PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
This memorandum was prepared by counsel for the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. in connection with a pending internal investigation. It is protected by the attorney-client privilege and the work-product doctrine. It is not to be disclosed to any person or entity outside the authorized distribution list without the prior written consent of the Audit Committee and Calderwood & Harkness LLP.
MEMORANDUM OF INTERVIEW
To: Investigation File, Matter No. 1021-00008
From: Liam Donahue, Calderwood & Harkness LLP Steven Hollander, Calderwood & Harkness LLP
Date of Memorandum: December 5, 2023
Re: Second Interview of Ryan Mateo Serrano, Controller, Verimark Coastal Resorts LLC
The following is a summary of the substance of the interview. It is based on contemporaneous notes taken by Steven Hollander and is not a verbatim transcript. Unless otherwise indicated, all statements attributed to Mr. Serrano reflect the substance of his responses and are not direct quotations.
I. PRELIMINARY MATTERS
A. Upjohn Warning Reconfirmation
At the outset of the interview, Howard Quinn reconfirmed the Upjohn warnings that had been previously administered to Mr. Serrano at Session 1, conducted on September 27, 2023. Specifically, Quinn reminded Mr. Serrano of the following:
1. Calderwood & Harkness LLP represents the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. Calderwood & Harkness does not represent Mr. Serrano in his individual capacity. The firm's engagement is with and on behalf of the Audit Committee, and no attorney-client relationship exists between Calderwood & Harkness and Mr. Serrano.
2. The attorney-client privilege with respect to the content of the interview and any related communications belongs to VHG, acting through its Audit Committee, and not to Mr. Serrano. The Audit Committee may, at its sole discretion, elect to waive the privilege and disclose the contents of the interview to third parties, including government authorities and regulators, without Mr. Serrano's consent.
3. The content of the interview is confidential, and Mr. Serrano is directed not to discuss the substance of the interview with any person other than his personal counsel, Mr. Ruiz, or other counsel at Coletti & Ruiz PA.
4. Mr. Serrano's participation in the interview is governed by the terms of the Cooperation Agreement dated November 15, 2023, which, among other things, obligates Mr. Serrano to provide truthful and complete information and to produce documents within his possession, custody, or control.
Mr. Serrano confirmed that he understood each of the foregoing admonitions and that he was willing to proceed with the interview on that basis. He stated that he recalled the Upjohn warnings from Session 1 and that his understanding of their import had not changed.
Mr. Ruiz confirmed on the record that the interview was proceeding pursuant to the terms of the November 15, 2023 Cooperation Agreement. Mr. Ruiz stated that Mr. Serrano was attending the interview voluntarily and in compliance with his obligations under the agreement, which required him to provide truthful and complete information and to make available documents and other materials reasonably requested by Calderwood & Harkness in connection with the investigation. Mr. Ruiz further stated that he had advised Mr. Serrano of his rights under the Cooperation Agreement, including the protections afforded to Mr. Serrano thereunder, and that Mr. Serrano was prepared to proceed.
B. Scope of Session 2
Quinn explained to Mr. Serrano that the second interview session would cover the following topics in detail:
1. A detailed, chronological account of the creation and processing of the 47 fictitious purchase orders identified to date in the investigation, including the specific mechanics by which each purchase order was generated, the descriptions used, and the approvals obtained.
2. The fund-flow mechanics by which payments were transmitted from Verimark Coastal Resorts LLC ("VCR") to the three shell entities — Gulf Standard Contracting LLC ("GSC"), Clearwater Design Collective Inc. ("CDC"), and Suncoast Property Services LLC ("SPS") — and Mr. Serrano's knowledge of the subsequent disposition of those funds.
3. The respective roles of and directions given by Garrett W. Daskine, Division President of VCR, and Nicole Prescott, VP of Finance of VCR, in conceiving, directing, and executing the scheme.
4. Mr. Serrano's knowledge of personal expenditures funded through the proceeds of the fictitious invoices.
5. Any additional documents, communications, or other evidence that Mr. Serrano could identify as relevant to the investigation.
Quinn noted that while the interview would primarily focus on the fictitious vendor scheme, questions concerning the premature revenue-recognition practices at VCR would also be addressed to the extent relevant to Mr. Serrano's knowledge and observations.
Mr. Serrano stated that he understood the scope of the interview and was prepared to address each of the topics identified.
C. Serrano's Demeanor and General Observations
Mr. Serrano appeared cooperative and responsive throughout the interview. He answered questions directly and did not appear evasive or reluctant to provide information. He occasionally paused to collect his thoughts or to consult with Mr. Ruiz before responding, but these pauses were brief and did not appear to be attempts to avoid answering.
Mr. Serrano brought with him to the interview a three-ring binder containing personal records, including copies of his personal bank statements and selected email printouts that he had compiled in preparation for the session. At Mr. Ruiz's direction, Mr. Serrano turned over the binder and its contents to Calderwood & Harkness at the commencement of the interview. The materials were received by Mr. Hollander and have been logged into the investigation file.
Mr. Ruiz intervened on only a few occasions during the interview, primarily to clarify questions posed by Quinn or Donahue and to ensure that Mr. Serrano understood the scope of what was being asked. Mr. Ruiz did not instruct Mr. Serrano to decline to answer any question.
Mr. Serrano expressed willingness to testify before regulatory bodies, including the Securities and Exchange Commission, if required in connection with the investigation or any subsequent enforcement proceedings. Mr. Ruiz confirmed that the Cooperation Agreement contemplated such cooperation and that Mr. Serrano understood this obligation.
II. BACKGROUND AND REPORTING STRUCTURE (RECONFIRMATION)
At the beginning of the substantive portion of the interview, Mr. Serrano reconfirmed the background information he had provided during Session 1 regarding his role, tenure, and reporting relationships within VHG and VCR.
