VERO BEACH — The fact that Ira Hatch’s Coastal Escrow firm closed on Sept. 4, 2007 leaving hundreds of depositors searching for funds is well-known, but testimony Monday revealed long-standing problems.
FBI Special Agent Rick Miller told the jury that he had found 1,138 bounced checks on Hatch’s bank accounts between 2004 and 2007 and nearly $40,000 paid to banks in returned check fees.
Former Coastal Escrow Office Manager Amelia Lennon detailed how she called several banks every morning, relayed balances to Hatch in a black-and-white student composition notebook and then planned out how to shift money around to cover shortages in cash. Lennon also included a dollar figure in parenthesis each day, which would dictate what happened with the money.
“Those were checks that were on hold to clear that day,” she said. “We had till two o’clock to get the money in the account.”
Lennon, who has been named in civil lawsuits filed by parties who lost money deposited in the firm, described in teary detail how she finally had enough of the stress, the confusion and the deception the Friday before Hatch closed the doors of Coastal Escrow.
“I told him I was leaving, that I wasn’t going to do it anymore,” Lennon said. “He had everything on his own computer, I told him that if he wanted to do this, he had to do this himself.”
Former Coastal Escrow bookkeeper Brenda Klotzer corroborated Lennon’s statements about the tenuous state of finances at the firm. The purpose of her testimony was not only to detail some of the bounced checks and transfers to cover shortages, but also to attest that direction for the actions came from Hatch.
When asked by Assistant State Attorney Lev Evans what the notation “per ICH” meant on a check, Klotzer identified ICH as Ira C. Hatch, her boss, whom she said she trusted.
“That means he’s the one that authorized me to do that, he’s the one who told me to do that,” Klotzer said.
Defense attorney Gregory Eisenmenger has repeatedly tried to cast doubt about whether or not employees were acting on their own or should somehow share in the blame. Eisenmenger asked Klotzer if she felt that what she was doing was wrong, transferring out hundreds of thousands of dollars of depositors’ money.
“I did not think it was wrong because he told us it was a loan,” she said.
Accounting experts for the state who have testified the past few days of the trial had identified that about $2 million was transferred out from Coastal Escrow Services to the Hatch and Doty law firm from 2004 to 2007.
Miller, a CPA who gave his opinion and analysis but was not permitted by the U.S. Department of Justice to testify as an “expert” explained to the jury why it was impossible to say exactly where the money of individual depositors went or when it was allegedly taken. Using a glass vase full of pennies, he demonstrated the concept of commingling of funds.
Miller placed some pennies in the vase to represent the balance in the account at the beginning of 2004. He then added pennies to represent the deposits of three different depositors, removed pennies representing funds that went out for closings and funds transferred to Hatch and Doty, each time, mixing up the pennies to show how different depositors’ funds were indistinguishable from others.
“As transfers were made and funds were depleted from Coastal Escrow, new money had to come in to make up the shortfall,” Miller said.
“Money was going in and money was going out and at the end of the day, you can’t tell what money was who’s,” he said.
While the jury was out of the courtroom and attorneys wrangled over the extent to which Miller would be able to testify to his opinion or to the conclusions of his investigation, part of his deposition was read aloud.
“My opinion is that Mr. Hatch was running the firm and that he intentionally and knowingly transferred money out of the escrow account,” Senior Judge James Midelis read from the deposition. Ultimately, the opinion was allowed, but came out slightly different using the penny show and tell, leaving jurors to take the next logical steps.
Upon cross examination by Eisenmenger, Miller testified that there were no fluctuations in the Coastal Escrow money market account due to volatility of the stock market. One of the defense’s theories has been that Coastal Escrow went belly-up due to business and investment losses.
Miller will return to the stand Tuesday morning when the trial resumes at 9 a.m. Also left to testify sometime in the next few days are officers of the Vero Beach Police Department who served search warrants and seized records and computers from Coastal Escrow in Septeember. 2007.
Depending on delays and challenges from defense, the state expects another two or three days of testimony to come.
Defense Attorney Gregory Eisenmenger said Monday that he would need “a couple of days” to present his case. He said he had not decided how many witnesses he would call or whether he would call any members of the Hatch family to testify.