." These meetings took place at Coastal Palms' principal office at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108. Prescott stated that the quarterly meetings typically lasted between one and two hours and involved a review of financial performance, distribution calculations, and any strategic issues such as potential property acquisitions or dispositions. He could not recall whether any other individuals — such as controllers, accountants, or other Coastal Palms personnel — attended these quarterly meetings. (Tr. 21:24–22:3.)
III. Prescott's Claimed Lack of Knowledge Regarding Revenue Reporting
A central theme of Prescott's testimony was his asserted ignorance of virtually every aspect of Coastal Palms' revenue-reporting obligations to Verimark. This section summarizes the substance of those claims; the documentary contradictions are addressed in Section IV.
A. GRR Reporting to Verimark
Prescott testified that he was not familiar with the term "Gross Room Revenue" as a defined term under the Franchise License Agreements. When asked whether he understood what GRR meant, he responded: "I know what room revenue is in a general sense — it's what the hotel takes in from renting rooms. But I didn't know there was a specific defined term for it in the franchise agreements." (Tr. 62:8–63:4.)
He stated that he had never reviewed any of the monthly GRR reports that Coastal Palms' property-level entities submitted to Verimark and was unaware of the specific mechanics by which revenue was calculated, compiled, and reported. He testified that he did not know who was responsible for preparing those reports, whether they were submitted electronically or by mail, or what documentation was required to accompany them. (Tr. 63:8–65:2.)
Prescott claimed that he did not know the royalty rate applicable to Coastal Palms' franchise agreements with Verimark, which is 5% of GRR as specified in Section 4.1 of the FLAs. He similarly claimed no knowledge of the marketing-fund contribution rate of 2.5% of GRR required under FLA Section 4.2 or the per-room technology fee of $12.50 per room per month mandated by FLA Section 4.3. He stated that he understood "in a general sense" that Coastal Palms paid franchise fees to Verimark but had no knowledge of the specific rates, amounts, or calculation methodology. (Tr. 65:6–67:14.)
B. Knowledge of FLA Terms
Prescott testified that he had never read any of the twenty-two individual Franchise License Agreements in their entirety. He acknowledged that copies of the FLAs may have been provided to him at various points but stated he had no recollection of receiving them and, if he did, he never reviewed them. (Tr. 67:18–69:12.)
He further acknowledged that he understood, at a general level, that Coastal Palms operated hotels under Verimark's brand flags — specifically, the Verimark Suites and Verimark Select brands — and that franchise fees of some nature were paid to Verimark in connection with the use of those brand names. However, he disclaimed any knowledge of the specific contractual obligations imposed by the FLAs beyond this general understanding. (Tr. 69:16–71:8.)
When asked about specific FLA provisions, Prescott stated he had no familiarity with any of them, including:
• The audit provisions of Section 8.2, which grant Verimark the right to audit the franchisee's books and records and specify that underreporting in excess of 2% of reported GRR triggers reimbursement of Verimark's audit costs;
• The cure provisions of Section 14.1, which provide a thirty-day cure period for specified defaults;
• The "incapable of cure" language in Section 14.2(c), which provides that systematic or intentional underreporting of GRR constitutes a default that is "incapable of cure" and entitles Verimark to immediate termination of the franchise;
• The liquidated-damages formula in Section 15.3, which provides for damages equal to three times the trailing-twelve-month royalties per property in the event of termination for cause.
Prescott testified that he had never discussed any of these provisions with Brecker, with counsel, or with anyone else. (Tr. 71:12–79:8.)
C. Knowledge of Suncoast Room Management Inc.
Prescott's testimony regarding Suncoast Room Management Inc. began with a claim of near-total unfamiliarity. When first asked whether he was familiar with Suncoast, he testified: "I may have heard the name. It sounds vaguely familiar. But I couldn't tell you what it does." (Tr. 143:6–143:14.)
As the examination continued and Prescott was confronted with documents referencing Suncoast, his position shifted from claiming unfamiliarity to claiming a lack of detailed understanding. This evolution is discussed further in Sections IV and V below.
In his initial testimony, Prescott stated that he did not know that Suncoast was the entity through which direct-booking revenues — including walk-in guests, corporate-direct contract bookings, and bookings made through the gulfcoastrooms.com website — were collected and processed. He stated he was unaware of the gulfcoastrooms.com website and did not know that Coastal Palms maintained any booking channel outside of the Verimark central reservation system and third-party online travel agencies. (Tr. 143:18–145:2.)
Prescott further denied knowing that Suncoast retained a 12% "management fee" on direct-booking revenues before remitting the balance to the property-level LLCs. He testified that he had no understanding of the fee structure or financial arrangements between Suncoast and the Coastal Palms property-level entities. (Tr. 145:6–145:22.)
Most critically, Prescott denied any knowledge that revenues collected by Suncoast were excluded from the GRR reports submitted to Verimark. He testified that he had no awareness of a dual-channel revenue structure in which franchise-reported GRR reflected only a portion of actual room revenue while Suncoast-collected revenues were kept separate and unreported. (Tr. 145:24–146:18.)
D. Knowledge of Underreporting
Prescott categorically denied any knowledge of revenue underreporting. His testimony on this point was emphatic:
> "I had no idea there was any problem with how revenue was being reported until I got a call from Randy telling me we'd been sued. That was the first I ever heard of it." (Tr. 170:2–170:8.)
