It turns out that nearly $20 million wasn’t enough to cover the shortages in the escrow accounts of LandCastle Title.
In August, Fidelity National Financial (FNF) acquired a 70% stake in LandCastle after “substantial escrow account misappropriations” were discovered within LandCastle’s parent company, the law firm of Morris Hardwick Schneider, in exchange for Fidelity agreeing to fund any escrow shortages in the LandCastle’s escrow accounts.
In November, HousingWire reported that Fidelity had contributed approximately $19 million to fund shortages found in LandCastle’s accounts as part of that agreement.
HousingWire reported extensively on the events surrounding LandCastle Title’s account shortages, including several blockbuster lawsuits.
One lawsuit accused former LandCastle CEO Nathan (Nat) Hardwick of embezzling $30 million from the company, while another was filed by PGA golfer Dustin Johnson, who accused Morris Hardwick Schneider, now known as Morris Schneider Wittstadt, Hardwick and the firm’s managing partners, Mark and Rod Wittstadt of using their positions as Johnson’s “trusted advisors” to steal $3 million from him to cover shortages in the firm’s accounts created by Hardwick himself.
In November, Fidelity disclosed in a filing with the Securities and Exchange Commission that based on its current understanding, the amount needed to fund the escrow shortages could increase by an additional $10 million.
While Fidelity hasn’t been forced to hand over an additional $10 million yet, the company disclosed in its 10-K annual report that it funneled an additional $3 million to LandCastle in the fourth quarter, increasing its total bailout to $22 million.
Additionally, Fidelity disclosed that on Jan. 31, it acquired an additional 5% ownership stake in LandCastle, meaning that Fidelity now owns 75% of LandCastle.
But that doesn’t mean that Fidelity is done cleaning up the mess at LandCastle Title.
Fidelity also said that “based on our current understanding” of the current situation, 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 $32 million.
"To allow LandCastle to fail would have been a calamity for the company’s employees, consumers, and the real estate industry, in general,” Fidelity said in a statement to HousingWire when the LandCastle acquisition was first disclosed.
“As a result, we felt it was in the best interest of all parties to put the financial resources of (Fidelity) behind LandCastle Title.”
Fidelity has certainly put its money where its mouth is, now to the tune of $22 million. But, the question remains – how much worse is the bailout of LandCastle Title going to get?