Mr. Serrano confirmed that he held the position of Controller of Verimark Coastal Resorts LLC, a wholly owned subsidiary of Verimark Hospitality Group Inc. VCR's principal office is located at 7820 Gulf Breeze Parkway, Suite 400, Destin, Florida 32541. VCR operates multiple resort and timeshare properties along the Florida Gulf Coast.
Mr. Serrano stated that at the time he was placed on administrative leave — August 7, 2023 — he had been employed by VHG for approximately five years. He was initially hired in 2018 as a Senior Staff Accountant within VCR's finance team and was promoted to Controller in January 2020.
Mr. Serrano confirmed that his direct supervisor was Nicole Prescott, Vice President of Finance at VCR. Prescott reported to Garrett W. Daskine, Division President of VCR. Daskine, in turn, reported to Margaret "Meg" Calder, CEO of VHG, and Thomas Rhett Griffith, CFO of VHG. Mr. Serrano stated that, in practice, Daskine operated VCR with a significant degree of autonomy from VHG corporate headquarters and that interactions between VCR's finance team and VHG's corporate finance function were limited primarily to the monthly and quarterly reporting process.
Mr. Serrano described his typical duties as Controller of VCR as follows:
• Managing VCR's general ledger, including overseeing chart-of-account maintenance and ensuring the accuracy of entries posted to the ledger.
• Processing purchase orders and overseeing the accounts-payable function, including vendor setup, invoice processing, and payment disbursement.
• Preparing monthly financial reports for VCR, which were consolidated into VHG's corporate financial reporting through Mr. Griffith's finance team at VHG headquarters.
• Assisting with quarterly and annual audit support, including responding to information requests from VHG's independent auditor, Hargrove, Stokes & Appletonton LLP ("HSA").
• Managing VCR's payroll interface with VHG's centralized payroll function.
Mr. Serrano stated that he had approximately four direct reports within VCR's accounting department, including a senior accountant, two staff accountants, and an accounts-payable specialist. He noted that none of these individuals, to his knowledge, were aware of the fictitious vendor scheme or the premature revenue-recognition practices at issue in this investigation.
III. GENESIS OF THE FICTITIOUS VENDOR SCHEME
A. Initial Approach by Daskine
Mr. Serrano stated that in approximately February 2021, Garrett Daskine approached him privately in Daskine's office at VCR's Destin headquarters. Serrano recalled that the conversation occurred late in the afternoon, after most other personnel had left the office for the day. Daskine closed the door and told Serrano that he wanted to discuss a "business idea" that he needed Serrano's help with.
Daskine proposed establishing an outside vendor entity that could receive payments from VCR for capital-improvement work that would not actually be performed. Daskine explained that he wanted a "flexible funding mechanism" for certain expenses that he did not want running through VHG's standard corporate-card program or reimbursement system. Daskine did not initially specify the nature of the expenses he intended to fund through this arrangement, but he made clear that the entity would function as a vehicle for directing VCR funds to purposes outside the ordinary course of VCR's business operations.
Mr. Serrano stated that he understood from the outset that the proposed arrangement was improper. He recognized that creating a fictitious vendor and submitting fabricated invoices for work not performed would constitute fraud against VCR and VHG. However, Serrano stated that he felt significant pressure from Daskine to comply. Daskine was a 17-year veteran of VHG, the Division President of VCR, and the most senior executive in the Destin office. Daskine directly controlled Serrano's performance evaluations, annual bonus determinations, and, effectively, his continued employment at VCR. Serrano stated that he did not believe he could refuse Daskine's request without suffering adverse employment consequences, including potential termination.
Serrano stated that he did not raise the proposal with anyone else, including Prescott, at that time. He did not report Daskine's request to VHG General Counsel Patricia Navarro, CFO Thomas Griffith, or any member of VHG's Board of Directors or Audit Committee. He acknowledged that VHG maintained an anonymous ethics hotline but stated that he did not use it.
When asked why he did not report the proposal through VHG's compliance channels, Serrano stated that he feared retaliation from Daskine, that he did not trust the anonymity of the hotline given Daskine's senior position, and that he was uncertain whether anyone at VHG corporate would take action against Daskine, who was viewed as a high performer and a close associate of CEO Meg Calder.
B. Formation of Gulf Standard Contracting LLC
At Daskine's direction, Serrano filed articles of organization for Gulf Standard Contracting LLC ("GSC") with the Florida Department of State, Division of Corporations, on March 12, 2021. Serrano stated that he completed the filing online using information provided by Daskine.
Serrano served as the registered agent for GSC, listing the registered-agent address as his personal residence. The sole member of GSC was Garrett Daskine, although Daskine's ownership interest was held through what Serrano described as a "nominee arrangement." Specifically, the formation documents listed the name of a personal friend of Daskine as the member of GSC. Serrano stated that he did not know the nominee personally but understood the nominee to be a longtime acquaintance of Daskine who agreed to lend his name to the filing. Serrano was emphatic that Daskine was the true beneficial owner of GSC and the sole decision-maker with respect to the entity's affairs, including all financial transactions. The nominee did not, to Serrano's knowledge, participate in or have knowledge of the fictitious vendor scheme.
Shortly after the formation of GSC, a commercial bank account was opened for the entity at a local bank branch in Destin, Florida. Daskine was the sole signatory on the account. Serrano stated that he assisted with the account opening by providing the entity's formation documents to the bank but that he did not have signatory authority and was not authorized to make withdrawals or transfers from the account.
Serrano stated that GSC had no employees, no physical office space, no equipment, and no operational infrastructure. It existed solely as a vehicle for receiving fraudulent payments from VCR.