Prescott stated that he first learned of the allegations in this case when Brecker contacted him by telephone shortly after the Complaint was filed on March 7, 2022. He testified that Brecker told him Verimark had filed a lawsuit alleging that Coastal Palms had underreported revenue, and that Brecker characterized the suit as "baseless" and assured Prescott that Whitfield, Barrow & Crane would handle the defense. Prescott stated that he did not ask Brecker any follow-up questions about the substance of the allegations at that time. (Tr. 170:12–171:6.)
Prescott further denied any knowledge of Janet Kerrigan, the former Regional Controller for the Coastal Palms Southeast region who served as the whistleblower in this matter. Kerrigan contacted Verimark's compliance hotline on November 8, 2021, and reported that Coastal Palms was systematically excluding Suncoast-collected revenues from its GRR reports. Prescott testified that he had never met Kerrigan, had never spoken with her, and did not learn of her existence until after the lawsuit was filed. He also stated he was unaware that Kerrigan had been terminated from Coastal Palms in October 2021, approximately two weeks before her whistleblower complaint. (Tr. 171:10–172:4.)
As detailed in Section IV.E below, Prescott's claim that he first learned of any reporting issues only after the Complaint was filed is contradicted by text messages exchanged with Brecker on November 12, 2021 — nearly four months before the Complaint was filed.
IV. Inconsistencies Between Testimony and Produced Documents
This section identifies five categories of produced documents that contradict or materially undermine Prescott's claimed lack of knowledge regarding the revenue-reporting practices at issue in this litigation. Each inconsistency is documented with specific Bates-number references and corresponding deposition transcript citations. The documents are presented in order of their probative significance, concluding with the two most damaging items.
A. Quarterly Financial Summary Reports
Document: Quarterly financial summaries emailed by Randall Brecker to Nolan Prescott at Prescott's personal email address (nprescott.naples@[redacted].com). These documents were produced by Coastal Palms in the supplemental document production served on November 18, 2022, which comprised approximately 312,000 documents including Suncoast Room Management records produced pursuant to this Court's order on Verimark's motion to compel dated October 3, 2022.
Bates Range: CP-SUPP-0087432 through CP-SUPP-0087561 (covering Q1 2015 through Q3 2021, a span of twenty-seven quarters).
Content: The quarterly financial summaries are typically four to six pages in length and provide a consolidated revenue breakdown for the entire Coastal Palms portfolio. They include property-by-property revenue figures, aggregate portfolio metrics, and key performance indicators such as occupancy rates, average daily rate, and revenue per available room. Critically, beginning with the Q1 2015 report, each quarterly summary contains a line item variously labeled "Suncoast Mgmt Revenue" or "Suncoast Direct-Booking Revenue," which is listed separately from and in addition to "Franchise-Reported Revenue" (i.e., the GRR reported to Verimark). The two revenue streams are then combined into a "Total Portfolio Revenue" figure. This two-line revenue presentation is consistent across all twenty-seven quarterly reports in the Bates range.
Specific Example: The Q4 2020 quarterly financial summary (CP-SUPP-0087518) presents the following revenue breakdown on its first page:
This document shows that in Q4 2020 alone, $7.4 million in room revenue collected through Suncoast was not included in the GRR reported to Verimark, representing approximately 21.6% of total portfolio revenue for that quarter.
Deposition Testimony: Prescott was shown CP-SUPP-0087518 (marked as Deposition Exhibit 3) and acknowledged that his email address appeared in the "To" field of the transmitting email. He initially stated that he "didn't recall" receiving the document. When pressed, he conceded that he "probably received it" given that his email address was listed, but he claimed he "never opened the attachments" or, alternatively, that if he did open them, he "didn't pay attention to the details." He testified: "I might have glanced at it, but I was looking at the bottom line — what my distribution was going to be. I wasn't analyzing revenue categories." (Tr. 112:4–113:18.)
When asked specifically whether the line item labeled "Suncoast Direct-Booking Revenue" would have caught his attention, Prescott responded: "I don't know. Maybe it should have. But I didn't focus on it. I trusted Randy to handle all of that." (Tr. 114:2–114:8.)
Significance: These documents demonstrate that for a period of at least six and one-half years — from Q1 2015 through Q3 2021 — Prescott received quarterly reports that explicitly separated Suncoast-collected revenue from franchise-reported GRR. The reports were sent directly to his personal email address, and the two-channel revenue structure was not buried in footnotes or appendices but was presented on the first page of each report as the primary revenue summary. Prescott's claim that he was unaware of Suncoast's role in collecting revenue or that a separate revenue stream existed outside franchise-reported GRR is rendered implausible by the consistent presentation of this information in documents he acknowledges receiving over a multi-year period.
B. Annual Distribution Memoranda with Revenue Breakdowns
Document: Annual distribution memoranda from Randall Brecker to all Members of Coastal Palms Franchise Holdings LLC. The three Members and their respective equity interests are: Randall Brecker (60%), Theresa Brecker (15%), and Nolan Prescott (25%). Each annual memorandum summarizes yearly performance across the full portfolio and calculates the distribution payable to each Member.
Bates Range: CP-00045210 through CP-00045247 (covering fiscal years 2014 through 2021, eight annual memoranda).
