1021-00008 · Client 1021 · Witness Interviews

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

MEMORANDUM OF INTERVIEW

To: Investigation File — C&H Matter No. 1021-00008

From: Liam Donahue, Calderwood & Harkness LLP Steven Hollander, Calderwood & Harkness LLP

Date: October 4, 2023

Re: Interview of Garrett W. Daskine, Division President, Verimark Coastal Resorts LLC

Note: This memorandum reflects the interviewers' account of the substance of the interview. It is not a verbatim transcript. It was prepared and finalized on October 4, 2023, and reviewed by Howard Quinn on October 5, 2023.

1. Preliminary Matters and Upjohn Warnings

At the outset of the interview, Howard Quinn delivered the standard Upjohn warning to Mr. Daskine. Specifically, Mr. Quinn advised Mr. Daskine of the following:

(a) Calderwood & Harkness LLP represents the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. ("VHG") in connection with this investigation. Calderwood & Harkness does not represent Mr. Daskine individually, and no attorney-client relationship exists between Calderwood & Harkness and Mr. Daskine by virtue of this interview.

(b) The attorney-client privilege for this interview, to the extent one applies, belongs to VHG through its Audit Committee, and not to Mr. Daskine personally.

(c) VHG, through the Audit Committee, may choose in its sole discretion to waive the privilege and disclose the contents of this interview to third parties, including but not limited to government regulators, the Securities and Exchange Commission, the Department of Justice, or any other governmental authority.

(d) The content of the interview is confidential, and Mr. Daskine should not discuss the substance of the interview with other VHG employees, officers, directors, or third parties, except as necessary in consultation with his personal counsel.

(e) Mr. Daskine is entitled to have his own personal counsel present during the interview, and the interviewers acknowledged the presence of Mr. James Corwin Merritt of Merritt & Dunleavy LLP as Mr. Daskine's personal attorney.

Mr. Quinn asked Mr. Daskine whether he understood each of the foregoing advisements. Mr. Daskine stated affirmatively that he understood the warnings and the nature of Calderwood & Harkness's representation.

Mr. Merritt stated on the record that Mr. Daskine was appearing voluntarily for this interview and that he reserved all rights, including the right to terminate the interview at any time for any reason. Mr. Merritt further stated that Mr. Daskine's appearance at this interview should not be construed as a waiver of any right or privilege to which Mr. Daskine may be entitled in any subsequent proceeding.

Mr. Quinn confirmed that Mr. Daskine had been placed on paid administrative leave by VHG effective August 7, 2023, and that the interview was being conducted as part of the Audit Committee's independent internal investigation into certain matters relating to financial reporting and vendor relationships at Verimark Coastal Resorts LLC ("VCR"), a wholly owned subsidiary of VHG.

2. Background and Employment History

Mr. Daskine provided the following background information:

Full Name: Garrett William Daskine.

Current Title: Division President, Verimark Coastal Resorts LLC ("VCR"). Mr. Daskine holds the title of Division President, which is the most senior operational role within VCR.

Employment Tenure: Mr. Daskine is a seventeen-year veteran of VHG and its subsidiary entities. He stated that he joined VHG in approximately 2006, initially in a regional operations management capacity. Over the ensuing years, he rose through various operational and management roles within VHG's resort and hospitality divisions, including positions in property management, resort development, and divisional operations. He was appointed Division President of VCR approximately five years prior to the interview, although he did not recall the precise date of his promotion to that role.

Reporting Line: Mr. Daskine stated that he reports directly to VHG Chief Executive Officer Margaret "Meg" Calder. He additionally described a dotted-line reporting relationship to VHG Chief Financial Officer Thomas Rhett Griffith on financial and budgetary matters, explaining that while his primary reporting obligation was to Ms. Calder on strategic and operational issues, he coordinated with Mr. Griffith's office on financial planning, quarterly reporting, and capital-expenditure matters.

Direct Reports: Mr. Daskine identified his principal direct reports as follows:

• Nicole Prescott, Vice President of Finance, VCR

• Ryan Mateo Serrano, Controller, VCR

• Vice President of Operations, VCR (name not relevant to this investigation and omitted at the request of counsel)

• Vice President of Sales & Marketing, VCR (name not relevant to this investigation and omitted at the request of counsel)

Office Location: Mr. Daskine confirmed that VCR's principal office is located at 7820 Gulf Breeze Parkway, Suite 400, Destin, FL 32541. He stated that this office serves as the administrative headquarters for VCR's resort-development and timeshare operations and houses the finance, operations, and sales teams.

Personal Residence: Mr. Daskine confirmed that he resides at 312 Harbor View Lane, Destin, FL 32541.

Mr. Daskine described his responsibilities as Division President as encompassing overall management and oversight of VCR's resort-development operations. He explained that this included supervision of VCR's timeshare-interest sales programs, which constitute a significant portion of VCR's revenue; oversight of capital-improvement projects at VCR-managed properties; and general management of resort operations. Mr. Daskine identified VCR's two principal properties as Coral Dune Resort & Residences, located at 14200 Emerald Coast Parkway, Destin, FL 32541, and Palmetto Bluff Club, located at 3950 Longboat Key Drive, Sarasota, FL 34228. He stated that Coral Dune is VCR's flagship property and the larger of the two in terms of unit count and revenue contribution.

3. Revenue-Recognition Practices at VCR

3.1 Overview of Timeshare-Interest Sales Process

Mr. Daskine described the general timeshare-interest sales process at VCR as follows. Prospective purchasers attend a sales presentation at one of VCR's resort properties, typically conducted by the sales and marketing team. If a prospective purchaser elects to purchase a timeshare interest, the purchaser signs a written purchase agreement and submits a deposit, which may range from several hundred dollars to several thousand dollars depending on the type and duration of the timeshare interest being purchased. Mr. Daskine explained that under Florida Statute § 721.10, which governs the sale of timeshare interests in the State of Florida, purchasers are entitled to a ten-calendar-day rescission period following execution of the purchase agreement, during which time the purchaser may cancel the transaction without penalty and receive a full refund of any deposit paid.

Mr. Daskine stated that he was "generally aware" that revenue from timeshare-interest sales should not be recognized until after the rescission period has expired and the sale is deemed final. He described this as a well-understood aspect of timeshare accounting that he had learned over the course of his career in the hospitality industry, though he did not purport to have detailed expertise in the applicable accounting standards, including ASC 606 or any predecessor guidance.

When asked who was responsible for the timing of revenue recognition in VCR's books and records, Mr. Daskine stated that this was a "finance function" handled by Nicole Prescott, in her capacity as VP of Finance, and Ryan Mateo Serrano, in his capacity as Controller. Mr. Daskine stated that he relied on their expertise and professional judgment on accounting matters and that he did not involve himself in the mechanics of journal entries, revenue-recognition timing, or other technical accounting decisions. He emphasized that both Prescott and Serrano were experienced accounting professionals and that he trusted them to apply the appropriate standards.

3.2 Premature Booking of Deposits as Revenue

Mr. Quinn presented Mr. Daskine with specific examples of timeshare-interest deposits at Coral Dune Resort & Residences (Phase III development) and Palmetto Bluff Club (Phase II development) that had been recorded in VCR's general ledger as completed-sale revenue at the time the purchase agreement was signed, rather than upon expiration of the ten-day rescission period required under Florida law and applicable accounting standards. Mr. Quinn identified these examples by reference to specific general-ledger entries and supporting documentation that had been produced during the document-review phase of the investigation.

Mr. Daskine stated that he was not personally involved in making journal entries or determining the timing of revenue recognition in VCR's accounting system. He reiterated that these were responsibilities delegated to the finance team, specifically to Prescott and Serrano, and that he did not review individual journal entries or revenue-recognition determinations.

