VERO BEACH — Lawyer Kevin Doty finally appeared on the witness stand Monday and described the final, crumbling days of Coastal Escrow Services, the business run by his former law partner Ira Hatch which left hundreds of clients owed millions of dollars.
Hatch, who was arrested on Jan. 11, 2008 and is facing 46 felony charges of grand theft, racketeering and money laundering, has sued Doty for the value of property he allegedly assumed or disposed of after Hatch closed the offices of Coastal Escrow on Sept. 4, 2007. Doty in turn has filed a counterclaim against Hatch and ex-wife Marjorie for money owed to him and to his clients, for lost income and for expenses related to the abrupt closing of the business. Doty had been expected to take the stand since the middle of last week, but repeated delays in the trial landed him there to start the week’s proceedings.
The state called Doty to describe events in the last days of Hatch & Doty. In August 2007 Doty found out that money from a personal injury settlement — just more than $150,000 — was missing from the Hatch & Doty trust account. That discovery set off a chain of events which led to Hatch consenting to a voluntary disbarment in mid-September 2007.
Doty testified about conversations he had with Hatch just prior to the closing of Coastal Escrow.
“He told me his problems were bigger than the bar,” Doty said.
Other problems included a client who wanted to pull $1.14 million out of Coastal Escrow — money that no longer existed in that account, according to testimony given over the past three weeks. Checks were bouncing and Hatch was reportedly trying to secure a loan to cover what he owed to depositors. The only option left was to close the business, declaring a total loss.
Doty said Hatch called him while Doty was on vacation in Nova Scotia on Labor Day weekend. Defense attorney Gregory Eisenmenger refreshed Doty’s recollection of the conversation by reading from a Feb. 2009 deposition.
“You said you couldn’t be more specific whether it was Saturday, Sunday or Monday, but that Hatch said ‘The sky is falling, it really is’ and that you said to him ‘What’s going on? Why did you do what you did?’ and he said ‘Just stupidity’,” Eisenmenger said.
“Those were his words,” Doty said. “That’s exactly what he said.”
Next, Doty said Hatch told him he would be closing his offices.
Eisenmenger questioned Doty extensively as to what happened to the computers, furniture, filing cabinets and other items contained in the former Hatch & Doty P.A. office. It was revealed that Det. Lee Evans of the Vero Beach Police Department had come back in January 2010 to seize a computer that, in Doty’s words, had been “sitting in a corner.”
Doty said he believed that all the computers that were used by or contained records of Coastal Escrow Services had already been seized when the initial three search warrants were served in the fall of 2007. Despite this, financial records in the form of Quickbooks files were found on that spare computer.
In early May, the defense subpoenaed other computers from Doty’s office
Doty was released just before 3 p.m., when other witnesses for the state were set to testify as to money they allegedly lost when Coastal Escrow closed. People waiting in the corridor were a mix of Realtors and clients of Realtors and property managers who were parties to rental leases or contracts for the purchase of property.
Real estate broker Steven Schlitt testified that, after several years of Hatch courting the business of his family’s real estate company, that they finally agreed to do away with their own escrow account services and to instead transfer the bulk balance, about $780,000 to Hatch’s Coastal Escrow. Schlitt said the money deposited was not recovered by clients who still had funds in escrow when the firm closed.
Testimony continues Tuesday. Among those 30 or so people yet to testify for the state are City of Vero Beach Police Det. Evans, an investigator from the State Attorney’s Office, the state’s accounting expert and an FBI agent who worked on the case.