Content: Each annual distribution memorandum includes a one-page summary presenting "Total Revenue" as the sum of two components: "Verimark-Reported Revenue" and "Suncoast-Managed Revenue." Below the revenue summary, the memoranda deduct operating expenses, debt service, reserves, and management fees, arriving at a "Distributable Cash" figure that is then allocated among the three Members according to their ownership percentages. The terminology used in the annual memoranda — particularly the distinction between "Verimark-Reported Revenue" and "Suncoast-Managed Revenue" — is arguably even more explicit than the terminology used in the quarterly summaries, as it directly invokes Verimark in labeling the franchise-reported revenue figure.
Specific Example: The 2021 annual distribution memorandum (CP-00045244, marked as Deposition Exhibit 4) presents the following revenue summary:
The $112.4 million "Verimark-Reported Revenue" figure matches the aggregate full-year 2021 GRR reported by Coastal Palms' property-level entities to Verimark, as reflected in Verimark's own records. The $31.6 million "Suncoast-Managed Revenue" figure represents revenue collected through direct-booking channels that was not included in franchise-reported GRR.
Note on Consistency with Forensic Analysis: The $31.6 million Suncoast figure for 2021 is slightly below the forensic estimate prepared by Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, who estimated $33.2 million in underreported GRR for fiscal year 2021 (based on an estimated true GRR of $145.6 million minus $112.4 million in reported GRR). The $1.6 million discrepancy may reflect revenues that flowed through channels other than Suncoast (e.g., certain cash transactions or miscategorized ancillary revenue) or minor differences in allocation methodology. Nonetheless, the distribution memorandum figure is broadly consistent with and corroborative of Ridgeline's forensic reconstruction, as approximately 95% of the estimated underreported revenue is accounted for by the Suncoast-Managed Revenue line item.
Deposition Testimony: When confronted with CP-00045244, Prescott acknowledged receiving the 2021 annual distribution memorandum and admitted that he reviewed it. However, he attempted to cabin his review by stating that he "only looked at the bottom line" — specifically, the distributable cash figure and his 25% share — and that he did not focus on where the revenue came from or how it was categorized. He testified: "When I got the distribution memo, I looked at what my check was going to be. That's what I cared about. I didn't analyze the revenue breakdown. That was Randy's department." (Tr. 134:8–136:22.)
When asked whether the label "Verimark-Reported Revenue" suggested to him that a different figure was being reported to Verimark than the total revenue generated by the properties, Prescott paused and then stated: "I don't know what it suggested. I didn't think about it that way." (Tr. 137:4–137:10.)
Significance: Prescott conceded both receiving and reviewing documents that present a separate Suncoast revenue stream alongside — and distinguished from — revenue reported to Verimark. His concession that he reviewed these memoranda, even if only to determine his distribution amount, directly contradicts his claim that he was unaware of Suncoast's function or the existence of a dual-revenue structure. A reasonable reader of these memoranda would necessarily have understood that the total revenue earned by the Coastal Palms properties was substantially greater than the amount reported to Verimark, and that the difference was attributable to revenues managed by Suncoast. Prescott's insistence that he reviewed these documents without noticing or comprehending the most prominent feature of the revenue summary strains credulity.
C. Email Exchange Regarding Ironclad National Bank Loan Refinancing (2018)
Document: Email chain among Randall Brecker, Nolan Prescott, and Devon Schultz (Senior Vice President, Commercial Real Estate Lending, Ironclad National Bank) regarding the refinancing of mortgage loans on several Coastal Palms hotel properties.
Bates Range: CP-SUPP-0112887 through CP-SUPP-0112894.
Content: The email chain spans approximately one week in June 2018 and relates to a refinancing package that Coastal Palms was submitting to Ironclad National Bank for mortgage loans on five properties in Southwest Florida. The chain includes discussions of financial documentation, appraisals, and guaranty requirements.
The critical email in the chain is dated June 22, 2018 (CP-SUPP-0112890), in which Brecker writes to Prescott:
> "Nolan – Devon at Ironclad wants to see full revenue numbers for the refi package. I'm sending him the combined figures including Suncoast. Just a heads up since you're guaranteeing the loans – the bank sees total revenue, not just what we report to Verimark."
Prescott's reply, sent the same day (CP-SUPP-0112891), states:
> "Got it. Makes sense to show the bank the full picture. Let me know if Devon needs anything else from me on the guaranty."
Deposition Testimony: Prescott was confronted with this email exchange during what proved to be the most contentious portion of the deposition. Upon being shown CP-SUPP-0112890, Prescott paused for a lengthy period — the video record reflects approximately forty-five seconds of silence — before Gabriela Montes requested a break for the witness to confer with counsel. The break lasted approximately twelve minutes. (Tr. 155:1–156:2.)
Upon returning, Prescott stated that he "didn't focus on the distinction" between what was reported to Verimark and what was shown to the bank. He characterized his reply email as a reflexive response to Brecker's message rather than a considered acknowledgment of the reporting differential. He testified: "I was just responding to Randy's email quickly. He said the bank needed full numbers. I said fine. I didn't sit there and parse the difference between what went to Verimark and what went to the bank. I was focused on getting the refinancing done." (Tr. 156:3–159:14.)