When asked directly whether he had ever directed, instructed, or otherwise caused Nicole Prescott or Ryan Serrano to book deposits as revenue before the statutory rescission period had expired, Mr. Daskine stated as follows: "No, I did not give specific accounting instructions. I set performance targets, and my finance team determined how to meet reporting requirements." Mr. Daskine repeated this characterization on multiple occasions during this portion of the interview.

Mr. Quinn then asked Mr. Daskine about a series of emails that had been identified during the document-review phase of the investigation. Mr. Quinn explained that the investigation had obtained and reviewed email communications in which Mr. Daskine sent messages to Nicole Prescott during the final days of Q3 2022, Q4 2022, Q1 2023, and Q2 2023. In each of these quarterly periods, Mr. Daskine's emails emphasized the importance of "hitting the quarterly number" and expressed concern about "pipeline deposits that need to be in the books before the quarter closes." The emails reflected a consistent pattern of end-of-quarter communications from Mr. Daskine to the VP of Finance that focused on ensuring that deposit-stage transactions were recorded in the books before the close of each quarter.

Mr. Daskine acknowledged sending emails of that general nature. He characterized these communications as routine messages about sales performance and the status of VCR's sales pipeline. He stated that it was standard practice for him to communicate with his finance team about the sales pipeline near the end of each quarter and that these emails reflected ordinary business management, not directives about accounting treatment or revenue-recognition timing.

Mr. Quinn then showed Mr. Daskine a specific email dated September 28, 2022, from Mr. Daskine to Nicole Prescott. The email stated, in relevant part: "we need to get these deposits booked — can't let them slip to Q4." Mr. Quinn asked Mr. Daskine to explain what he meant by this statement. Mr. Daskine stated that the email referred to ensuring that sales were completed — that is, that purchase agreements were executed and deposits were collected from purchasers — before the end of the quarter, and that the email was not a directive to recognize revenue prematurely or to circumvent the rescission-period requirement. Mr. Daskine characterized the word "booked" as referring to the recording of the sales transaction in VCR's sales-tracking system, not to the recognition of revenue in VCR's financial statements.

Mr. Quinn noted that the investigation had identified an aggregate revenue overstatement of approximately $26.4 million across four consecutive quarters, broken down as follows:

Mr. Quinn explained that this overstatement resulted from the practice of booking deposits as completed-sale revenue upon the signing of purchase agreements, before the ten-day rescission period had expired, in contravention of Florida Statute § 721.10 and applicable accounting guidance under ASC 606.

Mr. Daskine stated that he was not aware of a specific dollar figure associated with any revenue overstatement. He further stated that if revenue had been prematurely recognized, as described by Mr. Quinn, it was done by the finance team — specifically by Prescott and Serrano — without his knowledge, direction, or authorization. He maintained his position that he did not involve himself in revenue-recognition timing decisions and that any such decisions were the responsibility of the finance team.

When asked about VCR's timeshare rescission rate during the investigated period, Mr. Quinn noted that VCR's rescission rate was approximately 14.3%, compared to an industry average of approximately 11%. Mr. Quinn asked Mr. Daskine whether he believed this elevated rescission rate was connected to any pressure he placed on the sales or finance teams to accelerate the booking of timeshare transactions. Mr. Daskine acknowledged that VCR's rescission rate was "higher than we would have liked" and stated that this was a source of concern for him in his capacity as Division President. However, he attributed the elevated rate to general market conditions, including rising interest rates and economic uncertainty among consumers, and specifically denied that the rescission rate was related to any pressure he placed on the sales or finance teams.

3.3 Awareness of HSA Concerns

Mr. Quinn asked Mr. Daskine whether he was aware that VHG's external auditor, Hargrove, Steen & Aldrich LLP ("HSA"), had identified a potential material weakness relating to VCR's revenue-recognition controls during its interim review of VHG's financial statements for the first quarter of fiscal year 2023.

Mr. Daskine stated that he was informed "sometime in late June or early July" of 2023 by Nicole Prescott that HSA had raised questions about VCR's revenue-recognition practices. He stated that Prescott described the issue to him in general terms but that he did not understand the full scope or significance of HSA's concern at that time. Mr. Daskine stated that he first came to appreciate the gravity of the situation when he was notified of his placement on administrative leave on August 7, 2023.

Mr. Daskine stated that he had no direct communication with William Gentry, the HSA engagement partner responsible for VHG's audit, about the revenue-recognition issue or any other matter related to this investigation. He explained that his interactions with HSA were limited and that communications with the external auditors were typically handled by Prescott and Serrano at the VCR level, and by VHG's corporate finance team at the parent-company level.

When informed by Mr. Quinn that HSA's June 19, 2023 communication to VHG's Audit Committee specifically identified $9.8 million in timeshare-interest deposits that had been recorded as completed-sale revenue in Q1 2023 despite the fact that the applicable ten-day rescission periods had not yet expired at the time of booking, Mr. Daskine stated that he was not aware of that specific communication or the specific dollar amount identified by HSA. He reiterated that Prescott informed him only in general terms that the auditors had questions.

4. Expense-Reporting Practices and Vendor Relationships

4.1 Capital-Improvement Approval Process

Mr. Daskine described VCR's process for capital-improvement projects. He explained that capital-improvement work at VCR properties — including renovation, refurbishment, construction, and facilities upgrades — was initiated by the operations team, typically in coordination with the VP of Operations. The Controller, Ryan Serrano, would prepare purchase orders for capital-improvement expenditures, which would then be routed for approval. Mr. Daskine explained that VCR maintained an approval-threshold policy: expenditures below $25,000 could be approved by the VP of Finance (Nicole Prescott) or other authorized signatories, while expenditures of $25,000 or above required Mr. Daskine's personal approval as Division President. Mr. Daskine stated that this threshold had been in place throughout his tenure as Division President.

Mr. Daskine confirmed that he personally approved numerous purchase orders for capital-improvement work at both Coral Dune Resort & Residences and Palmetto Bluff Club during the period under investigation. He described this as a routine and expected part of his responsibilities, given that both properties were undergoing significant development and renovation activity.

4.2 Questioning Regarding Shell Entities

Mr. Quinn asked Mr. Daskine about three vendors that had received payments from VCR for purported capital-improvement work during the period from approximately July 2021 through June 2023. Mr. Quinn identified the three vendors as follows:

Gulf Standard Contracting LLC ("GSC"): A Florida limited liability company formed on March 12, 2021. Mr. Quinn stated that the investigation had identified nineteen invoices submitted by GSC to VCR, totaling $812,400 in aggregate payments. Mr. Quinn identified the largest single invoice as Invoice No. GSC-2023-007, dated February 14, 2023, in the amount of $94,500, which was described on the invoice as "lobby renovation materials — Coral Dune Phase III."

Clearwater Design Collective Inc. ("CDC"): A Florida corporation formed on June 4, 2021. Mr. Quinn stated that the investigation had identified sixteen invoices submitted by CDC to VCR, totaling $587,600 in aggregate payments.

Suncoast Property Services LLC ("SPS"): A Florida limited liability company formed on November 18, 2021. Mr. Quinn stated that the investigation had identified twelve invoices submitted by SPS to VCR, totaling $430,000 in aggregate payments.

Mr. Quinn asked Mr. Daskine directly whether he had any ownership interest in, affiliation with, or financial relationship with Gulf Standard Contracting LLC. Mr. Daskine paused and conferred privately with his counsel, Mr. Merritt, for several minutes. Upon resuming, Mr. Daskine stated: "I decline to answer that question at this time on the advice of counsel."

Mr. Merritt interjected and stated on the record that Mr. Daskine would not be responding to questions about ownership of any entities outside of VHG at this time. Mr. Merritt cited Fifth Amendment concerns as the basis for this position, stating that Mr. Daskine was exercising his right against self-incrimination with respect to this line of questioning.

Mr. Quinn noted for the record that the investigation had identified Florida Division of Corporations filings and related corporate records indicating the following:

(a) Ryan Mateo Serrano was listed as the registered agent for both Gulf Standard Contracting LLC and Clearwater Design Collective Inc.

