Summary: A real estate closing firm has been forced to file for bankruptcy after one of its partners embezzled millions of dollars.
Daily Report Online has revealed that on Sunday, real estate closing firm Morris Schneider Wittstadt filed for bankruptcy. The firm, which is based in Atlanta, and six entities owned by brothers Mark and Gerard Wittstadt filed for Chapter 11 relief in the U.S. Bankruptcy Court for the Eastern District of Virginia on the night of July 5.
According to the filing, the firm had 33 attorneys and 95 staff on its roster as of July 2. However, at the filing date, it was down to 5 attorneys and 31 staff. According to Housing Wire, the firm did open on Monday, but told its employees not to report to work.
The firm released a statement that said, “The majority of the former attorneys and staff who served as the backbone of the firm were able to find new jobs and the firm wishes them the best in their future endeavors.”
The firm began having issues last July when its three owners, the Wittstadt brothers and Nathan Hardwick IV discovered a multimillion-dollar shortage in its escrow accounts. Hardwick owned 55.5 percent of the firm, and each of the Wittstadts owned 22.22 percent. The shortfall was estimated to be in excess of $30 million in August.
The Wittstadts forced Hardwick out and sued him for embezzlement, selling a 70 percent interest in an affiliated title company, LandCastle Title, to Fidelity National Title Company. Fidelity agreed to cover the escrow accounts.
According to the filing, the firm is entangled in various creditor claims over unpaid loans that total more than $10 million. One of the creditors, a businessman from Georgia named Jim Pritchard, won $2.6 million against the firm in May. Professional golfer Dustin Johnson also seeks repayment in the amount of $3 million, Atlanta Journal Constitution adds.
Mark Wittstadt, the firm’s executive managing partner, said, “This is a very sad and difficult circumstance for Morris Schneider Wittstadt, and we share in the disappointment and frustration of the parties involved. MSW was an extraordinary firm with many outstanding lawyers and employees, making this situation exceptionally disheartening.”
MSW’s statement also said, “After considering its relatively few options available, MSW chose Chapter 11 filing as a regrettably necessary step for the future of the firm.”
The Wittstadts have requested that the cases be consolidated under a filing for Morris Schneider Wittstadt Va. PLLC in Richmond. The Wittstadt brothers are also co-owners of MSWLAW, a holding company based in Georgia that owns Morris Schneider Wittstadt LLC in Georgia, Morris Schneider Wittstadt Va. PLLC in Virginia, and Morris Schneider Wittstadt PLLC in West Virginia.
The brothers also own Teays Valley Trustees in West Virginia and Wittstadt Title & Escrow Co. in Virginia, which are two title companies. They also have a majority interest in York Trustee Services, a title company in Tennessee.
At its peak, the firm had roughly 850 employees, including 150 lawyers and 700 staff, for its foreclosure and closing practices. The foreclosure practice was sold to Butler & Hosch in January. That firm closed in May.
Source: Daily Report Online
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