Home / Daily Dose / Chronicling a Law Firm’s Fall and Leader’s Rise
Print This Post Print This Post

Chronicling a Law Firm’s Fall and Leader’s Rise

Editor’s note: This feature originally appeared in the February issue of DS News

The bad news began with a phone call. It kicked off a chain of events that would consume the next several years of Mark Wittstadt’s life and bring about the collapse of the company he had helped build.

Now, some five and a half years after that portentous phone call, the dust has settled but the debris remains. Throughout 2014 and 2015, the headlines surrounding Nathan Hardwick IV—previously one of Wittstadt’s partners, who served as CEO of LandCastle Title and Managing Partner of Morris Hardwick Schneider (MHS)—flew fast and furiously as the details of Hardwick’s misdeeds came to light. Unfortunately for Wittstadt, those headlines also included speculation about what Wittstadt’s own role in the emerging embezzlement scheme might have been.

Since then, both Wittstadt and his brother and partner, Gerard “Rod” Wittstadt, have been exonerated and, in February 2019, Hardwick was handed a 15-year sentence by a federal judge in Atlanta. But the damage was done. Morris Hardwick Schneider became a casualty of the crime, with hundreds of jobs destroyed and the Wittstadts being forced to burn through tens of thousands of dollars in attorneys’ fees spent dealing with the aftermath and shortfalls incurred by the case.

And yet, as a new year dawns, so too does a brighter future for Wittstadt, who has spent the intervening years building Lawyers Title Exchange and the firm, Wittstadt and Wittstadt, and LTX Law Group. Notably, Wittstadt is also, for the first time since Morris Hardwick Schneider collapsed, returning to the default space. As of early 2020, Wittstadt now serves in an Of Counsel role for the firm of Quintairos, Prieto, Wood & Boyer, P.A., working in mid-Atlantic default cases.

“Success is built out of a series of failures,” Mark Wittstadt told DS News. “Your story is who you are. You can let other people tell your story, or you can own it and define it. I'm not here to say this never happened to me … but it's my story.”

How do you go about rebuilding a career atop a foundation of ashes scorched black by someone you once trusted? How do you start again in an industry you love when, to this day, a Google search of your name returns a slideshow of your worst days? It takes a certain amount of moxie to return to the room that holds that many bad memories—but Wittstadt is determined to step over them and make something new.

The First Domino

The twisting tale of Nathan Hardwick IV and the fall of Morris Hardwick Schneider was extensively chronicled as more details emerged and litigation dragged on through the decade. It’s not surprising—the case had all the makings of a Grisham novel or a late-night TV legal thriller, with millions of dollars on the line, accusations flying between all involved parties, and even the very public involvement of PGA golfer Dustin Johnson, who loaned Hardwick $3 million in 2014. At the time, Johnson was unaware of Hardwick’s misappropriations of funds.

“The default side of the firm, which I ran, was very robust,” Wittstadt said. “We had budgets. We did forecasting—six months, a year, 18 months into the future, trying to plot where the firm needed to go and what changes it needed to make in order to keep up with the times. We had business plans and continuity of business to be able to see us through both sides of the real estate market.” Wittstadt told DS News that, had things gone differently, he expects MHS would still be one of the larger real estate closing and default operations in the country.

Mark Wittstadt remembers the day the phone rang without even having to think about it—July 31, 2014.

At the time, Wittstadt’s career was enjoying a high point. Having become an equity partner, along with his brother, in the firm of Morris Hardwick Schneider just about a year prior, Wittstadt was running the firm’s default practice from Baltimore. Hardwick was running the title business from Atlanta, serving as CEO of LandCastle Title and Managing Partner of the firm. It was in the midst of an outside financial audit when an email came through from Hardwick, requesting that the Wittstadts convene for an “emergency call.”

The bad news was bad indeed—Hardwick informed Wittstadt that some $750,000 was missing from the firm’s closing trust accounts.

“All the escrow accounts were separate,” Wittstadt recalled. “Closing had their own escrow accounts and default had their own escrow accounts, and [Hardwick] indicated that it was an error that his CFO had made. He said he had directed that $750,000 be moved from the operating account back into the escrow account.”

During that initial call, Wittstadt was actually on vacation with his family at the beach. As he made follow-up calls to try and figure out what was going on, he told DS News that he had an increasing feeling that “things weren’t adding up.” He flew back to the office in Atlanta and set about making arrangements to bring in a forensic fraud examiner to go over the books carefully.

“I wanted a full reconciliation of the books and the accounts,” Wittstadt said. “I wanted to know what was gone, where it went, and how it got out.”

The examiner and his team worked between August 2 and August 13, 2014, and they eventually came to a stark conclusion. The escrow accounts were short—to the tune of $37 million.

The Makings of a Movie

Wittstadt said that, after the initial emergency call, Hardwick had told his partners that he would personally borrow or sell assets to help offset the shortfall. However, even before the final tally came from the forensic fraud investigators, Wittstadt said that he was growing increasingly concerned about the potential extent of the problem. But he said nothing could have prepared him for the reality of that $37 million total.