(b) The sole member of Gulf Standard Contracting LLC was identified as Garrett W. Daskine, through what appeared to be a nominee arrangement involving a third-party formation service.

Mr. Daskine did not respond to this statement. Mr. Merritt did not offer any comment.

With respect to Suncoast Property Services LLC, Mr. Quinn noted that the registered agent was Panhandle Agent Services Inc., a commercial registered-agent service based in Tallahassee, Florida, and that the sole member of SPS was identified in the LLC's organizational documents as Garrett W. Daskine. Mr. Daskine again declined to respond on counsel's advice.

Mr. Quinn summarized the total payments made by VCR across the three entities as follows:

Mr. Quinn noted that the $1.83 million in total payments were made over a period of approximately twenty-four months, from July 2021 through June 2023, and that the investigation had concluded, based on its review to date, that the forty-seven purchase orders supporting these payments were fictitious — that is, they described capital-improvement work that was never actually performed at VCR properties.

4.3 Questioning Regarding Personal Expenditures

Mr. Quinn asked Mr. Daskine about forensic findings developed by Crestline Forensic Advisory LLC, the forensic accounting firm retained by Calderwood & Harkness on behalf of the Audit Committee. Mr. Quinn stated that Crestline's preliminary analysis indicated that funds paid by VCR to GSC and SPS had been traced to the following categories of personal expenditures:

(a) Personal credit-card payments made on accounts held in Mr. Daskine's name;

(b) Payments to contractors associated with a residential renovation at 312 Harbor View Lane, Destin, FL 32541, which is Mr. Daskine's personal residence;

(d) Purchases of luxury goods, including jewelry and furnishings.

Mr. Daskine, on the advice of counsel, declined to answer questions regarding the use of funds received by GSC, SPS, or CDC. Mr. Merritt stated that this line of questioning implicated Fifth Amendment concerns and that Mr. Daskine would not be providing responses.

Mr. Quinn then asked Mr. Daskine a more general question: whether he had undertaken any renovation work at his personal residence at 312 Harbor View Lane during the 2021–2023 timeframe. Mr. Merritt again advised Mr. Daskine not to respond to the question, and Mr. Daskine stated he would follow his counsel's advice. The question went unanswered.

4.4 Approval of GSC, CDC, and SPS Invoices

Mr. Quinn showed Mr. Daskine copies of several purchase orders and invoices bearing what appeared to be Mr. Daskine's approval signature or electronic authorization in VCR's procurement system. The documents were drawn from the population of forty-seven invoices across the three entities. Mr. Daskine examined the documents and acknowledged that the signatures "looked like" his own but stated that he could not confirm their authenticity without further review and that he would need additional time to examine the documents in detail.

When asked whether he had performed any due diligence, site inspection, or other verification of the work purportedly performed by GSC, CDC, or SPS before approving invoices from these entities, Mr. Daskine stated: "I approved hundreds of purchase orders every year. I relied on Ryan [Serrano] and his team to verify that work was performed." Mr. Daskine explained that it was not his standard practice to independently verify the completion of capital-improvement work described in purchase orders, and that he relied on the Controller's office to confirm that goods and services had been received before routing invoices for his approval.

Mr. Daskine denied having knowledge that GSC, CDC, or SPS may not have performed legitimate work at VCR properties. He stated that, to the extent any of these entities submitted invoices for work that was not actually performed, he was not aware of it at the time he approved the invoices.

5. Relationship with Nicole Prescott and Ryan Serrano

Mr. Daskine described his working relationship with Nicole Prescott as "professional." He stated that she was a "capable finance executive" who had been with VCR for several years and who had been instrumental in managing VCR's financial operations. He denied any personal relationship with Ms. Prescott beyond a professional working relationship. He stated that he and Prescott interacted primarily on budgetary, financial-reporting, and planning matters, and that their communications were conducted through normal business channels.

Mr. Daskine described Ryan Mateo Serrano as a "reliable controller" who handled the day-to-day accounting operations at VCR, including management of the general ledger, accounts payable, accounts receivable, and financial-statement preparation. He stated that Serrano reported to both Prescott, as VP of Finance, and to himself, as Division President, consistent with VCR's organizational structure. Mr. Daskine described Serrano as a detail-oriented professional who he trusted to manage VCR's accounting operations competently.

When asked whether he had ever discussed with Prescott or Serrano any arrangement to create fictitious vendors, to submit false invoices for work that was not performed, or to direct VCR payments to entities controlled by Mr. Daskine or any other VCR employee for personal benefit, Mr. Daskine denied any such discussions. He stated unequivocally that he had never entered into any agreement or understanding with either Prescott or Serrano regarding the creation of shell entities, the submission of fraudulent invoices, or the diversion of company funds.

Mr. Daskine was asked whether he was aware at the time of the interview that Ryan Serrano had been identified as the registered agent for both Gulf Standard Contracting LLC and Clearwater Design Collective Inc. Mr. Daskine stated that he was not aware of this fact. The interviewers noted that Mr. Daskine may have become aware of this information through pre-interview preparation with his personal counsel, Mr. Merritt, but Mr. Daskine did not confirm or deny this possibility.

6. Interactions with VHG Corporate Management

Mr. Daskine stated that he reported quarterly to CEO Margaret Calder on VCR's operational performance, strategic initiatives, and financial results. He described these interactions as consisting of formal quarterly business reviews as well as periodic informal check-ins and telephone calls with Ms. Calder. He also stated that he participated in quarterly business reviews with CFO Thomas Rhett Griffith, during which VCR's financial results were presented and discussed in the context of VHG's consolidated financial performance.

Mr. Daskine stated that he presented VCR's financial results to corporate leadership in these quarterly reviews but emphasized that he did not prepare the financial statements himself. He explained that VCR's financial statements and quarterly reports were prepared by Nicole Prescott and Ryan Serrano and their respective teams, and were subsequently reviewed by VHG's corporate finance team prior to consolidation into VHG's consolidated financial statements. Mr. Daskine stated that he reviewed summary-level financial information before presenting it to corporate leadership but that he relied on the finance team for the accuracy and completeness of the underlying data.

Mr. Daskine denied that anyone at VHG's corporate office — including CEO Calder, CFO Griffith, or any other corporate officer or employee — ever instructed him to inflate VCR's revenues, to report financial results that he knew to be inaccurate, or to engage in any other conduct that would result in the misstatement of VHG's consolidated financial statements. He stated that corporate management set performance targets but that those targets were communicated as goals, not as directives to manipulate financial reporting.

When asked whether he was aware of the significance of VCR's revenue as a proportion of VHG's consolidated revenue, Mr. Quinn noted that VCR's fiscal year 2022 revenue of approximately $438.7 million represented approximately 23.5% of VHG's $1.87 billion in consolidated revenue for the same period. Mr. Daskine stated that he understood VCR was an important and significant division within the VHG portfolio of businesses, but that he "did not focus on percentages" and instead concentrated on VCR's absolute performance against its internal budget and strategic plan.

7. SOX Certifications and Internal Controls

Mr. Daskine stated that he was familiar with VHG's obligations under Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 ("SOX") in a general sense. He understood that SOX required the CEO and CFO of a public company to certify the accuracy of the company's financial statements and the effectiveness of its internal controls over financial reporting. However, Mr. Daskine stated that he did not personally sign any SOX certifications, as those certifications were the responsibility of the CEO and CFO at the parent-company level.

Mr. Daskine stated that he was aware that VCR, as a significant subsidiary of VHG, was subject to internal controls over financial reporting as part of VHG's consolidated internal-controls framework. He explained, however, that he relied on Nicole Prescott and Ryan Serrano to ensure that VCR's operations complied with VHG's internal-controls requirements at the division level. He stated that VHG's corporate finance team and internal audit function also played a role in monitoring compliance, and that he viewed internal-controls compliance as a shared responsibility between VCR's finance team and VHG's corporate functions.