When Priya Anand pressed further, asking Prescott whether the phrase "not just what we report to Verimark" communicated to him that the figures reported to Verimark were different from — and less than — the total revenue generated by the properties, Prescott responded: "I can see how it reads that way now, sitting here. But at the time, I just didn't think about it." (Tr. 158:6–158:14.)
Significance: This email exchange is the single most damaging document for Prescott's credibility. It demonstrates, in Prescott's own words, that he was explicitly informed by Brecker that Coastal Palms reported different revenue figures to Verimark than to Ironclad National Bank — that the bank received "total revenue" including Suncoast figures while Verimark received something less. Prescott's reply — "Makes sense to show the bank the full picture" — reflects not only his understanding of the distinction but his comfort with the arrangement. His response does not contain any expression of surprise, confusion, or concern about why Verimark would be receiving different revenue figures than the bank. To the contrary, he treats the arrangement as unremarkable.
This document directly and unambiguously contradicts Prescott's deposition testimony that he had no knowledge of how revenue was reported to Verimark, that he was unaware of Suncoast's role in the revenue structure, and that he did not know the franchise-reported GRR excluded certain revenues. A jury evaluating Prescott's credibility will likely find it impossible to reconcile his professed ignorance with this contemporaneous email exchange.
Moreover, this exchange has potential implications beyond impeachment: it suggests that Ironclad National Bank was provided with revenue figures that included the Suncoast-diverted revenues — figures that may have been material to the bank's underwriting decisions for the refinancing. This issue may warrant further investigation in coordination with Verimark's potential cross-claims or third-party contribution analysis.
D. Operating Agreement Provisions Regarding Member Reporting Rights
Document: Coastal Palms Franchise Holdings LLC Operating Agreement (CP-00001015 through CP-00001089), marked as Deposition Exhibit 1.
Content: Two provisions of the operating agreement are relevant to Prescott's claimed ignorance:
Section 7.4 — Inspection Rights: Provides that all Members "shall have the right, at any reasonable time and upon not less than ten (10) business days' prior written notice to the Managing Member, to inspect and copy the Company's books and records, including without limitation all financial statements, tax returns, bank statements, accounts receivable and payable records, and franchise-related documents."
Section 7.6 — Quarterly Reports: Requires the Managing Member (Brecker) to "furnish to each Member, within thirty (30) days following the end of each calendar quarter, a financial report setting forth in reasonable detail the revenues, expenses, and net income of the Company and its subsidiaries for such quarter, together with a balance sheet as of the end of such quarter."
Deposition Testimony: Prescott acknowledged signing the operating agreement and confirmed that he understood, at a general level, that it set forth the governance and financial-reporting framework for Coastal Palms. However, he stated that he had never exercised his inspection rights under Section 7.4 and had relied entirely on the quarterly financial reports that Brecker sent him, which he characterized as compliance with Section 7.6. He testified: "I never asked to go in and look at the books. I didn't think I needed to. Randy sent me the quarterly reports, and that was enough for me." (Tr. 78:12–79:8.)
Significance: While these provisions are not directly inconsistent with Prescott's testimony — he does not deny the existence of his inspection rights, but merely states he did not exercise them — they are relevant for two reasons. First, they establish that Prescott had contractual mechanisms available to him that would have provided full visibility into the revenue-reporting practices of Coastal Palms and its affiliates. He could have, at any time, requested access to the franchise-related documents, including the GRR reports submitted to Verimark, and compared them against the total revenue figures reflected in the internal records. Second, they confirm that the quarterly financial reports Prescott received from Brecker — the very reports that explicitly separated Suncoast revenue from franchise-reported GRR — were provided pursuant to a contractual obligation, not as informal courtesy communications. This underscores that Prescott was expected to review these reports as part of his governance rights as a Member, making his claim that he "didn't pay attention to the details" all the more damaging.
Taken together with the quarterly summaries and annual distribution memoranda discussed above, the operating agreement provisions paint a picture of a Member who had both the contractual right and the practical means to understand exactly how revenue was being reported but who chose not to look — or, more likely, who looked and understood but now claims otherwise.
E. Text Messages Referencing "Franchise Audit"
Document: Text message exchange between Nolan Prescott and Randall Brecker, dated November 12, 2021. The messages were produced from Brecker's cellular phone in the supplemental document production of November 18, 2022.
Bates Range: CP-SUPP-0198445 through CP-SUPP-0198449.
Content: On November 12, 2021 — four days after Janet Kerrigan contacted Verimark's compliance hotline on November 8, 2021, and six days before Verimark engaged Thornbury & Associates CPAs LLP on November 22, 2021 to conduct a forensic compliance audit — Brecker initiated the following text exchange with Prescott:
Brecker (11/12/2021, 3:47 PM): "Heads up – Verimark might want to do an audit. Could get messy. Don't worry, I'll handle it."
Prescott (11/12/2021, 4:02 PM): "What kind of audit? Is this about the Suncoast stuff?"
Brecker (11/12/2021, 4:08 PM): "Yeah. Just stay quiet and let me deal with it."
Deposition Testimony: When shown these text messages (marked as Deposition Exhibit 6), Prescott was visibly uncomfortable. He was asked to explain what he meant by the phrase "the Suncoast stuff." He testified: "By 'the Suncoast stuff,' I meant just general management issues. Suncoast was part of the operation. I was asking if the audit was about management, about operations generally. I wasn't thinking about revenue reporting or anything specific." (Tr. 172:8–175:21.)
