[Update 1: Story updated with a statement from the law firm of Morris Schneider Wittstadt]

The situation surrounding the escrow account shortages discovered at LandCastle Title and the law firm of Morris Schneider Wittstadt is becoming significantly more complicated by the day, to the point where the tangled web — that led to PGA golfer Dustin Johnson suing the firm’s managing partners for stealing $3 million from him — is beginning to border on sinister.

Last month, Johnson filed a lawsuit against the title law firm of Morris Hardwick Schneider (now known as Morris Schneider Wittstadt), the firm’s former managing partner, Nathan (Nat) Hardwick, the firm’s current managing partner, Mark Wittstadt, and his brother, Gerard (Rod) Wittstadt, alleging that the parties conspired to steal $3 million from him to cover shortages in the firm’s accounts allegedly created by Hardwick, who stands accused by his former partners of embezzling at least $30 million from the firm’s own accounts and the firm’s trust accounts.

The Wittstadts fired back at Johnson’s claims earlier this month in an attempt to get Johnson’s lawsuit dismissed, saying that Johnson’s lawsuit was without merit, devoid of facts, “patently false” and a “travesty to legal pleading.”

Conspiracy allegations

Now, Johnson has answered the Wittstadts’ motion to dismiss with an amended complaint that levies blockbuster claims against the brothers, specifically that the Wittstadts conspired to use Hardwick as a pawn and set him up to take the fall for the shortages that were discovered in the accounts of the firm and its subsidiary, LandCastle Title.

Johnson’s complaint, filed Monday in United States District Court for the Northern District of Georgia and obtained exclusively by HousingWire, also alleges that the total shortfall in the firm’s accounts was originally thought to be only $6.5 million, not the $30 million that the Wittstadts accused Hardwick of stealing.

Johnson’s complaint lays out a clear, and previously unknown, timeline of how the account shortages were discovered and what the Wittstadts and Hardwick allegedly did to cover it all up.

According to Johnson’s complaint, Hardwick “played a particularly unique and significant role of trust and confidence, serving as one of Johnson’s primary advisors on all matters relating to his career as a professional golfer, as well as an officer in Johnson’s professional corporation.”

Johnson’s complaint states that on July 11, 2014, one of firm’s other partners, who is not specifically named by Johnson in the suit, informed Hardwick that there was an altered bank record for one of the firm’s escrow accounts for its real estate clients.

Then, on July 18, Hardwick reportedly discovered that LandCastle Title’s chief financial officer, who is also not identified by name, had “improperly moved funds from client escrow accounts to the law firm’s operating account.”

Johnson’s lawsuit states the CFO subsequently admitted to altering the bank statement and improperly moving $689,018.93 from the firm’s client escrow accounts into the firm’s operating account.

Based on the CFO’s admission, the firm then immediately moved $689,018.93 from its operating account to the LandCastle escrow accounts to cover the shortfall.

Johnson’s lawsuit states that after the original shortfall was discovered, the firm, at Hardwick’s direction, conducted an internal investigation and uncovered additional escrow account shortages.

While the investigation was taking place, Hardwick traveled to the British Open Championship golf tournament at Royal Liverpool Golf Club in Hoylake, England. When he returned from England on July 28, Hardwick as informed of the additional shortages and informed his two other equity partners in the firm, Mark and Rod Wittstadt.

According to Johnson’s lawsuit, Hardwick then hired outside investigators and outside legal counsel to conduct a further investigation into the firm’s accounts.

Johnson’s lawsuit states that on or around July 29, Hardwick and the Wittstadts began discussing how to cover the shortages in the firm’s accounts. By Aug. 6, the total shortfall was estimated to be approximately $6.5 million.

But the firm did not have enough operating capital to cover those shortages.

Hardwick and the Wittstadts then agreed that Hardwick would loan $1.4 million of his own money to the firm and also work to obtain loans to cover the additional $5 million.

Secret negotiations?

Johnson’s lawsuit states that while Hardwick was attempting to secure those loans, the Wittstadts entered into secret negotiations with Fidelity National Financial (FNF) to bail out the firm “in order to prevent a disastrous national impact on the housing market should the escrow account misappropriations become public before the Wittstadts could cover everything up.”

Those negotiations, which took place unbeknownst to Hardwick, subsequently led to Fidelity bailing out the firm to the tune of at least $19 million, as HousingWire reported earlier this month.

Fidelity also said that “based on our current understanding” the amount needed to fund the escrow shortages could increase by an additional $10 million, which would bring the total influx of funding into LandCastle’s accounts to $29 million.

But while those negations were taking place, Hardwick approached Johnson with a “very good investment” opportunity. Hardwick allegedly told Johnson that if he loaned the firm $3 million, the firm would pay him back $4 million in equal monthly installments over a 30-month term, beginning on Sept. 6 and secured by a promissory note and guaranteed by the firm.

“Mr. Johnson trusted his lawyers and his law firm,” Johnson’s original lawsuit states, and because of that trust Johnson wired $3 million into the firm’s “Equity Partners Account” on Aug. 6.

Hardwick also secured a $2 million loan from James Pritchard, one of Hardwick’s business contacts, by promising to repay Pritchard’s loan in 24 equal monthly payments of $96,146.94, which would total $2,307,526.56 in repayment to Pritchard.

When the firm did not make its first or second monthly installment payments, both Pritchard and Johnson sued in an attempt to reclaim their money.

But Johnson’s lawsuit states that the Wittstadts conspired to set up Hardwick to take the fall for the alleged misdeeds and never had any intention of repaying Johnson or Pritchard.

“Upon information and belief, however, unknown to Hardwick, the Wittstadt brothers on behalf of themselves, the Morris Corporation, and the Morris Firm, conspired among themselves in July and early August 2014, to use Hardwick as a pawn,” Johnson’s lawsuit states.

“The Wittstadts intended and directed Hardwick to represent to Pritchard and Johnson that the firm would guarantee any loans,” Johnson’s suit continues. “To the contrary, the Wittstadts never intended to pay back any money Hardwick could get into the firm’s account, but instead intended to keep all of that money for themselves with a plan to fire Hardwick and thereafter claim any money he was able to raise from clients or contacts was solely to cover Hardwick’s own misdeeds, and should be viewed as personal loans made to Hardwick only.”

Johnson’s lawsuit states that after securing the loans from Johnson and Pritchard, Hardwick informed Fidelity on Aug. 10 that he had raised the $5 million in loans.

But according to Johnson’s lawsuit, the Wittstadts “already had their plan in motion to give up a 70% stake in LandCastle to Fidelity in exchange for Fidelity’s agreement to pay any and all shortfalls in client escrow accounts.”

Click the next page for more explosive allegations from Johnson.