When asked whether he had ever identified or reported a deficiency in VCR's internal controls over financial reporting, Mr. Daskine stated that he had not. He did not recall ever being informed by Prescott, Serrano, or VHG's internal audit team of any specific internal-controls deficiency at VCR prior to the issues identified by HSA in mid-2023.

8. Administrative Leave and Current Status

Mr. Daskine confirmed that he was placed on paid administrative leave by VHG effective August 7, 2023. He stated that he received notification of his placement on leave from VHG General Counsel's office and understood that the leave was imposed pending the outcome of the Audit Committee's internal investigation.

Mr. Daskine stated that he had not accessed any VHG or VCR systems, facilities, records, or data since being placed on administrative leave. He confirmed that his access credentials had been deactivated and that he had not sought or obtained access through any alternative means.

Mr. Daskine confirmed that he had complied with the document-preservation notices issued by Calderwood & Harkness LLP. Specifically, he stated that he received and acknowledged both the VHG company-wide document-preservation notice dated July 24, 2023, and the targeted document-preservation notice directed to VCR custodians, also dated July 24, 2023. He stated that he had taken steps to preserve all responsive documents and materials in his possession, custody, or control, including materials stored on personal devices and in personal email accounts.

Mr. Merritt stated on the record that Mr. Daskine had preserved all responsive documents in his possession, custody, or control, consistent with the obligations set forth in the preservation notices, and that Mr. Daskine had complied with all instructions from Calderwood & Harkness and VHG General Counsel regarding document preservation. Mr. Merritt further stated that no responsive documents had been destroyed, deleted, or otherwise disposed of by Mr. Daskine following receipt of the preservation notices.

9. Refusal of Follow-Up Interview

At the conclusion of the interview, Mr. Quinn informed Mr. Daskine that the investigation team anticipated the possibility that additional evidence or topics would arise as the investigation progressed, and that the team might request a follow-up interview with Mr. Daskine to address those matters.

Mr. Merritt stated that Mr. Daskine would not be available for a follow-up interview. Mr. Merritt further stated that any further questions should be directed to Merritt & Dunleavy LLP in writing, and that his firm would evaluate any written inquiries and respond as it deemed appropriate, consistent with Mr. Daskine's rights.

Mr. Quinn acknowledged this position and noted it for the record. Mr. Quinn also stated that the investigation team reserved the right to draw appropriate inferences from Mr. Daskine's refusal to participate in further interviews, consistent with the standards applicable to this internal investigation.

Note: Calderwood & Harkness subsequently sent a letter dated October 25, 2023, to James Corwin Merritt at Merritt & Dunleavy LLP requesting production of additional documents from Mr. Daskine and seeking to schedule a follow-up interview. Mr. Merritt responded by letter declining both the document request and the follow-up interview on behalf of Mr. Daskine.

10. Assessment and Observations

The following assessment reflects the observations and preliminary conclusions of the interview team and is intended for the confidential use of the Audit Committee in connection with the internal investigation.

Demeanor: Mr. Daskine was generally cooperative and forthcoming when questioning addressed background information, his employment history, and the operational structure of VCR. He responded readily to questions about VCR's sales processes, organizational hierarchy, and general business practices. However, Mr. Daskine's demeanor became notably guarded and cautious when questioning turned to the three shell entities — Gulf Standard Contracting LLC, Clearwater Design Collective Inc., and Suncoast Property Services LLC — and to the forensic evidence regarding personal expenditures. During these portions of the interview, Mr. Daskine deferred to counsel on multiple occasions, conferred privately with Mr. Merritt before responding, and ultimately declined to answer the substantive questions on the advice of counsel. The contrast in Mr. Daskine's demeanor between the operational-background questions and the shell-entity questions was pronounced and noteworthy.

Credibility Observations: Mr. Daskine's characterization of his quarterly emails to Nicole Prescott as routine performance communications is, in the view of the interview team, inconsistent with the language and timing of the emails as reviewed during the document-review phase of the investigation. The emails in question were consistently sent in the final two to three days of each fiscal quarter and specifically referenced the need to ensure that pipeline deposits were "booked" or "in the books" before the quarter closed. The September 28, 2022 email — "we need to get these deposits booked — can't let them slip to Q4" — is particularly difficult to reconcile with Mr. Daskine's assertion that he was merely encouraging the completion of sales activities rather than directing the premature recognition of revenue. Mr. Daskine's claim of ignorance regarding the revenue-recognition mechanism employed at VCR is further difficult to reconcile with his seventeen years of experience in the hospitality and timeshare industry and his senior role overseeing VCR's financial performance, including his participation in quarterly business reviews with VHG's CEO and CFO where VCR's financial results were presented and discussed.

Invocation of Fifth Amendment Concerns: Mr. Merritt's invocation of Fifth Amendment considerations with respect to the shell-entity questions is noted and respected as Mr. Daskine's right. However, it is appropriate for the Audit Committee to be informed that, in the context of a civil and internal investigation, an adverse inference may be drawn from Mr. Daskine's refusal to answer questions about his ownership of, and financial relationship with, entities that received $1.83 million in payments from VCR over a twenty-four-month period for capital-improvement work that the investigation has determined to be fictitious. The decision whether to draw such an inference is within the province of the Audit Committee.

Open Items: Mr. Daskine's refusal to participate in a follow-up interview limits the investigation team's ability to confront him with additional forensic evidence that has been or may be developed after October 4, 2023. This includes, without limitation, detailed fund-tracing analysis currently being conducted by Crestline Forensic Advisory LLC, which is expected to further substantiate the connection between VCR payments to the shell entities and Mr. Daskine's personal expenditures. It also includes information provided by Ryan Mateo Serrano pursuant to the cooperation agreement executed on November 15, 2023, between VHG (through the Audit Committee) and Mr. Serrano. The investigation team will assess whether alternative means exist to present this evidence to Mr. Daskine or his counsel for response.

Coordination with Subject Counsel: All further correspondence and communications regarding Mr. Daskine should be directed to his personal counsel, James Corwin Merritt, at Merritt & Dunleavy LLP.

Prepared by: Liam Donahue, Senior Associate, Calderwood & Harkness LLP Steven Hollander, Associate, Calderwood & Harkness LLP

Reviewed by: Howard Quinn, Partner, Calderwood & Harkness LLP

Date Prepared: October 4, 2023 Date Reviewed: October 5, 2023

Matter No.: 1021-00008

Distribution: Investigation file (privileged); copies to Howard Quinn, Conrad Ashby

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT This memorandum was prepared in anticipation of litigation and at the direction of counsel. It reflects mental impressions, conclusions, and legal theories of counsel. It is not to be disclosed to any person or entity outside the investigation team and the Audit Committee without the prior written authorization of Calderwood & Harkness LLP.

Date of Interview:	October 4, 2023
Location:	Offices of Merritt & Dunleavy LLP, 1401 Brickell Avenue, Suite 2200, Miami, FL 33131
Time:	10:00 a.m. – approximately 1:45 p.m. (with a short break at approximately 12:00 p.m.)
Interviewers:	Howard Quinn (Partner, Calderwood & Harkness LLP); Liam Donahue (Senior Associate, Calderwood & Harkness LLP)
Also Present:	James Corwin Merritt (Merritt & Dunleavy LLP, counsel for Mr. Daskine)
Court Reporter / Recording:	None; memorandum prepared from contemporaneous notes taken by Liam Donahue and Steven Hollander (Steven Hollander present as notetaker)
Quarter	Revenue Overstatement
Q3 2022	$4.7 million
Q4 2022	$6.1 million
Q1 2023	$9.8 million
Q2 2023	$5.8 million
Total	$26.4 million
Entity	Total Payments	Number of Invoices
Gulf Standard Contracting LLC	$812,400	19
Clearwater Design Collective Inc.	$587,600	16
Suncoast Property Services LLC	$430,000	12
Total	$1,830,000	47