When pressed on why he used the specific phrase "the Suncoast stuff" in response to a warning about a potential franchise audit, rather than asking a more general question, Prescott became evasive and repeated variations of his initial explanation. He could not articulate what "general management issues" related to Suncoast he was referring to or why such issues would prompt a franchise audit. (Tr. 174:4–175:12.)
Significance: Prescott's use of the phrase "the Suncoast stuff" in the specific context of a potential Verimark franchise audit is powerful evidence that he had prior awareness of Suncoast's role in the revenue-diversion scheme. His immediate association between a franchise audit and Suncoast — without any prompting from Brecker beyond the word "audit" — strongly suggests that he understood Suncoast's operations were a source of franchise-compliance risk. His explanation that "the Suncoast stuff" referred to unspecified general management issues is implausible on its face: a franchise audit conducted by or on behalf of the franchisor would concern franchise-compliance matters (principally revenue reporting and fee payments), not general hotel-management operations.
Additionally, the temporal context is critical. These messages were exchanged on November 12, 2021 — nearly four months before the Complaint was filed on March 7, 2022. This directly contradicts Prescott's categorical testimony that he "had no idea there was any problem with how revenue was being reported until I got a call from Randy telling me we'd been sued." The text messages demonstrate that Prescott was aware of at least the possibility of a franchise audit — and immediately connected it to Suncoast — months before the lawsuit was initiated.
Brecker's final message in the exchange — "Just stay quiet and let me deal with it" — is also significant, as it suggests a coordinated effort to manage the response to the anticipated audit and to keep Prescott out of view. Whether this rises to the level of evidence of a conspiratorial agreement will require further analysis in connection with Count X.
V. Key Admissions and Concessions
Despite his general posture of claimed ignorance, Prescott made several notable concessions during questioning. These concessions, while individually limited in scope, collectively undermine the credibility of his broader narrative of passive, uninformed investment.
A. Receipt of Financial Reports
Prescott conceded that he received quarterly financial summaries from Brecker for the entire period of his membership in Coastal Palms, from approximately 2009 to the present. He acknowledged that these reports were sent to his personal email address on a regular basis and that he expected to receive them as part of his membership. (Tr. 108:3–109:11.)
He further conceded that he received and reviewed the annual distribution memoranda prepared by Brecker. Specifically, he acknowledged that his review of these memoranda was motivated by his interest in determining the amount of his quarterly or annual distribution — but he conceded that the memoranda contained revenue breakdowns that he at least had the opportunity to review. (Tr. 131:14–132:6.)
B. Knowledge of Suncoast's Existence
Despite his initial testimony that he "may have heard the name" Suncoast Room Management Inc. and was uncertain of its function, Prescott ultimately conceded — after being confronted with the quarterly summaries, annual distribution memoranda, and the June 2018 email exchange — that he was "generally aware" that Suncoast existed and that it was involved in some aspect of hotel operations within the Coastal Palms organizational structure. He maintained, however, that he did not understand the specifics of Suncoast's operations, its role in processing direct bookings, or its relationship to the franchise-reported revenue figures. (Tr. 146:22–148:3.)
This concession represents a significant retreat from his initial position and suggests that Prescott's strategy of denying all knowledge of Suncoast was untenable in the face of the documentary record. His fallback position — that he knew Suncoast existed but did not understand what it did — is itself difficult to credit, given the explicit presentation of Suncoast revenue data in the financial reports he received.
C. Guaranty Obligations
Prescott acknowledged that he personally guaranteed Ironclad National Bank's mortgage loans on multiple Coastal Palms hotel properties. He testified that he understood these guaranties exposed him to personal liability if the properties were unable to service their debt obligations. He further acknowledged that Ironclad National Bank evaluated the financial performance of the hotel properties — including their revenue — as part of the underwriting process for both original loans and refinancings, and that the revenue performance of the properties was directly relevant to his exposure under the guaranties. (Tr. 152:6–153:14.)
Significantly, Prescott acknowledged that he had a financial incentive to understand the revenue performance of the properties for which he was personally liable. When asked whether, as a guarantor, he had reason to pay attention to the revenue figures in the financial reports he received, he responded: "I suppose so, yes. But I relied on Randy for all of that." (Tr. 153:18–154:9.)
D. No Inquiry Despite Red Flags
Perhaps the most telling concessions relate to what Prescott did not do despite the information available to him:
• He conceded that he never asked Brecker why the quarterly financial summaries showed two separate revenue streams — one labeled "Franchise-Reported Revenue" and another labeled "Suncoast Direct-Booking Revenue" — or what the distinction between the two meant. (Tr. 118:4–119:22.)
• He conceded that he never asked Brecker why the revenue reported to Verimark was different from the total portfolio revenue shown in the financial reports. (Tr. 140:11–141:3.)
• He conceded that he never inquired into why separate line items existed for Suncoast-managed revenue or what purpose the Suncoast entity served within the organizational structure. (Tr. 147:2–148:3.)