C. Formation of Clearwater Design Collective Inc.
Mr. Serrano stated that in late May 2021, approximately two to three months after the formation of GSC, Nicole Prescott approached him and told him that she wanted a similar arrangement — a separate entity through which she could receive payments from VCR for services not actually rendered. Serrano stated that Prescott was direct in her request and appeared to already be aware of the GSC arrangement, which Serrano attributed to conversations between Prescott and Daskine.
At Prescott's request, Serrano filed articles of incorporation for Clearwater Design Collective Inc. ("CDC") with the Florida Department of State, Division of Corporations, on June 4, 2021. CDC was organized as a Florida corporation. Serrano again served as the registered agent, listing the registered-agent address as his personal residence.
Nicole Prescott was the sole shareholder of CDC. Unlike the GSC arrangement, Prescott's ownership was direct and not through a nominee. Serrano stated that he raised this as a potential concern with Prescott, suggesting that direct ownership could be traced back to her more easily, but Prescott dismissed the concern, stating that "no one is going to look."
A separate commercial bank account was established for CDC at a financial institution that Serrano recalled was different from the bank used for GSC, although he could not recall the name of the institution with certainty during the interview. Prescott was the sole signatory on the CDC account. As with GSC, Serrano assisted in providing formation documents for the account opening but did not have signatory authority.
Serrano stated that Prescott's involvement in the scheme was known to Daskine. Serrano observed interactions between Daskine and Prescott that indicated Daskine was aware of and approved of Prescott's formation of CDC and her receipt of payments through it. Serrano stated that the two appeared to operate in coordination, with Daskine serving as the overall architect of the scheme and Prescott functioning as both a participant and a facilitator through her control of the VP of Finance approval workflow.
CDC, like GSC, had no employees, no office space, no equipment, and no operational capacity. It existed solely as a vehicle for receiving fraudulent payments from VCR.
D. Formation of Suncoast Property Services LLC
Mr. Serrano stated that in the fall of 2021, approximately September or October, Daskine directed the creation of a third entity. Daskine told Serrano that he was "concerned about too much volume going through one company" and wanted to distribute the flow of payments across multiple entities to reduce the risk of detection. Daskine believed that maintaining three separate vendors, each receiving payments at different intervals and in varying amounts, would make the scheme less conspicuous than concentrating all payments through GSC alone.
At Daskine's direction, Serrano arranged for the formation of Suncoast Property Services LLC ("SPS") on November 18, 2021. SPS was organized as a Florida limited liability company. Unlike the first two entities, the registered agent for SPS was not Serrano but rather a commercial registered-agent service — Panhandle Agent Services Inc., located in Tallahassee, Florida. Serrano stated that Daskine specifically requested the use of a commercial agent service because Daskine wanted to "distance" the entity from internal VCR personnel. Serrano understood this to be an additional concealment measure, intended to obscure any connection between SPS and the individuals involved in the scheme.
The sole member of SPS was Garrett Daskine directly — not through a nominee arrangement, as had been the case with GSC. Serrano stated that he did not know why Daskine chose not to use a nominee for SPS but speculated that Daskine may have felt that the use of the commercial registered agent provided sufficient separation.
A bank account was opened for SPS, with Daskine as the sole signatory. Serrano assisted in providing the formation documents but, as with the other entities, did not have signatory authority or access to the account.
SPS, consistent with GSC and CDC, had no employees, no physical office, no equipment, and no operational presence. It existed solely as a conduit for receiving fraudulent payments from VCR.
IV. DETAILED ACCOUNT OF THE 47 FICTITIOUS PURCHASE ORDERS
A. Purchase Order Creation Process
Mr. Serrano provided a detailed description of the mechanics by which the fictitious purchase orders were created and processed through VCR's procurement system.
Serrano stated that the process began with a direction from either Daskine or Prescott (or, in many cases, both) specifying the approximate dollar amount to be invoiced and the property against which the expenditure should be coded. Using this information, Serrano would create a purchase order in VCR's procurement system — an Ridgeline Industries-based enterprise resource planning ("ERP") platform maintained by VHG's corporate IT department — for purported capital-improvement work at one of VCR's resort properties.
The two properties most frequently referenced in the fictitious purchase orders were:
• Coral Dune Resort & Residences, located at 14200 Emerald Coast Parkway, Destin, Florida 32541; and
• Palmetto Bluff Club, located at 3950 Longboat Key Drive, Sarasota, Florida 34228.
Serrano stated that he selected these two properties because both had active and ongoing capital-improvement programs during the relevant period, which made it plausible for new vendor invoices related to construction, renovation, or maintenance to appear in the accounts-payable system. The existence of legitimate capital-improvement activity at these properties provided cover for the fictitious expenditures.
The descriptions on the fictitious purchase orders were designed to match plausible categories of capital-improvement work. Serrano stated that he used descriptions such as:
• "Lobby renovation materials"
• "Pool deck resurfacing"
• "HVAC system upgrades"
• "Landscaping services"
• "Interior design consulting"
• "Exterior painting — common areas"
• "Flooring replacement — guest suites"
• "Fire suppression system inspection and repair"
Serrano stated that he selected these descriptions based on his familiarity with the types of capital-improvement expenditures that VCR routinely incurred and that he took care to vary the descriptions across invoices to avoid repetition that might draw attention.
No actual work was performed by GSC, CDC, or SPS in connection with any of the 47 purchase orders. None of the three entities had employees, equipment, or physical offices. They had no operational capacity to perform any of the services described in the purchase orders. The purchase orders and corresponding invoices were entirely fabricated.
After creating a purchase order, Serrano would generate a corresponding invoice bearing the name, address, and purported contact information of the relevant shell entity. The invoices were formatted to resemble standard vendor invoices, with invoice numbers, dates, line-item descriptions, and totals. Serrano stated that he created the invoice templates himself using Microsoft Word and printed them on plain paper. The invoices were then submitted through VCR's accounts-payable workflow for approval and payment.
