PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
MEMORANDUM
November 28, 2023
TO: Howard Quinn, Partner, Calderwood & Harkness LLP Conrad Ashby, Partner, Calderwood & Harkness LLP
FROM: Liam Donahue, Senior Associate Steven Hollander, Associate
RE: Shell Entity Analysis — Gulf Standard Contracting LLC, Clearwater Design Collective Inc., and Suncoast Property Services LLC
MATTER NO.: 1021-00008
CLIENT: Audit Committee of the Board of Directors, Verimark Hospitality Group Inc.
This memorandum was prepared at the direction of outside counsel for Calderwood & Harkness LLP in connection with our engagement by the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. and is protected by the attorney-client privilege and the attorney work-product doctrine. It should not be disclosed to any person or entity other than the intended recipients without the prior written consent of Calderwood & Harkness LLP.
I. Executive Summary
This memorandum presents the results of the investigation team's analysis of three entities that received payments from Verimark Coastal Resorts LLC ("VCR"), a wholly owned subsidiary of Verimark Hospitality Group Inc. ("VHG"), under purported capital-improvement contracts during the period from approximately July 2021 through June 2023. The Audit Committee retained Calderwood & Harkness LLP on July 31, 2023, following the identification of irregularities in VCR's capital-improvement expenditure records by VHG's internal audit function. The analysis set forth in this memorandum constitutes one of several workstreams being conducted under the Audit Committee's direction in connection with the broader investigation.
The three entities at issue are: (1) Gulf Standard Contracting LLC ("GSC"); (2) Clearwater Design Collective Inc. ("CDC"); and (3) Suncoast Property Services LLC ("SPS"). Each entity is organized under the laws of the State of Florida. As detailed in Sections III through V below, none of the three entities maintained any legitimate business operations at any time during the relevant period.
The investigation findings set forth herein are based on a comprehensive review of corporate records filed with the Florida Division of Corporations, bank records obtained through subpoena and voluntary production, email correspondence collected from identified custodians, witness interviews, and forensic accounting analysis performed by Crestline Forensic Advisory LLC (engagement number CFA-VHG-2023-0089; engagement partner Douglas Reinhardt, CPA, CFF; senior manager Priya Venkatesh, CPA). Based on the totality of the evidence reviewed, the investigation team has concluded that all three entities are shell companies with no legitimate business operations, created for the purpose of channeling VCR funds to or for the personal benefit of two VCR senior officers: VCR Division President Garrett W. Daskine and VCR Vice President of Finance Nicole Prescott.
The mechanics of the scheme were straightforward but effective. In aggregate, forty-seven (47) fictitious purchase orders were issued within VCR's accounts-payable system by VCR Controller Ryan Mateo Serrano, resulting in total payments of $1,830,000 (one million eight hundred thirty thousand dollars) to the three entities over an approximately twenty-four-month period from July 2021 through June 2023. Each fictitious purchase order was matched to a corresponding fictitious invoice generated by the relevant shell entity, and each transaction was coded within VCR's accounting system as a capital-improvement expenditure at one of two VCR resort properties.
The payments break down by entity as follows:
• Gulf Standard Contracting LLC (GSC): $812,400 across 19 invoices. Daskine was the beneficial owner of GSC.
• Clearwater Design Collective Inc. (CDC): $587,600 across 16 invoices. Prescott was the sole shareholder of CDC.
• Suncoast Property Services LLC (SPS): $430,000 across 12 invoices. Daskine was the sole member of SPS.
The largest single invoice was $94,500 — Invoice No. GSC-2023-007, dated February 14, 2023, purportedly for "lobby renovation materials — Coral Dune Phase III." The investigation found no evidence that any lobby renovation materials were purchased, delivered, or installed in connection with this invoice or, indeed, in connection with any of the forty-seven invoices at issue.
Crestline's forensic tracing analysis established that funds deposited into the bank accounts of the three shell entities were subsequently disbursed for the personal benefit of Daskine and Prescott. Specifically, the forensic tracing identified payments to contractors and vendors for a residential renovation at Daskine's personal residence, boat-slip fees at a Destin-area marina, luxury-goods purchases including jewelry and high-end electronics, personal credit-card payments on accounts held by Prescott, and direct transfers to personal bank accounts held by Daskine and Prescott. A detailed summary of the fund-flow analysis is set forth in Section III below and in the Crestline fund-flow diagrams attached as Appendix C.
II. Scope and Methodology
A. Scope of Analysis
The analysis set forth in this memorandum covers all payments from VCR to GSC, CDC, and SPS from the earliest identified payment (on or about July 14, 2021, when VCR issued its first payment to GSC in the amount of $32,500) through the end of the investigated period (June 30, 2023). The investigated period was defined by the Audit Committee in consultation with Calderwood & Harkness LLP, and encompasses the full period during which any of the three shell entities received payments from VCR.
All payments at issue were coded within VCR's Hollowell & Co.-based accounting system as capital-improvement expenditures under VCR's property-development cost centers. Specifically, the payments were allocated to capital-improvement projects at two VCR properties:
(i) Coral Dune Resort & Residences, located at 14200 Emerald Coast Parkway, Destin, Florida 32541 (the "Coral Dune Property"), a 312-unit timeshare resort and residential complex operated by VCR since 2014; and
(ii) Palmetto Bluff Club, located at 3950 Longboat Key Drive, Sarasota, Florida 34228 (the "Palmetto Bluff Property"), a 186-unit timeshare resort operated by VCR since 2017.
Both properties were undergoing legitimate capital-improvement programs during the relevant period, which provided cover for the fictitious invoices. The Coral Dune Property was in the midst of a multi-phase renovation program designated as "Coral Dune Phase III," which carried a board-approved budget of approximately $14.2 million. The Palmetto Bluff Property was engaged in a similar program designated as "Palmetto Bluff Phase II," with a board-approved budget of approximately $8.7 million. The fictitious invoices issued by the three shell entities were intermingled with invoices from legitimate vendors working on these projects, making detection more difficult.