These concessions establish that Prescott was presented with information that, on its face, should have raised questions about the relationship between franchise-reported revenue and total portfolio revenue — and he chose not to ask those questions. Whether this reflects willful blindness or actual knowledge is a factual question for the trier of fact, but in either case, the failure to inquire undermines his claim of innocent ignorance.
VI. Demeanor and Credibility Assessment
Prescott was generally cooperative and calm during the early portions of the deposition, answering questions about his background, his investment history, and his relationship with Brecker in a straightforward and conversational manner. He appeared at ease with the deposition process and did not exhibit signs of anxiety or defensiveness during the initial questioning.
His demeanor changed markedly, however, when the examination shifted to the produced documents. When confronted with documents contradicting his claimed ignorance — particularly the quarterly financial summaries, the annual distribution memoranda, and the June 2018 email exchange — Prescott became notably evasive. His answers became longer, more circuitous, and more heavily qualified. He frequently fell back on stock phrases including "I don't recall," "I didn't pay attention to that," "I relied on Randy for all of that," and "I just looked at the bottom line." These phrases were deployed with such regularity that they appeared to be rehearsed responses designed to avoid substantive engagement with the documentary evidence.
Several times during the document-focused portions of the examination, Prescott paused to confer with Gabriela Montes before answering questions. The most extended conferral occurred when the June 2018 email exchange with Brecker and Devon Schultz of Ironclad National Bank was introduced as an exhibit. Upon reviewing CP-SUPP-0112890, Prescott stopped, read the document twice, and then requested a break. The break lasted approximately twelve minutes. (Tr. 155:1–156:2.) While the substance of the conferral is, of course, privileged, the timing and duration of the break suggest that Prescott and his counsel recognized the significance of the document and needed time to formulate a response.
Prescott's explanation of the November 2021 text message exchange — specifically his contention that "the Suncoast stuff" referred to general management issues rather than revenue-reporting concerns — was delivered haltingly and without conviction. His voice dropped in volume, he avoided eye contact with examining counsel, and he repeated the same formulation multiple times without elaboration when pressed for specifics. The overall impression conveyed by his testimony on this topic was that the explanation was prepared in advance and did not reflect his genuine contemporaneous understanding.
Overall, Prescott presented as a witness who was comfortable reciting his prepared narrative of passive investment and deference to Brecker but who lacked the ability to maintain that narrative convincingly when confronted with specific documentary evidence. His credibility on the central issue of his knowledge of revenue-reporting practices is, in my assessment, significantly compromised by the documentary record. A jury viewing the video of this deposition would likely perceive a substantial disconnect between Prescott's professed ignorance and the contemporaneous documentary evidence.
VII. Relevance to Pending Claims
A. Civil Conspiracy (Count X)
Prescott is not individually named as a defendant in the Complaint. Count X of the Complaint alleges civil conspiracy and names only Randall Brecker and Suncoast Room Management Inc. as defendants in that count, alleging that they agreed to and participated in the scheme to divert revenues from franchise-reported GRR through the Suncoast direct-booking channel.
However, the evidence developed through Prescott's deposition and the underlying documentary record may be relevant to the civil conspiracy claim in several respects. First, it may help establish the scope and nature of the conspiracy by demonstrating that the dual-revenue structure was not a closely guarded secret known only to Brecker but was apparent to other principals of Coastal Palms, including its primary passive investor. This undermines any defense that the revenue diversion was a rogue operation conducted by Brecker alone without the knowledge or acquiescence of any other member of the organization.
Second, Prescott's November 2021 text message — "Is this about the Suncoast stuff?" — followed by Brecker's instruction to "stay quiet and let me deal with it" — may be relevant to establishing a post-hoc effort to conceal the scheme in the face of a potential audit. While this single exchange may not be sufficient to establish Prescott's membership in the conspiracy, it provides contextual evidence that the scheme was known beyond Brecker and that there was an understanding among principals that the arrangement should be shielded from scrutiny.
We should evaluate whether the evidence supports a motion to amend the Complaint to add Prescott as a defendant on the conspiracy count or, alternatively, whether Prescott's knowledge and acquiescence are better deployed as evidence in support of the existing claims against Brecker and Suncoast.
B. Damages and Collectibility
As a personal guarantor of Ironclad National Bank loans aggregating approximately $94 million and as a 25% equity holder in Coastal Palms Franchise Holdings LLC, Prescott represents a significant potential source of recovery. His personal financial resources — derived from a career in commercial real estate development — may be substantial, though we have not yet obtained detailed asset discovery from Prescott individually.
The evidence of Prescott's knowledge and participation in (or willful blindness to) the revenue-diversion scheme is directly relevant to settlement negotiations. If Prescott is at risk of personal liability — whether through an amended conspiracy count, a piercing-the-veil theory, or through his guaranty obligations to Ironclad (which may have cross-default or fraud-carve-out provisions triggered by the underreporting) — that risk creates leverage to incentivize his cooperation in settlement discussions. Prescott may also have an interest in cooperating with Verimark if he perceives that Brecker's management of the defense is not adequately protecting his individual interests.
The settlement authority memorandum should account for the strength of the evidence against Prescott and should include an analysis of the potential recovery from Prescott individually, separate from the Coastal Palms entity-level exposure.