B. Approval and Authorization Workflow
Serrano described the approval and authorization workflow for purchase orders within VCR as follows:
• For purchase orders with a total amount under $50,000, only the approval of the VP of Finance (Nicole Prescott) was required. Prescott could authorize such expenditures without any additional sign-off.
• For purchase orders with a total amount at or above $50,000 but below $100,000, the additional approval of the Division President (Garrett Daskine) was required, in addition to Prescott's approval.
• Under VHG corporate policy, purchase orders with a total amount at or above $100,000 were required to be routed to the corporate CFO (Thomas Rhett Griffith) for approval. This was a corporate-level control intended to provide oversight of significant expenditures by VHG subsidiaries.
Serrano stated that Daskine and Prescott always approved the fictitious purchase orders promptly and without raising questions or requesting supporting documentation. This was expected, given that both individuals were participants in the scheme and were the direct beneficiaries of the payments. Serrano noted that on several occasions, Prescott approved a purchase order within minutes of its submission, which was significantly faster than her typical response time for legitimate vendor invoices.
Critically, Serrano confirmed that no individual purchase order was set at an amount at or above $100,000. This was a deliberate concealment measure, intended to avoid triggering the corporate-level approval threshold that would have required the involvement of CFO Thomas Griffith. Serrano stated that Daskine specifically instructed him to keep all invoices below $100,000 for this reason. On at least two occasions, Daskine requested invoices in amounts that would have exceeded $100,000, and Serrano reminded him of the threshold, resulting in the amount being reduced or split across multiple invoices.
C. Distribution Across the Three Entities
Mr. Serrano confirmed the following distribution of fictitious invoices across the three shell entities, which is consistent with the data compiled by Crestline Forensic Advisory LLC in its preliminary forensic analysis report dated October 30, 2023:
The scheme ran from approximately July 2021, when the first fictitious invoice was submitted and paid, through approximately June 2023, when the last fictitious invoice was processed — a period of approximately 24 months. Serrano confirmed that the grand total of fraudulent disbursements was $1,830,000 (one million eight hundred thirty thousand dollars).
D. The Largest Single Invoice
Serrano identified the largest single fictitious invoice as Invoice No. GSC-2023-007, dated February 14, 2023, from Gulf Standard Contracting LLC, in the amount of $94,500. The invoice description was "lobby renovation materials — Coral Dune Phase III."
Serrano stated that no lobby renovation designated as "Phase III" was underway at the Coral Dune Resort & Residences at that time, and the invoice description was entirely fabricated. While there had been earlier phases of renovation work at the Coral Dune property performed by legitimate contractors, the "Phase III" designation was created by Serrano for the purpose of lending plausibility to the invoice.
Serrano stated that Daskine specifically requested this larger invoice amount because he had significant personal expenses to cover at the time. Serrano understood, based on conversations with Daskine, that the expenses related to a substantial construction project at Daskine's personal residence, including kitchen renovation and exterior improvement work. Serrano recalled Daskine stating words to the effect of, "I need a bigger one this time — the house is bleeding me dry."
The invoice amount of $94,500 was set just below the $100,000 corporate-level approval threshold, consistent with the concealment strategy described above.
E. Cadence and Volume Over Time
Mr. Serrano stated that the volume and frequency of fictitious purchase orders escalated significantly over the 24-month duration of the scheme.
During the initial months of the scheme — approximately July through December 2021 — only a handful of invoices were created. These early invoices were relatively small, typically in the range of $15,000 to $30,000 each, and were submitted infrequently, approximately once per month or less. Serrano described this initial period as a "testing phase," during which Daskine appeared to be assessing whether the invoices would attract attention or trigger any internal controls review.
By 2022, the invoice amounts increased and the frequency of submissions grew. Serrano estimated that during 2022, the average monthly volume was approximately two to three invoices per month across the three entities, with individual invoice amounts ranging from $20,000 to $75,000. By early 2023, the average invoice amount had increased further, with several invoices in the $60,000 to $94,500 range.
Serrano attributed the escalation to two factors. First, Daskine and Prescott grew more comfortable with the arrangement as time passed without detection, which emboldened them to increase the amounts and frequency. Second, their personal expenditure needs appeared to increase during this period. Serrano stated that Daskine undertook significant renovations to his personal residence beginning in late 2022, which Serrano believed drove the larger invoice requests. Prescott, similarly, appeared to increase her personal spending during this period, although Serrano had less direct visibility into Prescott's expenditures.
V. FUND-FLOW MECHANICS
A. Payment Processing
Mr. Serrano described the payment processing mechanics as follows.
Once a purchase order was created in VCR's procurement system and the corresponding invoice was submitted, Serrano processed the payment through VCR's standard accounts-payable system. He coded each expenditure to capital-improvement budget line items for the relevant property — either Coral Dune Resort & Residences or Palmetto Bluff Club. By coding the payments to capital-improvement accounts, the expenditures were classified as property-level capital expenditures in VCR's financial records and were not subjected to the more rigorous scrutiny typically applied to operating expenses or unusual disbursements.
Payments to the shell entities were made by ACH (Automated Clearing House) transfer from VCR's operating account to the bank accounts of GSC, CDC, or SPS. Serrano stated that VCR's standard payment method for vendor invoices was ACH transfer and that the use of this method for the fictitious invoices did not deviate from normal practice. No payments were made by check or wire transfer, which Serrano stated would have been more unusual for the types and amounts of expenditures involved.
The typical processing time from invoice submission to ACH disbursement was 10 to 15 business days, consistent with VCR's standard payment cycle for vendor invoices. Serrano stated that there were no expedited payments or rush processing requests associated with the fictitious invoices, as doing so might have attracted attention from the accounts-payable specialist who assisted with payment processing.