B. Sources Reviewed
The investigation team reviewed the following categories of documents and evidence in preparing this analysis:
1. Florida Division of Corporations filings. Articles of organization (for GSC and SPS, as limited liability companies) and articles of incorporation (for CDC, as a Florida corporation), annual reports, and registered agent designations for all three entities. These filings were obtained directly from the Florida Division of Corporations' Sunbiz online portal and verified against certified copies obtained by Crestline Forensic Advisory LLC.
2. VCR accounts payable records, purchase orders, and vendor master file entries. The investigation team obtained a complete extract of VCR's vendor master file as of August 1, 2023, as well as all purchase orders, invoices, and payment records associated with GSC, CDC, and SPS. These records were extracted from VCR's Hollowell & Co. system by VHG's information technology department under the supervision of VHG Chief Information Officer Miranda Chen, pursuant to a data-preservation and collection protocol issued by Calderwood & Harkness LLP on August 4, 2023.
3. Bank account records. Records for accounts held by GSC, CDC, and SPS at the following financial institutions were obtained through a combination of subpoena and voluntary production:
(a) GSC maintained a commercial checking account at Gulf Coast National Bank (account ending in -4738), opened on or about March 22, 2021.
(b) CDC maintained a commercial checking account at Coastal Heritage Credit Union (account ending in -9152), opened on or about June 18, 2021.
(c) SPS maintained a commercial checking account at Beaumont Savings Bank, now Harborview Financial (account ending in -6304), opened on or about December 3, 2021.
In each case, records were obtained for the full period from account opening through the date of the most recently available statement. Bank records for personal accounts held by Daskine and Prescott were obtained to the extent available through voluntary production by counsel for those individuals. Daskine's counsel produced limited personal banking records for two accounts; Prescott's counsel produced personal credit-card statements for three accounts. These personal financial records were cross-referenced against shell-entity disbursements as part of the forensic tracing analysis.
4. Email communications. The investigation team collected email communications from eight of eleven identified custodians as part of the broader document collection conducted in this investigation. The overall collection encompassed approximately 1.2 million documents. Following de-duplication, de-NISTing, and a TAR 2.0 predictive-coding workflow conducted by Triton discovery Solutions Inc. (project manager Kai Nakamura), approximately 347,000 documents were reviewed by the document review team. Email communications between and among Daskine, Prescott, and Serrano were prioritized for early review and proved to be among the most probative evidence supporting the findings in this memorandum. Key email correspondence is referenced throughout Section III and selected emails are attached as Appendix D.
5. Witness interview transcripts and memoranda. The investigation team conducted witness interviews of the following individuals relevant to this memorandum:
(a) Ryan Mateo Serrano, VCR Controller. First interview: September 27, 2023 (counsel Marco A. Ruiz of Coletti & Ruiz PA present). Second interview: December 5, 2023, conducted pursuant to a cooperation agreement executed on November 15, 2023 (counsel Marco A. Ruiz present). Serrano's cooperating testimony during the second interview provided detailed information regarding the mechanics of the shell-entity scheme, including Daskine's role in directing the creation of the entities and the generation of fictitious invoices.
(b) Garrett W. Daskine, VCR Division President. Interview: October 4, 2023 (counsel James Corwin Merritt of Merritt & Dunleavy LLP present). Daskine provided limited responses during this interview and declined to address the substance of the allegations in detail. A follow-up interview was requested on October 25, 2023; Daskine's counsel declined the request by letter dated October 30, 2023.
(c) Nicole Prescott, VCR VP of Finance. First interview: October 11, 2023 (counsel Candace O'Brien Langford of Langford Pace LLP present). Second interview: November 8, 2023 (counsel Langford present). During both interviews, Prescott denied knowledge of the beneficial ownership of GSC and SPS but acknowledged her ownership of CDC. Prescott characterized CDC as a legitimate business venture that she maintained outside of her employment with VCR, a characterization that is contradicted by the evidence reviewed.
Memoranda summarizing each interview were prepared contemporaneously by members of the investigation team and reviewed for accuracy by the attending Calderwood & Harkness attorneys. These memoranda are maintained in the investigation file.
6. Forensic tracing analysis prepared by Crestline Forensic Advisory LLC. Crestline was retained by Calderwood & Harkness LLP at the direction of the Audit Committee to perform forensic accounting and tracing analysis in connection with the investigation. Crestline's engagement (number CFA-VHG-2023-0089) is led by engagement partner Douglas Reinhardt, CPA, CFF, and senior manager Priya Venkatesh, CPA. Crestline's forensic tracing reports, including detailed fund-flow diagrams, are attached as Appendix C and are referenced throughout this memorandum.
C. Analytical Approach
The investigation team employed the following analytical framework in evaluating the three entities:
Corporate formation and ownership analysis. For each entity, the team reviewed the articles of organization or incorporation, operating agreements (where available), annual reports, and registered agent designations filed with the Florida Division of Corporations. This review was supplemented by examination of bank signature cards, account-opening documentation, and other records reflecting the identity of the individuals who controlled each entity.
Invoice-by-invoice review. Each of the 47 purchase orders and corresponding invoices was reviewed individually to assess legitimacy. This review included: (i) comparison of invoice descriptions to actual capital-improvement work performed at the Coral Dune Property and the Palmetto Bluff Property, as reflected in property management records, work orders, and project-management documentation maintained by VCR's on-site management teams; (ii) verification of whether any deliverables described in the invoices were actually received; (iii) review of site-visit records to determine whether representatives of any of the three entities were ever present at either property; and (iv) comparison of invoice amounts to the pricing of comparable services from legitimate vendors.
Bank-record tracing. Crestline Forensic Advisory LLC conducted a comprehensive tracing of funds from VCR's disbursement accounts through the bank accounts of the three shell entities to the ultimate recipients. This tracing involved the analysis of deposit records, wire transfers, ACH transactions, checks, debit-card transactions, and cash withdrawals, and the matching of outgoing disbursements from the shell entity accounts to identifiable personal expenditures of Daskine and Prescott.
Cross-referencing personal financial records. To the extent personal financial records of Daskine and Prescott were available (as described in Section II.B.3 above), the team cross-referenced deposits into, and payments from, personal accounts with corresponding disbursements from the shell entity bank accounts. This cross-referencing confirmed the connection between shell entity funds and specific personal expenditures.