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
MEMORANDUM OF INTERVIEW
To: Investigation File — C&H Matter No. 1021-00008
From: Liam Donahue, Calderwood & Harkness LLP Steven Hollander, Calderwood & Harkness LLP
Date: October 4, 2023
Re: Interview of Garrett W. Daskine, Division President, Verimark Coastal Resorts LLC
Note: This memorandum reflects the interviewers' account of the substance of the interview. It is not a verbatim transcript. It was prepared and finalized on October 4, 2023, and reviewed by Howard Quinn on October 5, 2023.
1. Preliminary Matters and Upjohn Warnings
At the outset of the interview, Howard Quinn delivered the standard Upjohn warning to Mr. Daskine. Specifically, Mr. Quinn advised Mr. Daskine of the following:
(a) Calderwood & Harkness LLP represents the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. ("VHG") in connection with this investigation. Calderwood & Harkness does not represent Mr. Daskine individually, and no attorney-client relationship exists between Calderwood & Harkness and Mr. Daskine by virtue of this interview.
(b) The attorney-client privilege for this interview, to the extent one applies, belongs to VHG through its Audit Committee, and not to Mr. Daskine personally.
(c) VHG, through the Audit Committee, may choose in its sole discretion to waive the privilege and disclose the contents of this interview to third parties, including but not limited to government regulators, the Securities and Exchange Commission, the Department of Justice, or any other governmental authority.
(d) The content of the interview is confidential, and Mr. Daskine should not discuss the substance of the interview with other VHG employees, officers, directors, or third parties, except as necessary in consultation with his personal counsel.
(e) Mr. Daskine is entitled to have his own personal counsel present during the interview, and the interviewers acknowledged the presence of Mr. James Corwin Merritt of Merritt & Dunleavy LLP as Mr. Daskine's personal attorney.
Mr. Quinn asked Mr. Daskine whether he understood each of the foregoing advisements. Mr. Daskine stated affirmatively that he understood the warnings and the nature of Calderwood & Harkness's representation.
Mr. Merritt stated on the record that Mr. Daskine was appearing voluntarily for this interview and that he reserved all rights, including the right to terminate the interview at any time for any reason. Mr. Merritt further stated that Mr. Daskine's appearance at this interview should not be construed as a waiver of any right or privilege to which Mr. Daskine may be entitled in any subsequent proceeding.
Mr. Quinn confirmed that Mr. Daskine had been placed on paid administrative leave by VHG effective August 7, 2023, and that the interview was being conducted as part of the Audit Committee's independent internal investigation into certain matters relating to financial reporting and vendor relationships at Verimark Coastal Resorts LLC ("VCR"), a wholly owned subsidiary of VHG.
2. Background and Employment History
Mr. Daskine provided the following background information:
Full Name: Garrett William Daskine.
Current Title: Division President, Verimark Coastal Resorts LLC ("VCR"). Mr. Daskine holds the title of Division President, which is the most senior operational role within VCR.
Employment Tenure: Mr. Daskine is a seventeen-year veteran of VHG and its subsidiary entities. He stated that he joined VHG in approximately 2006, initially in a regional operations management capacity. Over the ensuing years, he rose through various operational and management roles within VHG's resort and hospitality divisions, including positions in property management, resort development, and divisional operations. He was appointed Division President of VCR approximately five years prior to the interview, although he did not recall the precise date of his promotion to that role.
Reporting Line: Mr. Daskine stated that he reports directly to VHG Chief Executive Officer Margaret "Meg" Calder. He additionally described a dotted-line reporting relationship to VHG Chief Financial Officer Thomas Rhett Griffith on financial and budgetary matters, explaining that while his primary reporting obligation was to Ms. Calder on strategic and operational issues, he coordinated with Mr. Griffith's office on financial planning, quarterly reporting, and capital-expenditure matters.
Direct Reports: Mr. Daskine identified his principal direct reports as follows:
•  Nicole Prescott, Vice President of Finance, VCR
•  Ryan Mateo Serrano, Controller, VCR
•  Vice President of Operations, VCR (name not relevant to this investigation and omitted at the request of counsel)
•  Vice President of Sales & Marketing, VCR (name not relevant to this investigation and omitted at the request of counsel)
Office Location: Mr. Daskine confirmed that VCR's principal office is located at 7820 Gulf Breeze Parkway, Suite 400, Destin, FL 32541. He stated that this office serves as the administrative headquarters for VCR's resort-development and timeshare operations and houses the finance, operations, and sales teams.
Personal Residence: Mr. Daskine confirmed that he resides at 312 Harbor View Lane, Destin, FL 32541.
Mr. Daskine described his responsibilities as Division President as encompassing overall management and oversight of VCR's resort-development operations. He explained that this included supervision of VCR's timeshare-interest sales programs, which constitute a significant portion of VCR's revenue; oversight of capital-improvement projects at VCR-managed properties; and general management of resort operations. Mr. Daskine identified VCR's two principal properties as Coral Dune Resort & Residences, located at 14200 Emerald Coast Parkway, Destin, FL 32541, and Palmetto Bluff Club, located at 3950 Longboat Key Drive, Sarasota, FL 34228. He stated that Coral Dune is VCR's flagship property and the larger of the two in terms of unit count and revenue contribution.
3. Revenue-Recognition Practices at VCR
3.1 Overview of Timeshare-Interest Sales Process
Mr. Daskine described the general timeshare-interest sales process at VCR as follows. Prospective purchasers attend a sales presentation at one of VCR's resort properties, typically conducted by the sales and marketing team. If a prospective purchaser elects to purchase a timeshare interest, the purchaser signs a written purchase agreement and submits a deposit, which may range from several hundred dollars to several thousand dollars depending on the type and duration of the timeshare interest being purchased. Mr. Daskine explained that under Florida Statute § 721.10, which governs the sale of timeshare interests in the State of Florida, purchasers are entitled to a ten-calendar-day rescission period following execution of the purchase agreement, during which time the purchaser may cancel the transaction without penalty and receive a full refund of any deposit paid.
Mr. Daskine stated that he was "generally aware" that revenue from timeshare-interest sales should not be recognized until after the rescission period has expired and the sale is deemed final. He described this as a well-understood aspect of timeshare accounting that he had learned over the course of his career in the hospitality industry, though he did not purport to have detailed expertise in the applicable accounting standards, including ASC 606 or any predecessor guidance.
When asked who was responsible for the timing of revenue recognition in VCR's books and records, Mr. Daskine stated that this was a "finance function" handled by Nicole Prescott, in her capacity as VP of Finance, and Ryan Mateo Serrano, in his capacity as Controller. Mr. Daskine stated that he relied on their expertise and professional judgment on accounting matters and that he did not involve himself in the mechanics of journal entries, revenue-recognition timing, or other technical accounting decisions. He emphasized that both Prescott and Serrano were experienced accounting professionals and that he trusted them to apply the appropriate standards.
3.2 Premature Booking of Deposits as Revenue
Mr. Quinn presented Mr. Daskine with specific examples of timeshare-interest deposits at Coral Dune Resort & Residences (Phase III development) and Palmetto Bluff Club (Phase II development) that had been recorded in VCR's general ledger as completed-sale revenue at the time the purchase agreement was signed, rather than upon expiration of the ten-day rescission period required under Florida law and applicable accounting standards. Mr. Quinn identified these examples by reference to specific general-ledger entries and supporting documentation that had been produced during the document-review phase of the investigation.
Mr. Daskine stated that he was not personally involved in making journal entries or determining the timing of revenue recognition in VCR's accounting system. He reiterated that these were responsibilities delegated to the finance team, specifically to Prescott and Serrano, and that he did not review individual journal entries or revenue-recognition determinations.
When asked directly whether he had ever directed, instructed, or otherwise caused Nicole Prescott or Ryan Serrano to book deposits as revenue before the statutory rescission period had expired, Mr. Daskine stated as follows: "No, I did not give specific accounting instructions. I set performance targets, and my finance team determined how to meet reporting requirements." Mr. Daskine repeated this characterization on multiple occasions during this portion of the interview.