B. Subsequent Movement of Funds
Mr. Serrano stated that once funds arrived in the bank accounts of the shell entities, the control and disbursement of those funds was managed entirely by Daskine and Prescott. Serrano did not have signatory authority or access to any of the three shell entity bank accounts and was not directly involved in decisions about how the funds were spent after they left VCR's accounts.
However, Serrano stated that he had limited visibility into the downstream movement of funds based on conversations with Daskine and, to a lesser extent, Prescott, as well as documents he observed on occasion. Serrano described the following uses of the misappropriated funds, based on his knowledge and understanding:
Personal credit-card payments. Both Daskine and Prescott used shell entity funds to pay personal credit-card balances. Serrano recalled Daskine mentioning on multiple occasions that he was making credit-card payments from the GSC and SPS accounts. Serrano also recalled Prescott referencing credit-card payments from the CDC account.
Residential renovation at Daskine's personal residence. Daskine's personal residence is located at 312 Harbor View Lane, Destin, Florida 32541. Serrano stated that Daskine mentioned on numerous occasions a major kitchen renovation and exterior improvement project at his home, for which contractors were paid directly from the GSC and SPS accounts. Serrano recalled seeing, on at least one occasion, invoices from what appeared to be a legitimate residential contracting firm on Daskine's desk, and Daskine confirmed that those invoices were being paid from "the other accounts," which Serrano understood to refer to the shell entity bank accounts.
Boat-slip fees. Daskine maintained a boat slip at a marina in Destin. Serrano stated that Daskine told him the slip fees were being paid from the SPS account. Serrano did not know the specific marina or the amount of the fees.
Luxury-goods purchases. Serrano recalled Prescott mentioning, in casual conversation, purchases of jewelry and designer goods that she described as having been funded through CDC. Serrano could not recall specific items or amounts but stated that these references occurred on more than one occasion.
Serrano noted that the forensic analysis conducted by Crestline Forensic Advisory LLC, which had been shared with him through his counsel (Mr. Ruiz) in connection with the cooperation process, was consistent with his understanding of these fund flows. He stated that the Crestline findings, as he understood them, confirmed the types of expenditures he had described.
C. Concealment Measures
Mr. Serrano described several deliberate concealment measures that were employed to reduce the risk of detection of the scheme:
1. Plausible invoice descriptions. As described above, purchase order and invoice descriptions were designed to match plausible categories of capital-improvement work at existing VCR properties. Serrano selected descriptions that corresponded to types of work that VCR routinely contracted for, reducing the likelihood that the invoices would appear anomalous in the context of VCR's overall capital-improvement spending.
2. Sub-$100,000 invoicing threshold. No individual purchase order or invoice was set at an amount at or above $100,000, which was the threshold at which VHG corporate policy required approval by the corporate CFO (Thomas Griffith). By keeping all invoices below this threshold, the fictitious expenditures were confined to the VCR-level approval workflow controlled by Daskine and Prescott.
3. Distribution across multiple entities. The use of three separate shell entities was intended to avoid concentration of payments to a single vendor that might attract scrutiny during internal reviews or audits. By distributing payments across GSC, CDC, and SPS, the volume directed to any single entity was reduced, making each individual entity's payment history appear less conspicuous.
4. Varied vendor contact information. Serrano occasionally varied the "vendor contact" information and addresses on invoices submitted by the shell entities. He used P.O. Box addresses and, in the case of SPS, the registered-agent address of Panhandle Agent Services Inc. in Tallahassee, to create the appearance of distinct and independent business operations. Serrano stated that this variation was intended to prevent anyone reviewing the accounts-payable records from noticing that multiple vendors shared common contact information.
5. Avoidance of vendor-qualification review. Serrano stated that he never submitted any of the three shell entities for formal vendor-qualification review. VCR maintained a vendor-qualification process that was intended to verify the legitimacy and bona fides of new vendors prior to their being added to the approved vendor list. However, Serrano stated that VCR's vendor-approval controls were lax in practice. Prescott, as VP of Finance, had the authority to authorize the addition of new vendors to the system without independent verification, and she exercised that authority to approve GSC, CDC, and SPS without requiring any of the documentation or verification that the formal process contemplated.
VI. DASKINE'S DIRECTION AND OVERSIGHT OF THE SCHEME
A. Daskine as Architect
Mr. Serrano stated unequivocally that Garrett W. Daskine conceived, directed, and controlled the fictitious vendor scheme from its inception. Daskine was the originator of the idea, the person who instructed Serrano to form the shell entities, and the individual who controlled the timing, amounts, and descriptions of the fictitious invoices.
Serrano stated that Daskine selected the amounts and timing of invoices to be submitted, sometimes communicating his instructions to Serrano via text messages sent from Daskine's personal mobile phone. These text messages typically specified a dollar amount, the shell entity to be used (GSC, CDC, or SPS), and, in some cases, a suggested description for the invoice. In other instances, Daskine communicated instructions by telephone call from his personal phone or in person at the VCR office. Serrano stated that Daskine generally avoided using his VHG corporate email for communications related to the scheme, preferring personal channels that he believed would be less susceptible to monitoring or discovery.
Daskine also made the strategic decision to create the third entity (SPS) in the fall of 2021 to distribute the payment volume, as described above. This decision reflected Daskine's ongoing involvement in managing the operational details of the scheme, not merely its conception.
Serrano stated that at no point during the 24-month duration of the scheme did Daskine express doubt, hesitation, or second thoughts about the arrangement. To the contrary, Daskine appeared increasingly confident in the scheme's sustainability as time passed without detection.