Wittstadt set a meeting with the firm’s founding and retired partner Art Morris and with representatives from Fidelity National Financial. After explaining the situation, and desperate to try and offset the shortfall in the escrow accounts and prevent a large, widespread impact to affected homeowners, the group soon came to an agreement: Fidelity would acquire a 70% stake in LandCastle Title. Hardwick resigned as CEO of LandCastle and Wittstadt was named Executive Managing Partner of MHS.

However, Hardwick’s attempts to borrow from outside parties in order to make up for the shortfall soon came back to haunt the firm, kicking off a barrage of litigation that would stretch over many ensuing months. Hardwick reportedly secured loans from two people: business associate James Pritchard and Johnson. In October 2014, Johnson sued Hardwick, the Wittstadts, and the law firm of MHS,

alleging that the parties involved had conspired to steal the $3 million he had extended Hardwick as a loan. According to Johnson’s suit, Hardwick allegedly told Johnson that the firm would repay him $4 million in monthly installments.

Hardwick also reportedly borrowed $2 million from Pritchard, with repayment allegedly to come in 24 monthly installments and eventually totaling a $2.3 million repayment. Obviously, neither payment plan commenced as planned, and the lawsuits soon followed in the fall of 2014.

Johnson finally reached a $2 million settlement agreement in June 2016, part of the bankruptcy plan instigated as the firm reached the final stages of its collapse. Notably, Johnson admitted as part of the settlement agreements that neither of the Wittstadts had any involvement in the loan made to Hardwick. Pritchard ultimately secured a $2 million judgment against the firm, which was handled in the bankruptcy.

“It was a waterfall,” Wittstadt said. “It just kept coming.”

Salvaging What Mattered

As Mark Wittstadt and his brother navigated a maze of litigation, conflicting stories, and financial collapse, they were also working to try and ensure that the fallout didn’t reach the homeowners who had entrusted their escrow funds to LandCastle Title and MHS.

We were fighting battles on five different fronts,” Wittstadt said. “And I was prepared to fight those battles, because we didn't do anything. But I was spread too thin.”

“I was trying to fix it all the way up until the day we filed for bankruptcy,” he continued. “I had worked my entire legal career to get to where it was, and filing for bankruptcy was the last thing that I wanted to do. We tried for almost a year to pull out, and every time we thought we'd get a step ahead, we'd just get knocked back. The legal bills were just astronomical. The amount of money we were spending to defend ourselves against all these false and frivolous allegations against my brother and I, and against the firm, just became too much for us to overcome.”

In July 2015, they made the call and filed for bankruptcy. But while this was no small decision, it didn’t mean Wittstadt and his partners were out of the woods. Rather than turning things over to a trustee, the Wittstadts opted to stay and oversee the final steps.

“Once we filed bankruptcy, the firm was done,” Wittstadt said. “We knew that. But, as lawyers, we recognized that we had undertaken the obligation to all of our clients to represent them under the code of conduct that's required of lawyers. We had an ethical and moral obligation to make sure that that was done correctly.”

Wittstadt first contacted Jeffrey R. Waxman, a Partner at Morris James LLP and one of the attorneys who helped oversee the bankruptcy proceedings, on or around May 2015.

“They had a very short period of time in which to file for bankruptcy,” Waxman said. “To their credit, Mark and Rod were stand-up individuals throughout the process, despite the fact that it would have been easy for them to simply say, ‘This is more than I bargained for, I'm washing my hands and walking away.’ The two of them stuck through it for the entire process.”

Wittstadt recalled, “We had a lot of money in our escrow accounts that needed to get back to who it belonged to. We had a number of real estate closings that needed to be completed. We needed to make sure deeds were recorded, mortgages were paid off, releases filed—those types of things. So, we had to maintain a staff to be able to wind that business down. We had to account for whose money it was and ensure that the default escrow accounts, the ones that I had managed, were reconciled to the penny.”

Well, perhaps not to the penny. “We were off by like five cents,” said Wittstadt with a wry laugh.

“Mark and his brother did far more than any other firm [in this type of situation] that I've seen to date,” said Rudy Casanova, President of Rainmaker Solutions and an industry colleague of Wittstadt. “There have been other firms in the past who would just wash their hands of their situation [once bankruptcy begins]. In one of those situations, my company was harmed and we received $1 million judgment—of which we received zero dollars. Mark and his brother did far more than most people would have to maintain their integrity in the industry.”

Waxman recalled, “This was one of the more difficult cases that I've ever had. This was a confluence of a significant number of parties with a large interest. You had openly hostile creditors and counsel who were litigious from the first day of the case. You had a creditors’ committee who were fulfilling their fiduciary obligations by monitoring everything, but that also meant a large amount of scrutiny. You had the office of the United States Trustee, the watchdog of the bankruptcy process, who was justifiably skeptical at the outset of the case. But, throughout the case, Mark and Rod came to the hearings. They filed the schedules. For long periods of time, they weren't getting payments for their salary, or if they were, they were significantly reduced.”