Mr. Quinn then asked Mr. Daskine about a series of emails that had been identified during the document-review phase of the investigation. Mr. Quinn explained that the investigation had obtained and reviewed email communications in which Mr. Daskine sent messages to Nicole Prescott during the final days of Q3 2022, Q4 2022, Q1 2023, and Q2 2023. In each of these quarterly periods, Mr. Daskine's emails emphasized the importance of "hitting the quarterly number" and expressed concern about "pipeline deposits that need to be in the books before the quarter closes." The emails reflected a consistent pattern of end-of-quarter communications from Mr. Daskine to the VP of Finance that focused on ensuring that deposit-stage transactions were recorded in the books before the close of each quarter.
Mr. Daskine acknowledged sending emails of that general nature. He characterized these communications as routine messages about sales performance and the status of VCR's sales pipeline. He stated that it was standard practice for him to communicate with his finance team about the sales pipeline near the end of each quarter and that these emails reflected ordinary business management, not directives about accounting treatment or revenue-recognition timing.
Mr. Quinn then showed Mr. Daskine a specific email dated September 28, 2022, from Mr. Daskine to Nicole Prescott. The email stated, in relevant part: "we need to get these deposits booked — can't let them slip to Q4." Mr. Quinn asked Mr. Daskine to explain what he meant by this statement. Mr. Daskine stated that the email referred to ensuring that sales were completed — that is, that purchase agreements were executed and deposits were collected from purchasers — before the end of the quarter, and that the email was not a directive to recognize revenue prematurely or to circumvent the rescission-period requirement. Mr. Daskine characterized the word "booked" as referring to the recording of the sales transaction in VCR's sales-tracking system, not to the recognition of revenue in VCR's financial statements.
Mr. Quinn noted that the investigation had identified an aggregate revenue overstatement of approximately $26.4 million across four consecutive quarters, broken down as follows:
Mr. Quinn explained that this overstatement resulted from the practice of booking deposits as completed-sale revenue upon the signing of purchase agreements, before the ten-day rescission period had expired, in contravention of Florida Statute § 721.10 and applicable accounting guidance under ASC 606.
Mr. Daskine stated that he was not aware of a specific dollar figure associated with any revenue overstatement. He further stated that if revenue had been prematurely recognized, as described by Mr. Quinn, it was done by the finance team — specifically by Prescott and Serrano — without his knowledge, direction, or authorization. He maintained his position that he did not involve himself in revenue-recognition timing decisions and that any such decisions were the responsibility of the finance team.
When asked about VCR's timeshare rescission rate during the investigated period, Mr. Quinn noted that VCR's rescission rate was approximately 14.3%, compared to an industry average of approximately 11%. Mr. Quinn asked Mr. Daskine whether he believed this elevated rescission rate was connected to any pressure he placed on the sales or finance teams to accelerate the booking of timeshare transactions. Mr. Daskine acknowledged that VCR's rescission rate was "higher than we would have liked" and stated that this was a source of concern for him in his capacity as Division President. However, he attributed the elevated rate to general market conditions, including rising interest rates and economic uncertainty among consumers, and specifically denied that the rescission rate was related to any pressure he placed on the sales or finance teams.
3.3 Awareness of HSA Concerns
Mr. Quinn asked Mr. Daskine whether he was aware that VHG's external auditor, Hargrove, Steen & Aldrich LLP ("HSA"), had identified a potential material weakness relating to VCR's revenue-recognition controls during its interim review of VHG's financial statements for the first quarter of fiscal year 2023.
Mr. Daskine stated that he was informed "sometime in late June or early July" of 2023 by Nicole Prescott that HSA had raised questions about VCR's revenue-recognition practices. He stated that Prescott described the issue to him in general terms but that he did not understand the full scope or significance of HSA's concern at that time. Mr. Daskine stated that he first came to appreciate the gravity of the situation when he was notified of his placement on administrative leave on August 7, 2023.
Mr. Daskine stated that he had no direct communication with William Gentry, the HSA engagement partner responsible for VHG's audit, about the revenue-recognition issue or any other matter related to this investigation. He explained that his interactions with HSA were limited and that communications with the external auditors were typically handled by Prescott and Serrano at the VCR level, and by VHG's corporate finance team at the parent-company level.
When informed by Mr. Quinn that HSA's June 19, 2023 communication to VHG's Audit Committee specifically identified $9.8 million in timeshare-interest deposits that had been recorded as completed-sale revenue in Q1 2023 despite the fact that the applicable ten-day rescission periods had not yet expired at the time of booking, Mr. Daskine stated that he was not aware of that specific communication or the specific dollar amount identified by HSA. He reiterated that Prescott informed him only in general terms that the auditors had questions.
4. Expense-Reporting Practices and Vendor Relationships
4.1 Capital-Improvement Approval Process
Mr. Daskine described VCR's process for capital-improvement projects. He explained that capital-improvement work at VCR properties — including renovation, refurbishment, construction, and facilities upgrades — was initiated by the operations team, typically in coordination with the VP of Operations. The Controller, Ryan Serrano, would prepare purchase orders for capital-improvement expenditures, which would then be routed for approval. Mr. Daskine explained that VCR maintained an approval-threshold policy: expenditures below $25,000 could be approved by the VP of Finance (Nicole Prescott) or other authorized signatories, while expenditures of $25,000 or above required Mr. Daskine's personal approval as Division President. Mr. Daskine stated that this threshold had been in place throughout his tenure as Division President.
Mr. Daskine confirmed that he personally approved numerous purchase orders for capital-improvement work at both Coral Dune Resort & Residences and Palmetto Bluff Club during the period under investigation. He described this as a routine and expected part of his responsibilities, given that both properties were undergoing significant development and renovation activity.
4.2 Questioning Regarding Shell Entities
Mr. Quinn asked Mr. Daskine about three vendors that had received payments from VCR for purported capital-improvement work during the period from approximately July 2021 through June 2023. Mr. Quinn identified the three vendors as follows:
Gulf Standard Contracting LLC ("GSC"): A Florida limited liability company formed on March 12, 2021. Mr. Quinn stated that the investigation had identified nineteen invoices submitted by GSC to VCR, totaling $812,400 in aggregate payments. Mr. Quinn identified the largest single invoice as Invoice No. GSC-2023-007, dated February 14, 2023, in the amount of $94,500, which was described on the invoice as "lobby renovation materials — Coral Dune Phase III."
Clearwater Design Collective Inc. ("CDC"): A Florida corporation formed on June 4, 2021. Mr. Quinn stated that the investigation had identified sixteen invoices submitted by CDC to VCR, totaling $587,600 in aggregate payments.
Suncoast Property Services LLC ("SPS"): A Florida limited liability company formed on November 18, 2021. Mr. Quinn stated that the investigation had identified twelve invoices submitted by SPS to VCR, totaling $430,000 in aggregate payments.
Mr. Quinn asked Mr. Daskine directly whether he had any ownership interest in, affiliation with, or financial relationship with Gulf Standard Contracting LLC. Mr. Daskine paused and conferred privately with his counsel, Mr. Merritt, for several minutes. Upon resuming, Mr. Daskine stated: "I decline to answer that question at this time on the advice of counsel."
Mr. Merritt interjected and stated on the record that Mr. Daskine would not be responding to questions about ownership of any entities outside of VHG at this time. Mr. Merritt cited Fifth Amendment concerns as the basis for this position, stating that Mr. Daskine was exercising his right against self-incrimination with respect to this line of questioning.
Mr. Quinn noted for the record that the investigation had identified Florida Division of Corporations filings and related corporate records indicating the following:
(a) Ryan Mateo Serrano was listed as the registered agent for both Gulf Standard Contracting LLC and Clearwater Design Collective Inc.
(b) The sole member of Gulf Standard Contracting LLC was identified as Garrett W. Daskine, through what appeared to be a nominee arrangement involving a third-party formation service.