C. Impeachment Value
The documentary inconsistencies identified in Section IV provide strong impeachment material for use at trial. The June 2018 email exchange (CP-SUPP-0112890–91) and the November 2021 text messages (CP-SUPP-0198445–49) are the most powerful impeachment exhibits, as they contain Prescott's own words demonstrating awareness of the very matters he denied knowledge of under oath.
If Prescott is called as a witness at trial — whether by Verimark or by Coastal Palms as part of its defense — the cross-examination opportunities are substantial. The contrast between his deposition testimony of passive ignorance and the documentary evidence of active awareness will be immediately apparent to the jury and will undermine not only Prescott's individual credibility but the broader defense narrative that the revenue-reporting practices were an operational matter known only to a small group within Coastal Palms' management.
Even if Prescott is not called as a live witness at trial, his deposition testimony may be presented by designation, and the documentary impeachment materials can be offered independently as exhibits in Verimark's case-in-chief to establish the breadth of knowledge of the dual-revenue structure within the Coastal Palms organization.
VIII. Comparison with Other Witness Testimony
The Prescott deposition should be evaluated in the context of other depositions taken in this matter to assess both corroboration and gaps in the evidentiary record.
Randall Brecker (deposed January 9–10, 2023): Brecker was deposed over two days and admitted that he personally directed the controllers at Coastal Palms' property-level entities to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. Brecker characterized this practice as a "management decision" that he believed was permissible under the FLAs because, in his view, Suncoast-collected revenues were earned through independent booking channels outside the scope of the franchise relationship. This interpretation is, of course, inconsistent with the broad definition of Gross Room Revenue in the FLAs, which encompasses all room revenue regardless of booking channel.
Notably, Brecker did not specifically address what Prescott knew about the revenue-reporting practices. He was not asked directly whether he informed Prescott of the exclusion of Suncoast revenues from GRR reports. However, the documents in which Brecker communicated with Prescott — the June 2018 email regarding the Ironclad refinancing and the November 2021 text messages regarding the potential audit — speak for themselves and suggest that Brecker assumed Prescott's awareness of the arrangement. The June 2018 email, in particular, was written in a matter-of-fact tone that presupposed Prescott's understanding of the distinction between franchise-reported revenue and total revenue.
Janet Kerrigan (deposed January 27, 2023): Kerrigan, the former Regional Controller who served as the whistleblower, testified that she had no direct interaction with Prescott regarding revenue reporting or any other matter. She stated that all instructions to exclude direct-booking revenues from GRR reports came from Brecker personally or through Brecker's regional managers. She did not testify about Prescott's knowledge one way or the other, and she was not asked about Prescott during her examination.
Kerrigan's testimony is consistent with Prescott's characterization of his role as non-operational: Kerrigan's interactions were with Brecker and his operational team, not with passive investors. However, the absence of Kerrigan testimony regarding Prescott does not exculpate Prescott; it simply means that the evidence of Prescott's knowledge comes from documentary evidence and his own admissions rather than from the testimony of operational personnel.
Property-Level Witnesses (deposed January–March 2023): A composite summary of ten depositions of property-level managers and accountants has been prepared separately. The composite reflects consistent testimony that direction to route walk-in and corporate-direct bookings through Suncoast came from "corporate" — uniformly understood to mean Brecker and his central management team at the Naples office. None of the ten property-level witnesses identified Prescott as involved in any operational decisions, and none recalled interacting with Prescott in any capacity. This is consistent with both Prescott's testimony and Brecker's description of Prescott's role as a passive capital contributor.
IX. Recommendations
Based on the foregoing analysis, I recommend the following actions:
1. Preserve Impeachment Materials. The five categories of documents identified in Section IV — quarterly financial summaries (CP-SUPP-0087432–0087561), annual distribution memoranda (CP-00045210–00045247), the June 2018 Ironclad email chain (CP-SUPP-0112887–0112894), the Coastal Palms operating agreement (CP-00001015–00001089), and the November 2021 text messages (CP-SUPP-0198445–0198449) — should be flagged in the trial-exhibit database for use in impeachment and/or as exhibits in Verimark's case-in-chief. The June 2018 email exchange and the November 2021 text messages should be designated as priority trial exhibits given their exceptional impeachment value.
2. Leverage Prescott's Personal Guaranty Exposure in Settlement Discussions. Prescott's documented awareness of the dual-revenue structure significantly strengthens Verimark's position regarding Prescott's personal exposure — whether through his Ironclad National Bank guaranty obligations (which may contain fraud or misrepresentation carve-outs triggered by the provision of inflated revenue figures to the bank), through potential personal liability on an amended conspiracy count, or through general judgment-enforcement strategies against the Coastal Palms entity of which he is a 25% equity holder. In any settlement discussion, Prescott's individual exposure should be highlighted to incentivize his cooperation and to create a wedge between Prescott's interests and Brecker's interests in the defense.
3. Consider Supplemental discovery Targeted at Prescott Individually. We should evaluate whether to serve targeted interrogatories or requests for production on Prescott personally — not merely as a Member of Coastal Palms — regarding any additional communications about Suncoast, franchise reporting, or the potential Verimark audit that may not have been captured in Coastal Palms' document production. In particular, Prescott's personal email account, text messages, and any files maintained at his residence or personal office may contain additional relevant communications with Brecker or others. The supplemental discovery should also seek information regarding Prescott's knowledge of Janet Kerrigan or her termination, given the temporal proximity of the November 2021 text messages to Kerrigan's October 2021 termination and November 2021 whistleblower complaint.