III. Entity-by-Entity Analysis
A. Gulf Standard Contracting LLC ("GSC")
1. Formation and Corporate Structure. GSC is a Florida limited liability company formed on March 12, 2021, as reflected in articles of organization filed with the Florida Secretary of State (Document No. L21000112847). The stated purpose of the entity in its articles of organization was "general contracting and construction services." The entity's initial and only registered agent was Ryan Mateo Serrano, the VCR Controller, whose personal residence address at 1507 Bayou Drive, Unit 204, Fort Walton Beach, Florida 32548, was listed as the registered agent's address.
The principal office address listed in GSC's state filings was 8610 U.S. Highway 98 West, Suite 1120, Destin, Florida 32541. The investigation team confirmed that this address corresponds to a commercial mail-receiving agency (PostalPlus, a Halcyon Partners LLC Store franchise). The investigation found no evidence that GSC maintained any office space, warehouse, or other physical location at which business operations were conducted.
The sole member of GSC was Garrett W. Daskine, the VCR Division President. Daskine's ownership was structured through a nominee arrangement in which Serrano was listed as the nominal member in certain public-facing documents, while the operating agreement for GSC — a copy of which was recovered from Serrano's personal files during the document collection — identifies Daskine as the sole beneficial owner holding a 100% membership interest. Bank signature cards for GSC's commercial checking account at Gulf Coast National Bank (account ending in -4738) list both Daskine and Serrano as authorized signers, with Daskine identified as the account's primary authorized representative. The account-opening documentation, obtained via subpoena, further confirms Daskine as the beneficial owner of the entity.
The investigation found no evidence that GSC maintained any employees at any time during its existence. There is no evidence of workers' compensation insurance, general liability insurance, or any other form of business insurance. Critically, GSC did not hold a Florida construction contractor license, as would be required under Florida Statutes Chapter 489 for an entity performing the types of construction and renovation work described in the invoices submitted to VCR. A search of the Florida Department of Business and Professional Regulation's licensing database conducted on September 15, 2023, confirmed that no license has ever been issued to "Gulf Standard Contracting LLC" or to any individual associated with the entity. No evidence of construction equipment, vehicles, tools, or materials was identified.
In sum, GSC possessed none of the indicia of a legitimate contracting business: no employees, no licenses, no insurance, no equipment, no physical place of business, and no operating history apart from its role as a recipient of VCR payments.
2. Transactional History. GSC submitted a total of nineteen (19) invoices to VCR over the investigated period. These invoices resulted in aggregate payments from VCR to GSC totaling $812,400.
The first invoice was submitted on or about July 9, 2021, approximately four months after GSC's formation. The first payment, in the amount of $32,500, was processed by VCR on or about July 14, 2021, and deposited into GSC's Gulf Coast National Bank account on July 16, 2021. The last identified invoice was dated April 18, 2023, and the corresponding payment of $48,000 was processed by VCR on or about April 25, 2023.
All nineteen invoices described capital-improvement work at one of two VCR properties. Twelve invoices were attributed to work at the Coral Dune Resort & Residences, specifically described as relating to the "Phase III" renovation of timeshare units and common areas. The remaining seven invoices were attributed to work at the Palmetto Bluff Club, described as relating to the "Phase II" renovation of timeshare units. Invoice descriptions referenced a range of purported services and materials, including demolition work, drywall installation, tile procurement, lobby renovation materials, HVAC upgrades, and general construction services.
The largest single invoice was Invoice No. GSC-2023-007, dated February 14, 2023, in the amount of $94,500. This invoice was described as "lobby renovation materials — Coral Dune Phase III" and purported to cover the cost of materials for the renovation of the main lobby and reception area at the Coral Dune Property. The investigation found no evidence that any lobby renovation materials were purchased, ordered, delivered, or installed in connection with this invoice. The Coral Dune Property's on-site property management team maintains detailed work-order logs and delivery records, and no entry in these records corresponds to the date, description, or amount of Invoice No. GSC-2023-007. Moreover, the actual lobby renovation at the Coral Dune Property was performed by Emerald Coast Builders LLC, a licensed general contractor, under a separate, legitimate contract, and was completed in October 2022 — approximately four months before Invoice No. GSC-2023-007 was issued.
Purchase orders for all nineteen invoices were created by Ryan Mateo Serrano within VCR's Hollowell & Co.-based accounts-payable system. System audit logs confirm that each purchase order was generated under Serrano's unique user credentials (user ID: RMSERRANO). Approval authority for each purchase order was traced to either Daskine or Prescott, or both. The investigation team identified a consistent pattern in the approval workflow: Serrano would create the purchase order, and the system would route it for approval to the VCR Division President (Daskine) or the VCR VP of Finance (Prescott), depending on the cost center and amount. In every instance, the approver was one of the two individuals who stood to benefit from the payment.
The investigation also identified a pattern in the invoice amounts. Of the nineteen invoices, all but two were in amounts below $50,000. This threshold is significant because, under VHG's corporate finance policies in effect during the relevant period, capital-improvement expenditures at or above $50,000 per invoice required a secondary approval from the VHG corporate finance department at headquarters in Tampa, Florida. The two invoices that exceeded this threshold — Invoice No. GSC-2023-007 ($94,500) and Invoice No. GSC-2022-014 ($72,300) — were both coded in the system as split payments across two cost centers, each below $50,000, a technique that circumvented the secondary approval requirement. This coding manipulation was identified by Crestline during its forensic review and confirmed by Serrano during his December 5, 2023 cooperating interview.
The absence of any legitimate work corresponding to GSC's invoices was confirmed through multiple independent sources. First, the on-site property management teams at both the Coral Dune Property and the Palmetto Bluff Property were unable to identify GSC as a vendor with which they had any dealings. Second, no work orders, inspection reports, delivery receipts, or other operational records at either property reference GSC. Third, the project managers overseeing the Coral Dune Phase III and Palmetto Bluff Phase II renovations — respectively, Margaret Thornton (VCR Senior Project Manager) and David Campos (VCR Project Manager) — each confirmed during interviews that they had never heard of GSC and that no entity by that name performed any work on their projects.