Mr. Daskine did not respond to this statement. Mr. Merritt did not offer any comment.
With respect to Suncoast Property Services LLC, Mr. Quinn noted that the registered agent was Panhandle Agent Services Inc., a commercial registered-agent service based in Tallahassee, Florida, and that the sole member of SPS was identified in the LLC's organizational documents as Garrett W. Daskine. Mr. Daskine again declined to respond on counsel's advice.
Mr. Quinn summarized the total payments made by VCR across the three entities as follows:
Mr. Quinn noted that the $1.83 million in total payments were made over a period of approximately twenty-four months, from July 2021 through June 2023, and that the investigation had concluded, based on its review to date, that the forty-seven purchase orders supporting these payments were fictitious — that is, they described capital-improvement work that was never actually performed at VCR properties.
4.3 Questioning Regarding Personal Expenditures
Mr. Quinn asked Mr. Daskine about forensic findings developed by Crestline Forensic Advisory LLC, the forensic accounting firm retained by Calderwood & Harkness on behalf of the Audit Committee. Mr. Quinn stated that Crestline's preliminary analysis indicated that funds paid by VCR to GSC and SPS had been traced to the following categories of personal expenditures:
(a) Personal credit-card payments made on accounts held in Mr. Daskine's name;
(b) Payments to contractors associated with a residential renovation at 312 Harbor View Lane, Destin, FL 32541, which is Mr. Daskine's personal residence;
(c) Boat-slip fees at a marina facility in the Destin area; and
(d) Purchases of luxury goods, including jewelry and furnishings.
Mr. Daskine, on the advice of counsel, declined to answer questions regarding the use of funds received by GSC, SPS, or CDC. Mr. Merritt stated that this line of questioning implicated Fifth Amendment concerns and that Mr. Daskine would not be providing responses.
Mr. Quinn then asked Mr. Daskine a more general question: whether he had undertaken any renovation work at his personal residence at 312 Harbor View Lane during the 2021–2023 timeframe. Mr. Merritt again advised Mr. Daskine not to respond to the question, and Mr. Daskine stated he would follow his counsel's advice. The question went unanswered.
4.4 Approval of GSC, CDC, and SPS Invoices
Mr. Quinn showed Mr. Daskine copies of several purchase orders and invoices bearing what appeared to be Mr. Daskine's approval signature or electronic authorization in VCR's procurement system. The documents were drawn from the population of forty-seven invoices across the three entities. Mr. Daskine examined the documents and acknowledged that the signatures "looked like" his own but stated that he could not confirm their authenticity without further review and that he would need additional time to examine the documents in detail.
When asked whether he had performed any due diligence, site inspection, or other verification of the work purportedly performed by GSC, CDC, or SPS before approving invoices from these entities, Mr. Daskine stated: "I approved hundreds of purchase orders every year. I relied on Ryan [Serrano] and his team to verify that work was performed." Mr. Daskine explained that it was not his standard practice to independently verify the completion of capital-improvement work described in purchase orders, and that he relied on the Controller's office to confirm that goods and services had been received before routing invoices for his approval.
Mr. Daskine denied having knowledge that GSC, CDC, or SPS may not have performed legitimate work at VCR properties. He stated that, to the extent any of these entities submitted invoices for work that was not actually performed, he was not aware of it at the time he approved the invoices.
5. Relationship with Nicole Prescott and Ryan Serrano
Mr. Daskine described his working relationship with Nicole Prescott as "professional." He stated that she was a "capable finance executive" who had been with VCR for several years and who had been instrumental in managing VCR's financial operations. He denied any personal relationship with Ms. Prescott beyond a professional working relationship. He stated that he and Prescott interacted primarily on budgetary, financial-reporting, and planning matters, and that their communications were conducted through normal business channels.
Mr. Daskine described Ryan Mateo Serrano as a "reliable controller" who handled the day-to-day accounting operations at VCR, including management of the general ledger, accounts payable, accounts receivable, and financial-statement preparation. He stated that Serrano reported to both Prescott, as VP of Finance, and to himself, as Division President, consistent with VCR's organizational structure. Mr. Daskine described Serrano as a detail-oriented professional who he trusted to manage VCR's accounting operations competently.
When asked whether he had ever discussed with Prescott or Serrano any arrangement to create fictitious vendors, to submit false invoices for work that was not performed, or to direct VCR payments to entities controlled by Mr. Daskine or any other VCR employee for personal benefit, Mr. Daskine denied any such discussions. He stated unequivocally that he had never entered into any agreement or understanding with either Prescott or Serrano regarding the creation of shell entities, the submission of fraudulent invoices, or the diversion of company funds.
Mr. Daskine was asked whether he was aware at the time of the interview that Ryan Serrano had been identified as the registered agent for both Gulf Standard Contracting LLC and Clearwater Design Collective Inc. Mr. Daskine stated that he was not aware of this fact. The interviewers noted that Mr. Daskine may have become aware of this information through pre-interview preparation with his personal counsel, Mr. Merritt, but Mr. Daskine did not confirm or deny this possibility.
6. Interactions with VHG Corporate Management
Mr. Daskine stated that he reported quarterly to CEO Margaret Calder on VCR's operational performance, strategic initiatives, and financial results. He described these interactions as consisting of formal quarterly business reviews as well as periodic informal check-ins and telephone calls with Ms. Calder. He also stated that he participated in quarterly business reviews with CFO Thomas Rhett Griffith, during which VCR's financial results were presented and discussed in the context of VHG's consolidated financial performance.
Mr. Daskine stated that he presented VCR's financial results to corporate leadership in these quarterly reviews but emphasized that he did not prepare the financial statements himself. He explained that VCR's financial statements and quarterly reports were prepared by Nicole Prescott and Ryan Serrano and their respective teams, and were subsequently reviewed by VHG's corporate finance team prior to consolidation into VHG's consolidated financial statements. Mr. Daskine stated that he reviewed summary-level financial information before presenting it to corporate leadership but that he relied on the finance team for the accuracy and completeness of the underlying data.
Mr. Daskine denied that anyone at VHG's corporate office — including CEO Calder, CFO Griffith, or any other corporate officer or employee — ever instructed him to inflate VCR's revenues, to report financial results that he knew to be inaccurate, or to engage in any other conduct that would result in the misstatement of VHG's consolidated financial statements. He stated that corporate management set performance targets but that those targets were communicated as goals, not as directives to manipulate financial reporting.
When asked whether he was aware of the significance of VCR's revenue as a proportion of VHG's consolidated revenue, Mr. Quinn noted that VCR's fiscal year 2022 revenue of approximately $438.7 million represented approximately 23.5% of VHG's $1.87 billion in consolidated revenue for the same period. Mr. Daskine stated that he understood VCR was an important and significant division within the VHG portfolio of businesses, but that he "did not focus on percentages" and instead concentrated on VCR's absolute performance against its internal budget and strategic plan.
7. SOX Certifications and Internal Controls
Mr. Daskine stated that he was familiar with VHG's obligations under Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 ("SOX") in a general sense. He understood that SOX required the CEO and CFO of a public company to certify the accuracy of the company's financial statements and the effectiveness of its internal controls over financial reporting. However, Mr. Daskine stated that he did not personally sign any SOX certifications, as those certifications were the responsibility of the CEO and CFO at the parent-company level.
Mr. Daskine stated that he was aware that VCR, as a significant subsidiary of VHG, was subject to internal controls over financial reporting as part of VHG's consolidated internal-controls framework. He explained, however, that he relied on Nicole Prescott and Ryan Serrano to ensure that VCR's operations complied with VHG's internal-controls requirements at the division level. He stated that VHG's corporate finance team and internal audit function also played a role in monitoring compliance, and that he viewed internal-controls compliance as a shared responsibility between VCR's finance team and VHG's corporate functions.