4. Coordinate with Forensic Expert (Dr. Kettlewell). The annual distribution memoranda showing combined revenue figures should be provided to Dr. Sharon Kettlewell at Ridgeline Forensic Advisory LLC for integration into her forensic reconstruction of true GRR. The 2021 distribution memorandum figure of $144.0 million in combined revenue is broadly consistent with her independent estimate of $145.6 million in true GRR for fiscal year 2021, and the year-by-year distribution memoranda (2014–2021) may provide a useful cross-check against her property-level analysis for each year in the damages period. The distribution memoranda also provide an additional, independently prepared data source that corroborates the magnitude of the underreporting, which will be valuable for Dr. Kettlewell's testimony at trial.
5. Brief Priya Anand on Trial-Strategy Implications. The Prescott deposition supports and strengthens Verimark's trial narrative that the revenue-diversion scheme was not a rogue operation conducted in secret by Brecker alone but was a systematic arrangement that was known to — or, at minimum, willfully ignored by — other principals of Coastal Palms, including its primary passive investor and personal loan guarantor. This narrative is important because it rebuts the anticipated defense that Brecker acted unilaterally and that any damages should be assessed only against Brecker personally rather than against the Coastal Palms entities and their assets. Priya should incorporate the Prescott evidence into the trial-presentation strategy and consider how to sequence the presentation of Prescott's testimony relative to Brecker's testimony and the documentary evidence.
X. Appendix — Key Transcript Citations
The following table provides a quick-reference guide to the critical transcript page and line citations from the Prescott deposition, organized by topic. These citations should be used for motion practice, trial preparation, and cross-referencing with the deposition exhibits.
XI. Exhibit Index
The following exhibits were marked during the deposition of Nolan Prescott on February 10, 2023. All exhibits are maintained in the litigation document management system and in the physical deposition binder.
Please contact me with any questions or if you would like to discuss any of the foregoing. I am available to walk through the key transcript passages in detail at your convenience. A copy of the full deposition transcript and the video recording have been uploaded to the matter workspace.
Carlos Espinoza Associate
Line Item | Amount
Franchise-Reported Revenue (GRR) | $26.8M
Suncoast Direct-Booking Revenue | $7.4M
Total Portfolio Revenue | $34.2M
Suncoast Mgmt Fee (12%) | $888K
Line Item | Amount
Verimark-Reported Revenue | $112.4M
Suncoast-Managed Revenue | $31.6M
Combined Total Revenue | $144.0M
Topic | Transcript Citation | Summary
Background and role in Coastal Palms | Tr. 12:1–28:16 | Personal history, investment in Coastal Palms, passive-investor characterization, guaranty obligations
Knowledge of FLA terms and GRR reporting | Tr. 62:8–79:8 | Claimed unfamiliarity with GRR, royalty rates, FLA provisions; stated never read FLAs
Quarterly financial summaries | Tr. 108:3–119:22 | Acknowledged receiving summaries; conceded "probably received" Q4 2020 report; claimed he "never opened attachments" or "didn't pay attention to details"; conceded never asking about dual revenue streams
Annual distribution memoranda | Tr. 131:14–141:3 | Acknowledged receiving and reviewing distribution memos; claimed "only looked at the bottom line"; conceded never asking about Verimark-Reported vs. Suncoast-Managed Revenue distinction
Knowledge of Suncoast | Tr. 143:6–148:3 | Initial claim of near-total unfamiliarity; evolved to "generally aware" of Suncoast's existence; denied understanding specifics of Suncoast's role
Ironclad refinancing email exchange | Tr. 152:6–159:14 | Acknowledged guaranty obligations; confronted with June 2018 email; extended conferral with counsel; claimed he "didn't focus on the distinction" between Verimark and bank reporting
November 2021 text messages | Tr. 170:2–175:21 | Categorical denial of prior knowledge of reporting issues; confronted with "Suncoast stuff" text; offered implausible explanation referencing "general management issues"
General demeanor and credibility | Noted throughout | Calm in early portions; evasive when confronted with documents; frequent use of stock phrases; extended pause and counsel conferral on June 2018 email; halting, rehearsed-sounding explanation of November 2021 texts
Exhibit No. | Description | Bates Range
Exhibit 1 | Coastal Palms Franchise Holdings LLC Operating Agreement | CP-00001015 – CP-00001089
Exhibit 2 | Quarterly Financial Summaries, Q1 2015 – Q3 2021 (27 reports) | CP-SUPP-0087432 – CP-SUPP-0087561
Exhibit 3 | Q4 2020 Quarterly Financial Summary | CP-SUPP-0087518
Exhibit 4 | 2021 Annual Distribution Memorandum | CP-00045244
Exhibit 5 | Email Chain re Ironclad National Bank Loan Refinancing (June 2018) | CP-SUPP-0112887 – CP-SUPP-0112894
Exhibit 6 | Text Message Exchange, Brecker–Prescott (November 12, 2021) | CP-SUPP-0198445 – CP-SUPP-0198449
Exhibit 7 | Select FLA Excerpts (§§ 4.1, 4.2, 4.3, 8.2, 14.1, 14.2(c), 15.3) | Various

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