3. Fund-Flow Analysis. Crestline Forensic Advisory LLC conducted a detailed tracing of funds deposited into GSC's commercial checking account at Gulf Coast National Bank (account ending in -4738) following receipt of VCR payments. The tracing covered all deposits and disbursements during the life of the account and identified the following principal categories of disbursements:
Residential renovation expenditures. Crestline traced approximately $389,000 in payments from the GSC account to contractors, subcontractors, and materials suppliers who performed work on or supplied materials for the renovation of Garrett Daskine's personal residence located at 312 Harbor View Lane, Destin, Florida 32541. These payments were made by check and wire transfer to entities including Gulf Breeze Home Builders Inc., Prestige Tile & Stone LLC, and Seabreeze Kitchen & Bath Design. Public building-permit records for Okaloosa County confirm that a residential renovation permit was issued for 312 Harbor View Lane on or about April 15, 2021, with Daskine listed as the property owner. The scope of the permitted work — a kitchen remodel, master bath renovation, and outdoor living area expansion — is consistent with the vendors and amounts identified in the fund-flow analysis.
Boat-slip fees. Crestline identified approximately $47,500 in payments from the GSC account to Destin Harbor Marina LLC for monthly boat-slip fees and related marine services. Public records indicate that Daskine is the registered owner of a 38-foot recreational vessel ("Sea Change," FL registration No. FL 7428 NR) berthed at the Destin Harbor Marina.
Luxury-goods purchases. Crestline traced approximately $118,000 in debit-card transactions and checks from the GSC account to luxury retailers, including Pemberton & Co. (jewelry), Sterling Reach Partners LLC and Sterling Reach & Co. (electronics), and Camberwell Enterprises (high-end furnishings). A substantial portion of these purchases were made using a debit card linked to the GSC account, with the card issued in Daskine's name.
Cash withdrawals. Approximately $63,400 in cash withdrawals were made from the GSC account over the relevant period. Due to the nature of cash transactions, Crestline was unable to trace the ultimate use of these funds. However, the frequency and amounts of the withdrawals (ranging from $2,000 to $9,500 per withdrawal) are inconsistent with legitimate business operations.
Transfers to Daskine's personal accounts. Crestline identified approximately $194,500 in direct transfers from the GSC account to personal checking and savings accounts held by Daskine at Ashgrove Savings Bank.
In total, Crestline traced the disposition of approximately $812,400 from the GSC account, accounting for the full amount of VCR payments received. A detailed fund-flow diagram is included in Appendix C.
B. Clearwater Design Collective Inc. ("CDC")
1. Formation and Corporate Structure. CDC is a Florida corporation incorporated on June 4, 2021, as reflected in articles of incorporation filed with the Florida Secretary of State (Document No. P21000048923). The stated purpose of the corporation in its articles of incorporation was "interior design consulting and furnishing procurement services." As with GSC, the registered agent was Ryan Mateo Serrano, with his personal residence address at 1507 Bayou Drive, Unit 204, Fort Walton Beach, Florida 32548 listed as the registered agent's address.
The principal office address listed in CDC's state filings was 2215 Gulf-to-Bay Boulevard, Suite 340, Clearwater, Florida 33765. The investigation team confirmed that this address also corresponds to a commercial mail-receiving agency (Emerald Mailbox & Business Center), not a place of business with staff or operational capacity. The investigation found no evidence that CDC maintained any office, showroom, design studio, or other physical location.
Nicole Prescott, VCR's VP of Finance, was identified as the sole shareholder and sole director of CDC. Unlike GSC, where Daskine's ownership was structured through a nominee arrangement, Prescott's ownership of CDC was documented directly in the articles of incorporation and in the corporate records maintained by Prescott. The bank signature card for CDC's commercial checking account at Coastal Heritage Credit Union (account ending in -9152) lists Prescott as the sole authorized signer on the account. The account-opening documentation identifies Prescott as the sole owner of CDC.
The investigation found no evidence that CDC maintained any employees, subcontractors, or independent contractors at any time. CDC did not maintain a portfolio of design work, a client list, a website, or any other indicia of a functioning interior design business. No professional licenses of any kind were on file with the Florida Department of Business and Professional Regulation in the name of CDC or Prescott in connection with design or contracting services. CDC did not maintain general liability insurance, professional liability (errors and omissions) insurance, or any other form of business insurance. The entity had no operational infrastructure whatsoever.
During her interviews on October 11, 2023, and November 8, 2023, Prescott acknowledged her ownership of CDC but characterized it as a legitimate side business that she had established to pursue interior design consulting opportunities outside of her VHG employment. When asked to identify any clients other than VCR, any design work product, or any employees or subcontractors, Prescott was unable to do so. She stated that CDC was "still in its early stages" and that she had been "building the business slowly." This characterization is contradicted by the totality of the evidence, which establishes that CDC's sole function was to receive payments from VCR based on fictitious invoices.
2. Transactional History. CDC submitted a total of sixteen (16) invoices to VCR over the investigated period, resulting in aggregate payments from VCR to CDC totaling $587,600.
The first invoice was submitted on or about September 22, 2021, approximately three and one-half months after CDC's incorporation. The corresponding first payment, in the amount of $28,500, was processed by VCR on or about September 29, 2021. The last identified invoice was dated May 12, 2023, with the corresponding payment of $41,200 processed on or about May 19, 2023.
All sixteen invoices described interior design consultation services, furnishing procurement, and related capital-improvement services at VCR properties. Nine invoices were attributed to work at the Coral Dune Resort & Residences, and seven invoices were attributed to work at the Palmetto Bluff Club. Invoice descriptions referenced services including "unit interior redesign consultation," "lobby furnishing procurement and installation," "color scheme development and materials sourcing," and "model unit staging services."
Purchase orders for all sixteen invoices were created by Serrano within VCR's accounts-payable system under his user credentials. As with the GSC invoices, the approval workflow routed each purchase order to Daskine and/or Prescott. The investigation identified that Prescott approved eight of the sixteen CDC purchase orders herself — an extraordinary conflict of interest in which the sole shareholder of the vendor approved the company's own payments to that vendor. The remaining eight purchase orders were approved by Daskine.