When asked whether he had ever identified or reported a deficiency in VCR's internal controls over financial reporting, Mr. Daskine stated that he had not. He did not recall ever being informed by Prescott, Serrano, or VHG's internal audit team of any specific internal-controls deficiency at VCR prior to the issues identified by HSA in mid-2023.
8. Administrative Leave and Current Status
Mr. Daskine confirmed that he was placed on paid administrative leave by VHG effective August 7, 2023. He stated that he received notification of his placement on leave from VHG General Counsel's office and understood that the leave was imposed pending the outcome of the Audit Committee's internal investigation.
Mr. Daskine stated that he had not accessed any VHG or VCR systems, facilities, records, or data since being placed on administrative leave. He confirmed that his access credentials had been deactivated and that he had not sought or obtained access through any alternative means.
Mr. Daskine confirmed that he had complied with the document-preservation notices issued by Calderwood & Harkness LLP. Specifically, he stated that he received and acknowledged both the VHG company-wide document-preservation notice dated July 24, 2023, and the targeted document-preservation notice directed to VCR custodians, also dated July 24, 2023. He stated that he had taken steps to preserve all responsive documents and materials in his possession, custody, or control, including materials stored on personal devices and in personal email accounts.
Mr. Merritt stated on the record that Mr. Daskine had preserved all responsive documents in his possession, custody, or control, consistent with the obligations set forth in the preservation notices, and that Mr. Daskine had complied with all instructions from Calderwood & Harkness and VHG General Counsel regarding document preservation. Mr. Merritt further stated that no responsive documents had been destroyed, deleted, or otherwise disposed of by Mr. Daskine following receipt of the preservation notices.
9. Refusal of Follow-Up Interview
At the conclusion of the interview, Mr. Quinn informed Mr. Daskine that the investigation team anticipated the possibility that additional evidence or topics would arise as the investigation progressed, and that the team might request a follow-up interview with Mr. Daskine to address those matters.
Mr. Merritt stated that Mr. Daskine would not be available for a follow-up interview. Mr. Merritt further stated that any further questions should be directed to Merritt & Dunleavy LLP in writing, and that his firm would evaluate any written inquiries and respond as it deemed appropriate, consistent with Mr. Daskine's rights.
Mr. Quinn acknowledged this position and noted it for the record. Mr. Quinn also stated that the investigation team reserved the right to draw appropriate inferences from Mr. Daskine's refusal to participate in further interviews, consistent with the standards applicable to this internal investigation.
Note: Calderwood & Harkness subsequently sent a letter dated October 25, 2023, to James Corwin Merritt at Merritt & Dunleavy LLP requesting production of additional documents from Mr. Daskine and seeking to schedule a follow-up interview. Mr. Merritt responded by letter declining both the document request and the follow-up interview on behalf of Mr. Daskine.
10. Assessment and Observations
The following assessment reflects the observations and preliminary conclusions of the interview team and is intended for the confidential use of the Audit Committee in connection with the internal investigation.
Demeanor: Mr. Daskine was generally cooperative and forthcoming when questioning addressed background information, his employment history, and the operational structure of VCR. He responded readily to questions about VCR's sales processes, organizational hierarchy, and general business practices. However, Mr. Daskine's demeanor became notably guarded and cautious when questioning turned to the three shell entities — Gulf Standard Contracting LLC, Clearwater Design Collective Inc., and Suncoast Property Services LLC — and to the forensic evidence regarding personal expenditures. During these portions of the interview, Mr. Daskine deferred to counsel on multiple occasions, conferred privately with Mr. Merritt before responding, and ultimately declined to answer the substantive questions on the advice of counsel. The contrast in Mr. Daskine's demeanor between the operational-background questions and the shell-entity questions was pronounced and noteworthy.
Credibility Observations: Mr. Daskine's characterization of his quarterly emails to Nicole Prescott as routine performance communications is, in the view of the interview team, inconsistent with the language and timing of the emails as reviewed during the document-review phase of the investigation. The emails in question were consistently sent in the final two to three days of each fiscal quarter and specifically referenced the need to ensure that pipeline deposits were "booked" or "in the books" before the quarter closed. The September 28, 2022 email — "we need to get these deposits booked — can't let them slip to Q4" — is particularly difficult to reconcile with Mr. Daskine's assertion that he was merely encouraging the completion of sales activities rather than directing the premature recognition of revenue. Mr. Daskine's claim of ignorance regarding the revenue-recognition mechanism employed at VCR is further difficult to reconcile with his seventeen years of experience in the hospitality and timeshare industry and his senior role overseeing VCR's financial performance, including his participation in quarterly business reviews with VHG's CEO and CFO where VCR's financial results were presented and discussed.
Invocation of Fifth Amendment Concerns: Mr. Merritt's invocation of Fifth Amendment considerations with respect to the shell-entity questions is noted and respected as Mr. Daskine's right. However, it is appropriate for the Audit Committee to be informed that, in the context of a civil and internal investigation, an adverse inference may be drawn from Mr. Daskine's refusal to answer questions about his ownership of, and financial relationship with, entities that received $1.83 million in payments from VCR over a twenty-four-month period for capital-improvement work that the investigation has determined to be fictitious. The decision whether to draw such an inference is within the province of the Audit Committee.
Open Items: Mr. Daskine's refusal to participate in a follow-up interview limits the investigation team's ability to confront him with additional forensic evidence that has been or may be developed after October 4, 2023. This includes, without limitation, detailed fund-tracing analysis currently being conducted by Crestline Forensic Advisory LLC, which is expected to further substantiate the connection between VCR payments to the shell entities and Mr. Daskine's personal expenditures. It also includes information provided by Ryan Mateo Serrano pursuant to the cooperation agreement executed on November 15, 2023, between VHG (through the Audit Committee) and Mr. Serrano. The investigation team will assess whether alternative means exist to present this evidence to Mr. Daskine or his counsel for response.
Coordination with Subject Counsel: All further correspondence and communications regarding Mr. Daskine should be directed to his personal counsel, James Corwin Merritt, at Merritt & Dunleavy LLP.
Prepared by: Liam Donahue, Senior Associate, Calderwood & Harkness LLP Steven Hollander, Associate, Calderwood & Harkness LLP
Reviewed by: Howard Quinn, Partner, Calderwood & Harkness LLP
Date Prepared: October 4, 2023 Date Reviewed: October 5, 2023
Matter No.: 1021-00008
Distribution: Investigation file (privileged); copies to Howard Quinn, Conrad Ashby
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT This memorandum was prepared in anticipation of litigation and at the direction of counsel. It reflects mental impressions, conclusions, and legal theories of counsel. It is not to be disclosed to any person or entity outside the investigation team and the Audit Committee without the prior written authorization of Calderwood & Harkness LLP.
Date of Interview: | October 4, 2023
Location: | Offices of Merritt & Dunleavy LLP, 1401 Brickell Avenue, Suite 2200, Miami, FL 33131
Time: | 10:00 a.m. – approximately 1:45 p.m. (with a short break at approximately 12:00 p.m.)
Interviewers: | Howard Quinn (Partner, Calderwood & Harkness LLP); Liam Donahue (Senior Associate, Calderwood & Harkness LLP)
Also Present: | James Corwin Merritt (Merritt & Dunleavy LLP, counsel for Mr. Daskine)
Court Reporter / Recording: | None; memorandum prepared from contemporaneous notes taken by Liam Donahue and Steven Hollander (Steven Hollander present as notetaker)
Quarter | Revenue Overstatement
Q3 2022 | $4.7 million
Q4 2022 | $6.1 million
Q1 2023 | $9.8 million
Q2 2023 | $5.8 million
Total | $26.4 million
Entity | Total Payments | Number of Invoices
Gulf Standard Contracting LLC | $812,400 | 19
Clearwater Design Collective Inc. | $587,600 | 16
Suncoast Property Services LLC | $430,000 | 12
Total | $1,830,000 | 47

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

MEMORANDUM OF INTERVIEW

Record

Parties

Dates

Amounts