B. Daskine's Awareness of Revenue-Recognition Practices
Mr. Serrano stated that the fictitious vendor scheme was separate from, but occurred alongside, the premature revenue-recognition practices at VCR that are also under investigation.
Serrano understood, based on his observations and involvement in VCR's accounting processes, that Daskine directed Prescott to book timeshare-interest purchase deposits as completed revenue upon the signing of purchase agreements by buyers, rather than deferring recognition until the expiration of the 10-day rescission period mandated by Florida Statute § 721.10. Under that statutory provision, purchasers of timeshare interests in Florida have the right to rescind their purchase agreements within 10 days of execution, and any deposits collected during that period are subject to refund if the purchaser exercises the rescission right.
Serrano stated that his personal role in the revenue-recognition process was limited. He processed journal entries that were prepared by Prescott's team, including entries that recorded timeshare-interest deposits as revenue upon contract execution. Serrano stated that he was aware these entries were premature and inconsistent with what he understood to be the appropriate accounting treatment under ASC 606 (Revenue from Contracts with Customers) and VHG's stated accounting policies, which he believed required deferral of revenue recognition until the rescission period had expired.
Serrano stated that the rescission rate during the investigated period was approximately 14.3%, which was higher than the industry average of approximately 11%. This meant that a meaningful portion of the revenue that VCR recognized upon contract execution would ultimately need to be reversed when purchasers exercised their rescission rights. Serrano stated that these reversals occurred but were often recorded in subsequent periods, creating a pattern of premature recognition followed by later adjustment that obscured the true financial performance of VCR's timeshare-sales operations.
Serrano stated that Daskine's motivation for the premature revenue-recognition practice was to meet or exceed quarterly revenue targets established by VHG corporate. Meeting these targets directly affected Daskine's performance bonus, which was calculated in part based on divisional revenue metrics, as well as VCR's standing within VHG's portfolio of operating subsidiaries. Serrano stated that Daskine was intensely focused on meeting quarterly targets and that the premature recognition practice was a tool Daskine used to ensure that VCR's reported numbers met or exceeded expectations.
C. Daskine's Instructions Regarding Confidentiality
Mr. Serrano recalled specific statements by Daskine regarding the need for confidentiality about both the fictitious vendor scheme and the revenue-recognition practices.
With respect to the fictitious vendor scheme, Serrano recalled Daskine explicitly telling him on more than one occasion that "this stays between us." Serrano also recalled Daskine warning him that if the arrangement were exposed, "we all go down together" — a statement that Serrano interpreted as both a threat and an attempt to ensure Serrano's continued silence by emphasizing their mutual exposure.
With respect to the revenue-recognition practices, Daskine told Serrano not to discuss VCR's revenue-recognition timing with anyone outside VCR, including VHG's corporate finance team or the independent auditors at HSA. Serrano stated that Daskine was particularly insistent that Serrano not raise revenue-recognition timing issues in any communications with HSA's audit team during the quarterly review and annual audit processes. Serrano complied with these instructions.
VII. PRESCOTT'S ROLE
A. Prescott's Participation in Expense Scheme
Mr. Serrano described Nicole Prescott's role in the fictitious vendor scheme as that of both a direct participant and a facilitator.
As described above, Prescott was the sole shareholder of Clearwater Design Collective Inc. She directly benefited from 16 fictitious invoices submitted in CDC's name, totaling $587,600 in fraudulent disbursements from VCR. These funds were deposited into the CDC bank account over which Prescott had sole signatory authority.
Prescott also played a critical role in the approval workflow. As VP of Finance, Prescott had authority to approve all purchase orders under $50,000 without additional sign-off. She approved all fictitious POs that fell within her approval authority promptly and without inquiry. For larger POs requiring Daskine's additional approval, Prescott approved first and then forwarded the PO to Daskine, who also approved without delay.
Serrano stated that Prescott was aware of and participated in selecting invoice descriptions for the fictitious purchase orders. On several occasions, Prescott suggested specific descriptions that she believed would be most consistent with ongoing or recently completed projects at VCR properties, reducing the likelihood of the invoices attracting attention.
In addition, as VP of Finance, Prescott had the authority to approve new vendors in VCR's procurement system without independent verification. She used this authority to add GSC, CDC, and SPS to the approved vendor list without subjecting them to the formal vendor-qualification process that VCR's policies nominally required. This was a critical enabling step, as the vendor-qualification process, had it been followed, would likely have identified the shell entities as lacking the indicia of legitimate business operations.
B. Prescott's Role in Revenue-Recognition Scheme
Serrano stated that Prescott was the primary implementer of the premature revenue-recognition practice at VCR. While Daskine directed the overall approach, Prescott was responsible for operationalizing it within VCR's accounting function.
Prescott directed her team — the revenue-accounting personnel within VCR's finance department — to record timeshare-interest purchase deposits as completed sales revenue upon the execution of purchase agreements by buyers, rather than deferring recognition until the expiration of the 10-day statutory rescission period. Prescott prepared or supervised the preparation of the journal entries that effected this recognition, and Serrano then processed those entries through VCR's general ledger.
Serrano recalled a specific instance in which Prescott articulated this approach as VCR's policy. During a team meeting in approximately the fourth quarter of 2022, Prescott stated words to the effect of, "We book on signing — that's our policy." Serrano stated that he believed this statement was inconsistent with the requirements of ASC 606 and VHG's stated accounting policies, but he did not challenge Prescott in the meeting or raise the issue subsequently.
Serrano stated that he did not know whether Prescott genuinely believed the recognition-upon-signing approach was appropriate under applicable accounting standards or whether she was knowingly implementing an improper practice at Daskine's direction. However, Serrano noted that Prescott was an experienced finance professional — a CPA with prior public-accounting experience — and he found it difficult to believe that she was unaware of the rescission-period issue and its implications for revenue recognition.