The same pattern of structuring invoice amounts to avoid triggering VHG corporate-level review thresholds was observed with CDC's invoices. Fifteen of the sixteen invoices were in amounts below $50,000. The single invoice that exceeded the threshold — Invoice No. CDC-2022-011, in the amount of $52,800, dated November 3, 2022, for "comprehensive furnishing procurement — Palmetto Bluff Phase II model units" — was coded in the system with a split cost-center allocation, as observed with the two GSC invoices described above.
As with GSC, the investigation confirmed that no design services, furnishings, or other deliverables were actually provided by CDC to either the Coral Dune Property or the Palmetto Bluff Property. Property management records at neither property reference CDC as a vendor, consultant, or service provider. The actual interior design work for both the Coral Dune Phase III and Palmetto Bluff Phase II renovation programs was performed by Seaside Interiors Group LLC, a licensed and insured interior design firm based in Tampa, Florida, under legitimate contracts negotiated and executed by VCR's procurement department. Seaside Interiors' principal, Alicia Montoya, confirmed during an interview on October 18, 2023, that she had never heard of CDC and that no entity by that name performed any work at either property.
3. Fund-Flow Analysis. Crestline's forensic tracing of CDC's bank account at Coastal Heritage Credit Union (account ending in -9152) identified the following principal categories of disbursements following the receipt of VCR payments:
Personal credit-card payments. Crestline traced approximately $267,000 in payments from the CDC account to three personal credit-card accounts held by Nicole Prescott at Pinnacle Partners LLC, Chase, and Penmark Group. These payments were made via online bill-pay transfers initiated from the CDC account. Credit-card statements produced by Prescott's counsel confirm that the accounts were personal (not business) accounts and that the charges on the accounts were for personal expenditures, including travel, dining, clothing, and household goods.
Luxury retail purchases. Approximately $134,600 in debit-card transactions and checks from the CDC account were traced to luxury retailers, including Tarrant Corporation, Quillon Holdings, and Kestrel Corporation. These transactions were made using a debit card linked to the CDC account issued in Prescott's name.
Transfers to Prescott's personal accounts. Crestline identified approximately $158,000 in direct transfers from the CDC account to personal checking and savings accounts held by Prescott at Severin Securities. These transfers were made via ACH transfer, typically in amounts ranging from $5,000 to $25,000 per transfer.
Miscellaneous expenses and account fees. The remaining approximately $28,000 was attributable to miscellaneous expenses, including account maintenance fees, check-printing fees, and a small number of payments to unidentified payees that Crestline was unable to trace further. Crestline has flagged these payments for potential additional analysis if warranted.
In total, Crestline traced the disposition of the full $587,600 in VCR payments received by CDC. A detailed fund-flow diagram is included in Appendix C.
C. Suncoast Property Services LLC ("SPS")
1. Formation and Corporate Structure. SPS is a Florida limited liability company formed on November 18, 2021, as reflected in articles of organization filed with the Florida Secretary of State (Document No. L21000289514). The stated purpose of the entity in its articles of organization was "property maintenance, landscaping, and related services." SPS was the last of the three entities to be formed, approximately eight months after GSC and five months after CDC.
The registered agent for SPS was Panhandle Agent Services Inc., a commercial registered-agent service based in Tallahassee, Florida. This is a notable distinction from GSC and CDC, for which Serrano personally served as registered agent. The use of a commercial registered-agent service for SPS appears to have been a deliberate effort to create distance between SPS and VCR personnel, likely in response to a growing awareness on the part of the scheme participants that the pattern of Serrano's personal involvement in entity formation could create a detectable link. This assessment is supported by Serrano's cooperating testimony during his December 5, 2023 interview, in which he stated that Daskine instructed him to "use a different setup" for SPS so that the entities would not "all look the same if someone went checking."
The principal office address listed in SPS's state filings was 4450 Capital Circle NW, Suite 100, Tallahassee, Florida 32303. The investigation confirmed that this address corresponds to the business address of Panhandle Agent Services Inc. and is a virtual-office facility. SPS maintained no physical presence, employees, or operational capacity at this or any other location.
Garrett W. Daskine was identified as the sole member of SPS. This determination is based on multiple sources of evidence: (i) the operating agreement for SPS, a copy of which was produced by Serrano, identifies Daskine as the sole member; (ii) bank signature cards for SPS's commercial checking account at Beaumont Savings Bank (now Harborview Financial, account ending in -6304) list Daskine as the sole authorized signer; and (iii) Serrano confirmed Daskine's ownership of SPS during his cooperating testimony on December 5, 2023. Unlike with GSC, Serrano was not listed as an authorized signer on the SPS bank account, consistent with the apparent effort to distance Serrano's name from SPS.
The investigation found no evidence that SPS maintained any employees, landscaping equipment, vehicles, maintenance supplies, insurance policies, or any other indicia of a legitimate property-services business. No contractor license or other professional license was on file with the Florida Department of Business and Professional Regulation in the name of SPS.
2. Transactional History. SPS submitted a total of twelve (12) invoices to VCR over the investigated period, resulting in aggregate payments from VCR to SPS totaling $430,000.
The first invoice was submitted on or about February 8, 2022, approximately three months after SPS's formation. The corresponding first payment, in the amount of $28,000, was processed by VCR on or about February 15, 2022. The last identified invoice was dated June 6, 2023, with the corresponding payment of $36,500 processed on or about June 13, 2023.
SPS's invoices described landscaping, exterior maintenance, and property-management services at VCR resort properties. Unlike the GSC and CDC invoices, which were attributed to specific renovation phases (Coral Dune Phase III and Palmetto Bluff Phase II), the SPS invoices were more generically described, referencing "ongoing exterior maintenance and grounds care," "seasonal landscaping upgrades," and "property condition assessment and maintenance coordination." This generic language made the invoices more difficult to tie to specific project budgets but also meant that they were less likely to be questioned in the context of project cost-tracking.
As with the other two entities, all twelve purchase orders were created by Serrano within VCR's accounts-payable system. All twelve were approved by Daskine in his capacity as Division President.