“It took a lot of effort to make sure that my default banking clients got all their money back, but every single one of them got all their money back,” Wittstadt continued. It took Wittstadt and his remaining staff the better part of a year to finish reconciling the escrow accounts and ensuring all those who were owed money back were addressed.

Wittstadt told DS News that, during this stressful and emotionally draining time period, he often turned back to lessons he learned from his father—who had served as a lawyer and then later as a judge—to help push him forward.

“He instilled in us that we have an ethical obligation to our clients,” Wittstadt said. “It's immaterial to your representation of your clients to allow your personal issues to interfere with your obligations to your clients. That's what I believed, and I continue to believe that today.”

The Aftermath (and a New Beginning)

In September 2016, Wittstadt’s day-to-day obligations to the firm were finalized, and oversight of the bankruptcy was passed on to the liquidating trustee. Along with a couple of employees he had remaining, Wittstadt launched LTX Companies, as well as shifting focus to the firm he founded with his brother, Wittstadt and Wittstadt.

In the years that followed, Wittstadt got back to work, representing clients doing real estate closings, title abstracting work, real estate litigation, and other related matters. After having overseen an organization of around 700 employees, Wittstadt now has just under a dozen on his payroll. It was good, honest work, but Wittstadt recalls a sense of restlessness.

“In this life, you only have two choices: you fight for your spot in the sandbox, or you pick up your toys and you go home,” he said. “I'm 54 years old today, but I'm not ready to pack up my toys and go home. I want my space back. I want my spot back.”

Time passed, as it does. In February 2019, Hardwick was finally sentenced, closing the door on the saga of MHS and LandCastle Title, but for the wounds left behind and a once successful business brought down by malfeasance.

But, as we spoke to Wittstadt in the fall of 2019, there was a new light on the horizon. In 2018, Wittstadt began returning to the sort of industry events he’d avoided for a while, including the Five Star Conference and Expo and some MBA events. He began discussing possible paths back into the default industry where he felt his skills would best be served.

In late 2019, those discussions bore fruit with the announcement that Wittstadt would be serving Of Counsel for the firm of Quintairos, Prieto, Wood & Boyer, P.A. Wittstadt will assist with the firm’s clients in the Mid-Atlantic states.

Mike Barker, Managing Partner, Financial Services Division for Quintairos, Prieto, Wood & Boyer, P.A., told DS News, “We are very pleased that Mark has joined the firm as Of Counsel. We see substantial opportunity for him to rebuild his practice in Maryland and we are pleased to embark on this journey with him. There are few people who could have gone through what he went through and still have enough in them to persevere, fight, and rebuild.”

As he returns to default practice, Wittstadt said he’s encountered a mostly warm reception from both clients and other organizations, something he says he credits to the work he and his brother put into trying to make things right. He also said he’s looking forward to returning to this field with lessons instilled both by these particular experiences and from the perspective the years have provided.

“You have to have a diversification of your law practice,” Wittstadt said. “You can't put all your eggs into one basket and expect that that business is always going to be there, it's always going to thrive, and it's always going to generate the type of revenue that you were accustomed to before. The successful plan is watching the market and figuring out how to provide the best services utilizing as much automation as you can, providing excellent customer service, and diversifying your practice to follow trends to allow for other revenue streams. That's the only way that a successful firm will survive.”

He also suggests that a sense of vigilance is critical for leadership of firms and other organizations so that they can catch red flags sooner rather than later.

“Whoever's at the helm needs to make sure that they are looking at critical areas every day to make sure that things are in accordance with how you want it to run, not just on the surface but in the underlying mechanisms, the underlying workflows,” Wittstadt said. “You have to take deeper dives down into the way your firm and your business is running. You have to know those business lines and not take for granted just what's on the surface. It's just like going to the doctor. Just because you feel good doesn't mean you don't go get your checkups.”

He added, “Everything is not always fine.”

The story of Mark Wittstadt’s past decade is one that often wound through dark places, but now there is sunlight on the horizon. Moreover, the address of his Baltimore offices as he returns to the default industry suggest that maybe, just maybe, the storm has truly passed. He’ll be doing business at 902 Light St.

“Sometimes bad things happen to good people,” Wittstadt said. What matters, he suggests, is what you do next.

About Author: David Wharton

David Wharton, Editor-in-Chief at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has nearly 20 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. He can be reached at David.Wharton@thefivestar.com.

Check Also

SFR Platform Progress Residential Names Adolfo Villagomez as CEO

Former Home Depot exec brings two decades-plus worth of experience to his new role for SFR management platform responsible for more than 80,000 homes across 30 markets.

Your Daily Dose of DS News

Get the news you need, when you need it. Subscribe to the Daily Dose of DS News to receive each day’s most important default servicing news and market information, absolutely free of charge.