VIII. SERRANO'S OWN CULPABILITY AND MOTIVATION
Mr. Serrano acknowledged his active and knowing participation in the fictitious vendor scheme. He stated, without equivocation, that he created the 47 fictitious purchase orders at the direction of Daskine and Prescott. He formed two of the three shell entities (GSC and CDC) and served as registered agent for both. He arranged for the formation of the third entity (SPS), although a commercial registered agent was used. He fabricated invoices, submitted them through VCR's accounts-payable workflow, and processed the resulting payments.
Serrano stated that he did not receive direct financial benefit from the shell entity payments. He did not hold an ownership interest in any of the three entities — GSC, CDC, or SPS — and he did not receive payments, distributions, or transfers from any of their bank accounts. He stated that the fraudulent funds flowed exclusively to Daskine (through GSC and SPS) and Prescott (through CDC), and that he was not a beneficiary of those funds.
However, Serrano acknowledged that he derived indirect benefits from his participation. He received favorable performance reviews and above-average annual bonuses during the period of the scheme, which he attributed in part to Daskine's favorable treatment of him as a result of his compliance with Daskine's directives and his facilitation of the scheme. Serrano stated that his annual bonus during the period averaged approximately 25% of his base salary, compared to a typical bonus range of 10–15% for employees at his level. While Serrano could not quantify the precise portion of his bonus attributable to his participation in the scheme versus his legitimate job performance, he acknowledged that the favorable treatment was connected to his role in the arrangement.
Serrano also acknowledged that fear of retaliation and termination motivated his continued participation. He stated that he felt unable to extricate himself from the scheme without risking his employment, and that as the scheme progressed and the amounts grew, he became increasingly aware that his own exposure was growing. He described a feeling of being "trapped" — aware that continuing was wrong, but equally aware that disclosing the scheme would implicate him as a participant.
Mr. Serrano expressed remorse for his participation. He stated that his decision to cooperate with the investigation was motivated by a desire to "make things right" and to provide a full and truthful account of his involvement and the involvement of others. He acknowledged that he should have reported Daskine's initial proposal through VHG's compliance channels and that his failure to do so was a serious error in judgment.
IX. COMMUNICATIONS AND DOCUMENTARY EVIDENCE IDENTIFIED BY SERRANO
A. Text Messages
Mr. Serrano stated that he preserved text messages between himself and Daskine on his personal mobile phone. These text messages span the period of the scheme and include communications in which Daskine provided specific directions regarding invoice amounts, descriptions, and the entities to be used. Serrano stated that many of the text messages are short and relatively cryptic but that, read in context, they clearly relate to the preparation and submission of fictitious invoices.
Serrano's counsel (Mr. Ruiz) confirmed that copies of the text messages had been produced to Calderwood & Harkness pursuant to the Cooperation Agreement. Ruiz stated that the production was made on November 28, 2023, and included screenshots and a forensic extraction performed by a third-party vendor retained by Coletti & Ruiz. Calderwood & Harkness's review of these materials is ongoing.
Serrano stated that his text communications with Prescott regarding the scheme were fewer in number. Prescott generally communicated with Serrano about the fictitious invoices in person or by email through the VCR corporate email system. Serrano identified several email exchanges on VCR email relating to invoice processing for CDC, which are discussed further below.
B. Email Communications
Mr. Serrano identified specific email threads within his VCR corporate email account that are relevant to the investigation. These include:
• Emails from Prescott to Serrano containing instructions on journal-entry timing for timeshare-interest deposit recognition. Serrano stated that these emails directed him to post journal entries recording deposits as revenue upon execution of purchase agreements and reflect the premature revenue-recognition practice at issue.
• Emails from Daskine to Serrano in which Daskine forwarded invoices from what appeared to be legitimate residential contracting firms. Serrano stated that he believed these were invoices for work performed at Daskine's personal residence at 312 Harbor View Lane, Destin, Florida 32541, and that Daskine forwarded them to Serrano for purposes Serrano did not fully understand — possibly for reference in setting the amounts of upcoming fictitious invoices, or possibly inadvertently. Serrano stated that these forwarded invoices corroborated his understanding that Daskine was using shell entity funds to pay for personal residential construction.
Serrano stated that he had identified these email threads to his counsel and that they should be among the materials collected by Triton discovery Solutions Inc. as part of the document-preservation and collection process implemented at the outset of the investigation.
C. Additional Documents
In addition to the text messages and email communications described above, Mr. Serrano provided the following additional documents through his counsel in connection with the interview:
Personal bank records. Serrano produced copies of his personal bank statements for the period from January 2021 through August 2023. Serrano stated that these records demonstrate that he did not receive wire transfers, ACH transfers, or other deposits from any of the three shell entities during the relevant period, which corroborates his assertion that he did not receive direct financial benefit from the fraudulent payments.
Handwritten notebook. Serrano produced a handwritten notebook in which he logged certain purchase order numbers, dates, amounts, and the corresponding shell entity for each fictitious invoice he created. Serrano stated that he maintained this log as a personal record throughout the duration of the scheme. He stated that he did not create the log at anyone's direction and that neither Daskine nor Prescott was aware of its existence. Serrano stated that the notebook was kept at his personal residence and was not maintained on VCR premises. The notebook was produced to Calderwood & Harkness at the interview and has been logged into the investigation file.
Calderwood & Harkness intends to cross-reference the entries in Serrano's notebook against VCR procurement records previously collected through Triton discovery Solutions Inc. as a verification step.