The investigation confirmed that SPS did not perform any landscaping, exterior maintenance, or property-management services at any VCR property. VCR's actual landscaping and grounds maintenance at the Coral Dune Property was performed by GreenWorks Landscaping of Northwest Florida Inc. under a multi-year contract executed in 2019 and renewed in 2022. Landscaping and grounds maintenance at the Palmetto Bluff Property was performed by Sarasota Bay Landscape Services LLC under a contract executed in 2020. Both GreenWorks and Sarasota Bay were legitimate, licensed vendors with established track records and no connection to the scheme participants. Representatives of both firms were interviewed and confirmed that they had no knowledge of SPS and that no other landscaping or maintenance vendor performed work at the respective properties during the relevant period.
3. Fund-Flow Analysis. Crestline's forensic tracing of SPS's bank account at Harborview Financial (account ending in -6304) identified the following principal categories of disbursements:
Transfers to Daskine's personal bank accounts. Crestline traced approximately $247,000 in transfers from the SPS account to personal checking and savings accounts held by Daskine at Ashgrove Savings Bank. These transfers were the primary use of SPS funds and were typically made within five to ten business days of the deposit of a VCR payment into the SPS account.
Additional residential renovation expenditures. Approximately $112,000 in payments were traced from the SPS account to contractors and vendors performing work on the renovation of Daskine's personal residence at 312 Harbor View Lane, Destin, Florida 32541. These payments supplemented the residential renovation expenditures identified in the GSC fund-flow analysis, bringing the total amount of shell-entity funds traced to Daskine's personal residential renovation to approximately $501,000 ($389,000 from GSC and $112,000 from SPS).
Boat-related expenses. Approximately $58,000 in payments from the SPS account were traced to boat-related expenses, including additional boat-slip fees at Destin Harbor Marina LLC, fuel charges, and marine supply purchases. When combined with the $47,500 in boat-related expenses traced from the GSC account, total shell-entity funds used for boat-related expenses amount to approximately $105,500.
Miscellaneous expenses. The remaining approximately $13,000 was attributable to account fees, small cash withdrawals, and miscellaneous payments that Crestline was unable to trace further.
In total, Crestline traced the disposition of the full $430,000 in VCR payments received by SPS. A detailed fund-flow diagram is included in Appendix C.
IV. Aggregate Summary of Fictitious Payments
The following table consolidates the key data regarding all three entities analyzed in this memorandum:
Several features of the aggregate data merit emphasis:
Aggregate scope. The scheme resulted in $1,830,000 in total improper payments to three shell entities across 47 fictitious purchase orders over an approximately 24-month period (July 2021 through June 2023). This amount represents approximately 8% of the combined board-approved capital-improvement budgets for the Coral Dune Phase III and Palmetto Bluff Phase II renovation programs (approximately $22.9 million in the aggregate).
Largest single invoice. The largest single fictitious invoice was $94,500 — Invoice No. GSC-2023-007, dated February 14, 2023, issued by Gulf Standard Contracting LLC for "lobby renovation materials — Coral Dune Phase III." As noted in Section III.A.2, the investigation found no evidence that any materials were purchased or delivered in connection with this invoice.
Role of Serrano. All 47 purchase orders were created by Ryan Mateo Serrano in his capacity as VCR Controller. Serrano's user credentials were used to initiate each transaction within VCR's Hollowell & Co.-based accounts-payable system, and Serrano served as registered agent for two of the three entities (GSC and CDC).
Daskine's aggregate benefit. Daskine was the beneficial owner of two of the three shell entities — GSC (19 invoices, $812,400) and SPS (12 invoices, $430,000) — receiving aggregate payments of $1,242,400. Funds from these entities were traced to the renovation of Daskine's personal residence ($501,000), boat-related expenses ($105,500), luxury-goods purchases ($118,000), cash withdrawals ($63,400), transfers to personal accounts ($441,500), and miscellaneous expenses ($13,000).
Prescott's aggregate benefit. Prescott was the sole shareholder of CDC, which received $587,600 across 16 invoices. Funds from CDC were traced to personal credit-card payments ($267,000), luxury retail purchases ($134,600), transfers to personal accounts ($158,000), and miscellaneous expenses ($28,000).
V. Role of Each Individual Subject
A. Garrett W. Daskine
Garrett W. Daskine has been employed by VHG for approximately seventeen years. At the time of the events at issue, he held the position of Division President of VCR, with overall management responsibility for VCR's resort operations, capital-improvement programs, and financial performance. In his capacity as Division President, Daskine was the most senior VHG employee with day-to-day oversight of VCR's operations and reported to VHG's Chief Operating Officer, Philip Crane.
The investigation established that Daskine was the beneficial owner of two of the three shell entities: GSC (held through a nominee arrangement in which Serrano was the nominal member) and SPS (held directly as sole member). Daskine's aggregate benefit from the scheme was $1,242,400.
The evidence, including documentary evidence and Serrano's cooperating testimony provided during his December 5, 2023 interview (conducted pursuant to the cooperation agreement executed on November 15, 2023 by Patricia Navarro on behalf of VHG and Marco A. Ruiz on behalf of Serrano), establishes that Daskine directed the creation of the shell entities and the implementation of the fictitious-invoice scheme. Specifically, Serrano testified that:
(a) In or about February 2021, Daskine approached Serrano and proposed the creation of a contracting entity that could be used to invoice VCR for purported capital-improvement work, with the proceeds to be shared between Daskine and Serrano. Serrano agreed to participate and subsequently filed the articles of organization for GSC with the Florida Secretary of State on March 12, 2021.
(b) Daskine identified the amounts and descriptions for the fictitious invoices, which Serrano then entered into VCR's accounts-payable system as purchase orders. Daskine typically communicated invoice details to Serrano via text message or, in some instances, via personal email accounts rather than VHG corporate email. However, certain communications regarding invoice timing and amounts were conducted via VHG corporate email and were captured in the document collection. Selected examples are attached as Appendix D.
(c) Daskine directed the creation of SPS in November 2021, instructing Serrano to use a commercial registered-agent service rather than serving as registered agent personally, in order to reduce the visibility of Serrano's connection to the entity.
(d) Daskine recruited Prescott into the scheme at some point in mid-2021, prior to the formation of CDC, by proposing that Prescott establish her own entity to receive a share of the fictitious payments.
In his capacity as Division President, Daskine approved the majority of the fictitious purchase orders through VCR's accounts-payable system. The system audit logs confirm that Daskine was the final approver for 31 of the 47 purchase orders; the remaining 16 were approved by Prescott.
Crestline's fund-flow analysis established that funds from GSC and SPS were traced to personal expenditures of Daskine, including the renovation of his personal residence at 312 Harbor View Lane, Destin, Florida 32541 (approximately $501,000); boat-slip fees and marine expenses for his recreational vessel (approximately $105,500); luxury-goods purchases (approximately $118,000); cash withdrawals (approximately $63,400); and direct transfers to his personal bank accounts (approximately $441,500), with the remainder attributable to miscellaneous expenses.
Daskine was placed on administrative leave on August 7, 2023, following the initiation of the Audit Committee investigation. His employment was terminated for cause on December 18, 2023, following the completion of the investigation team's analysis and the Audit Committee's review of the findings. Daskine is represented by James Corwin Merritt of Merritt & Dunleavy LLP, located in Miami, Florida. Daskine was interviewed on October 4, 2023, at which time counsel Merritt was present. During the interview, Daskine provided limited responses and declined to address the substance of the allegations in detail. A follow-up interview was requested by Calderwood & Harkness LLP on October 25, 2023; Daskine's counsel declined the request by letter dated October 30, 2023, stating that Daskine "respectfully declines to participate in any further interviews at this time."
B. Nicole Prescott
Nicole Prescott has been employed by VHG for approximately nine years. At the time of the events at issue, she held the position of Vice President of Finance at VCR, with responsibility for VCR's financial reporting, budgeting, and accounts-payable functions. In her capacity as VP of Finance, Prescott reported to Daskine and had direct supervisory authority over the VCR Controller, Serrano.
The investigation established that Prescott was the sole shareholder and sole director of CDC, which received $587,600 across 16 fictitious invoices. Unlike Daskine's ownership of GSC (which was structured through a nominee arrangement), Prescott's ownership of CDC was held directly and was documented in CDC's articles of incorporation and corporate records.
Prescott participated in the scheme by, among other things: (i) approving fictitious purchase orders through VCR's accounts-payable system — including eight of the sixteen CDC purchase orders, which she approved notwithstanding her direct financial interest as the sole shareholder of the vendor; (ii) ensuring that the fictitious invoices were processed and paid without question within VCR's finance function; and (iii) assisting in the selection of invoice descriptions and amounts that would be consistent with the types of expenditures associated with the Coral Dune Phase III and Palmetto Bluff Phase II renovation programs.
Crestline's fund-flow analysis established that the $587,600 in VCR payments received by CDC was traced to personal expenditures of Prescott, including personal credit-card payments ($267,000), luxury retail purchases ($134,600), transfers to personal bank accounts ($158,000), and miscellaneous expenses ($28,000).
Prescott was placed on administrative leave on August 7, 2023, on the same date as Daskine and Serrano. Her employment was terminated for cause on December 18, 2023. Prescott is represented by Candace O'Brien Langford of Langford Pace LLP, located in Tallahassee, Florida. Prescott was interviewed on two occasions — October 11, 2023, and November 8, 2023 — with counsel Langford present at both interviews. During these interviews, Prescott acknowledged her ownership of CDC but denied knowledge of the beneficial ownership of GSC and SPS and characterized CDC as a legitimate business venture. As noted above, this characterization is contradicted by the evidence.
C. Ryan Mateo Serrano
Ryan Mateo Serrano has been employed by VHG for approximately five years. At the time of the events at issue, he held the position of Controller at VCR, with responsibility for day-to-day accounting operations, including the processing of purchase orders and vendor payments within VCR's accounts-payable system. In his capacity as Controller, Serrano reported to Prescott.
The investigation established that Serrano served as the operational facilitator of the shell-entity scheme. His role included the following:
(a) Serrano served as registered agent for both GSC and CDC, using his personal residential address as the registered agent's address on the state filings.
(b) Serrano created all 47 fictitious purchase orders in VCR's accounts-payable system. System audit logs confirm that every purchase order at issue was created under Serrano's unique user credentials (user ID: RMSERRANO).
(c) Serrano assisted in the preparation of the fictitious invoices themselves, generating invoice documents that matched the descriptions and amounts communicated to him by Daskine.
(d) Serrano was listed as an authorized signer on the GSC bank account at Gulf Coast National Bank.
Serrano was initially interviewed on September 27, 2023, at which time his counsel, Marco A. Ruiz of Coletti & Ruiz PA (Fort Lauderdale, Florida), was present. During this initial interview, Serrano acknowledged his role as registered agent for GSC and CDC and his creation of the purchase orders but attributed his actions to direction from Daskine and, to a lesser extent, Prescott. Serrano expressed a willingness to cooperate with the investigation in exchange for certain considerations.
Following negotiations between Calderwood & Harkness LLP and Serrano's counsel, Serrano entered into a cooperation agreement with VHG on November 15, 2023. The cooperation agreement was executed by Patricia Navarro (VHG General Counsel) on behalf of VHG and by Marco A. Ruiz on behalf of Serrano. Under the terms of the cooperation agreement, Serrano agreed to provide truthful and complete testimony regarding the shell-entity scheme, to make himself available for additional interviews and, if necessary, testimony in any legal proceeding, and to produce any documents in his possession related to the scheme. In exchange, VHG agreed that Serrano's employment would be terminated on a non-cause basis (rather than for cause) and that VHG would not initiate civil litigation against Serrano seeking the recovery of damages, provided that Serrano complied fully with his cooperation obligations.
Serrano provided detailed cooperating testimony during his second interview on December 5, 2023, with counsel Ruiz present. During this interview, Serrano described in detail the mechanics of the scheme, Daskine's role in directing the creation of the shell entities and the fictitious invoices, Prescott's participation in approving invoices, the invoice-structuring techniques used to avoid triggering corporate-level review thresholds, and the use of a commercial registered-agent service for SPS at Daskine's direction. Serrano's cooperating testimony is consistent with and corroborated by the documentary and forensic evidence reviewed by the investigation team.