X. SERRANO'S KNOWLEDGE OF HSA'S FINDINGS AND THE 8-K
Mr. Serrano stated that he became aware of the identification by Hargrove, Stokes & Appletonton LLP ("HSA") of a potential material weakness in VHG's internal controls over financial reporting only after he was placed on administrative leave on August 7, 2023. Specifically, Serrano learned — through news reports and, subsequently, through his counsel — that HSA had identified approximately $9.8 million in timeshare-interest deposits that had been improperly recognized as revenue in VCR's financial statements for the first quarter of 2023, triggering a broader review of VCR's revenue-recognition practices and the discovery of the fictitious vendor scheme.
Serrano stated that he was aware VHG filed a Current Report on Form 8-K with the Securities and Exchange Commission on August 14, 2023, under Item 4.02 (Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review). He understood that the 8-K filing disclosed VHG's determination, in consultation with the Audit Committee, that VHG's previously issued financial statements for certain periods should no longer be relied upon and that the financial statements would be restated.
Mr. Serrano stated that prior to the HSA finding, he had not communicated concerns about either the revenue-recognition practices or the fictitious vendor scheme to anyone outside VCR. Specifically, he did not report these matters to VHG General Counsel Patricia Navarro, CFO Thomas Rhett Griffith, any member of VHG's Board of Directors or Audit Committee, or HSA. He reiterated the reasons he had previously provided for his failure to report: fear of retaliation by Daskine, distrust of the anonymity protections of VHG's ethics hotline, and uncertainty about whether VHG corporate would act on a report against Daskine given Daskine's seniority and perceived close relationship with VHG's CEO.
XI. SERRANO'S PRIOR INTERVIEW AND COOPERATION AGREEMENT
Quinn noted for the record that Mr. Serrano's first interview in connection with the investigation was conducted on September 27, 2023, at the offices of Calderwood & Harkness LLP in Miami. Mr. Ruiz was present during Session 1 as counsel for Mr. Serrano. The Session 1 interview covered background information, an initial overview of the fictitious vendor scheme, and preliminary identification of documents and communications.
Since Session 1, Mr. Serrano entered into a formal Cooperation Agreement with Verimark Hospitality Group Inc. on November 15, 2023. The Cooperation Agreement sets forth the terms of Mr. Serrano's cooperation with the Audit Committee's investigation, including his obligation to provide truthful and complete information and documents, to make himself available for additional interviews, and to cooperate with regulatory and governmental authorities if requested by VHG. The Cooperation Agreement also sets forth certain protections afforded to Mr. Serrano in exchange for his cooperation, the terms of which are documented separately in the investigation file.
Mr. Serrano confirmed that the information he provided in Session 2 was consistent with and supplemented the information he provided in Session 1. He identified no material corrections to or inconsistencies with his prior testimony. Where Session 2 covered topics previously addressed in Session 1, the information provided in Session 2 was more detailed and granular, reflecting the deeper level of inquiry contemplated by Session 2's scope.
Mr. Serrano confirmed that he had not communicated with Garrett Daskine or Nicole Prescott since being placed on administrative leave on August 7, 2023. He stated that he had complied with the directive from VHG and the terms of the Cooperation Agreement prohibiting such contact. He stated that neither Daskine nor Prescott had attempted to contact him, to his knowledge.
XII. CONCLUDING MATTERS
A. Follow-Up Items
At the conclusion of the substantive portion of the interview, Quinn identified the following follow-up items for the investigation team:
1. Text message review. Calderwood & Harkness to complete its review of the text messages produced by Mr. Serrano through Mr. Ruiz on November 28, 2023. The review should focus on identifying specific directions from Daskine regarding invoice amounts, timing, and descriptions, as well as any communications that shed light on the downstream use of the misappropriated funds.
2. Notebook cross-reference. Calderwood & Harkness to review Mr. Serrano's handwritten notebook and cross-reference the purchase order numbers, dates, and amounts recorded therein against VCR procurement records already collected through Triton discovery Solutions Inc. This exercise will serve as a verification of the completeness and accuracy of the data previously compiled by Crestline Forensic Advisory LLC.
3. Fund-flow tracing. Crestline Forensic Advisory LLC, through its engagement leads Douglas Reinhardt and Priya Venkatesh, to complete fund-flow tracing for the three shell entity bank accounts using the newly produced bank records. This analysis should trace funds from their initial deposit in the shell entity accounts through to their ultimate disposition, identifying specific recipients and expenditure categories.
4. Third interview session. A determination will be made as to whether a third interview session with Mr. Serrano is necessary. Quinn stated that he did not anticipate one at this time, based on the comprehensiveness of the information provided in Sessions 1 and 2, but reserved the right to schedule an additional session if review of the newly produced documents or the Crestline analysis raises additional questions.
B. Admonitions. Quinn reiterated the confidentiality of the interview and reminded Mr. Serrano that he is not to discuss the substance of the interview with anyone other than his personal counsel, Mr. Ruiz, or other counsel at Coletti & Ruiz PA. Quinn further reminded Mr. Serrano that the attorney-client privilege with respect to the interview belongs to VHG, acting through its Audit Committee, and that disclosure by Mr. Serrano of the interview's content could constitute a breach of the Cooperation Agreement and a waiver of the privilege.
Mr. Ruiz acknowledged on the record the ongoing obligations of both himself and Mr. Serrano under the Cooperation Agreement, including the obligation of continued cooperation, truthful disclosure, and confidentiality. Mr. Ruiz stated that Mr. Serrano understood and would comply with these obligations.
C. Adjournment. The interview was adjourned at approximately 3:15 p.m. on December 5, 2023. Including two breaks — one mid-morning break of approximately 15 minutes and a lunch break of approximately 45 minutes — the total time of active interview was approximately four and one-half hours.
Prepared by: Steven Hollander, Calderwood & Harkness LLP
Reviewed by: Liam Donahue, Calderwood & Harkness LLP
Approved by: Howard Quinn, Calderwood & Harkness LLP