Serrano was placed on administrative leave on August 7, 2023. His employment was terminated on a non-cause basis on December 20, 2023, in accordance with the terms of the cooperation agreement.
VI. Internal Control Failures
The investigation identified several significant deficiencies in VCR's internal controls that enabled the shell-entity scheme to operate undetected for approximately two years. These deficiencies are summarized below. A comprehensive analysis of the control environment and detailed remediation recommendations will be set forth in a separate Remediation Recommendations Memorandum, currently in preparation, with an anticipated delivery date of January 3, 2024.
Vendor-onboarding deficiencies. VCR's vendor-onboarding process did not require verification of contractor licenses, insurance coverage, or operational history before a new vendor could be added to the vendor master file in VCR's accounts-payable system. The process required only the submission of a W-9 form and basic contact information. As a result, GSC, CDC, and SPS were each added to the vendor master file without any independent verification that they were legitimate, operating businesses with the capability to perform the services described in their invoices. Had VCR's vendor-onboarding process required verification of a Florida construction contractor license (for GSC and SPS) or verification of business insurance and operational history (for all three entities), the fictitious vendors would likely have been identified and rejected at the onboarding stage.
Segregation-of-duties failures in the purchase-order approval process. Purchase orders created by the Controller (Serrano) could be approved by the Division President (Daskine) or the VP of Finance (Prescott) without any independent verification or secondary approval by VHG corporate finance personnel. This approval workflow created a closed loop in which the individuals who created the fictitious purchase orders and the individuals who benefited from the payments were the same individuals who authorized the payments. There was no independent check or counterbalancing control outside of VCR's divisional management structure. This deficiency effectively allowed the same individuals who benefited from the payments to authorize them, in direct contravention of fundamental segregation-of-duties principles.
Absence of vendor-file reconciliation procedures. VCR did not perform periodic reconciliations of vendor addresses, registered agent information, or beneficial-ownership data against employee records. Had such a reconciliation been performed at any point during the relevant period, it would have revealed that Serrano's personal residential address was listed as the registered agent's address for two of VCR's vendors (GSC and CDC) — a red flag that would likely have prompted further inquiry and led to the detection of the scheme.
Capital-improvement expenditure approval thresholds. Under VHG's corporate finance policies in effect during the relevant period, capital-improvement expenditures below a certain per-invoice threshold (generally $50,000) did not require approval from VHG's corporate finance department at headquarters. This threshold was intended to provide divisional management with operational flexibility for routine expenditures, but it also permitted a significant volume of fictitious payments to proceed without any review or oversight from VHG headquarters. As noted above, the scheme participants deliberately structured the majority of fictitious invoices to stay below this threshold, and the two invoices that exceeded the threshold were coded with split cost-center allocations to circumvent the requirement.
Consistency with HSA interim review findings. The internal control deficiencies described above are consistent with the potential material weakness in VCR's internal controls over financial reporting identified by HSA (Hargrove, Steen & Aldrich LLP), VHG's independent registered public accounting firm, during its Q1 2023 interim review. HSA communicated its preliminary findings regarding this potential material weakness to VHG Chief Financial Officer Thomas Rhett Griffith and Audit Committee Chair Diane Kowalski on June 19, 2023. HSA's communication was one of the catalysts for the internal audit review that ultimately led to the discovery of the fictitious-vendor scheme and the initiation of the Audit Committee investigation.
SOX implications. The implications of these control deficiencies under Sections 302 and 404 of the Sarbanes-Oxley Act of 2002, including the potential impact on VHG's management assessment of internal controls over financial reporting and HSA's audit opinion on internal controls, are addressed separately in the Remediation Recommendations Memorandum.
VII. Key Documentary Evidence
The following is a summary of the critical categories of documentary evidence supporting the findings set forth in this memorandum. This list is not exhaustive but identifies the principal evidentiary sources for each major finding.
1. Florida Secretary of State filings. Articles of organization for GSC (filed March 12, 2021, Document No. L21000112847) and SPS (filed November 18, 2021, Document No. L21000289514); articles of incorporation for CDC (filed June 4, 2021, Document No. P21000048923). Annual reports and registered agent designations for all three entities. These filings establish the formation dates, stated purposes, registered agents, and principal office addresses of each entity.
2. Operating agreements and bank signature cards. Operating agreements for GSC and SPS, identifying the beneficial owners. Bank signature cards and account-opening documentation for all three entities, confirming authorized signers and beneficial owners. These documents were obtained through a combination of voluntary production by Serrano's counsel, subpoena to the relevant financial institutions, and review of documents collected from Serrano's personal files.
3. VCR accounts-payable records. All 47 purchase orders from VCR's Hollowell & Co.-based accounts-payable system, each created under Serrano's user credentials (user ID: RMSERRANO). System audit logs reflecting the creation, approval, and payment processing of each purchase order. Vendor master file entries for GSC, CDC, and SPS, including W-9 forms and contact information submitted during the vendor-onboarding process.
4. Invoices. All 47 corresponding invoices issued by GSC (19 invoices), CDC (16 invoices), and SPS (12 invoices), including descriptions of purported services, amounts, and property attributions.
5. Bank records. Complete bank account records for: (i) GSC's account at Gulf Coast National Bank (account ending in -4738); (ii) CDC's account at Coastal Heritage Credit Union (account ending in -9152); and (iii) SPS's account at Harborview Financial (account ending in -6304). These records include deposit records confirming the receipt of VCR payments and detailed disbursement records showing subsequent transfers, payments, and withdrawals.
6. Email correspondence. Email communications between Daskine and Serrano discussing invoice amounts, invoice timing, cost-center coding, and other aspects of the scheme. Email communications between Prescott and Serrano regarding invoice processing and approval. These communications were captured from VHG corporate email accounts during the broader document collection and were identified through the TAR 2.0 predictive-coding workflow. Selected examples are attached as Appendix D.
7. Crestline forensic tracing reports. Detailed fund-flow analyses prepared by Crestline Forensic Advisory LLC tracing the path of funds from VCR's disbursement accounts through shell entity bank accounts to ultimate personal expenditures of Daskine and Prescott. These reports include fund-flow diagrams, which are attached