Hardwick’s former law firm and a related title company have sued at least two casinos and a private jet operator, Apollo Jets, seeking almost $5.5 million Hardwick paid them.
“Apollo Jets knew or should have known that the funds it accepted by wire … did not belong to Mr. Hardwick,” they said in their lawsuit in U.S. District Court in Atlanta seeking $602,841 from the New York company.
Most of the wired cash was clearly marked as coming from law firm trust accounts holding escrow money for real estate transactions, according to the lawsuits. A lawyer wouldn’t normally be able to use such accounts for gambling or flight expenses, and the recipients should have recognized the payments were illicit, Morris Schneider contends.
Two other lawsuits seek $1.5 million from the Beau Rivage Resorts in Mississippi and almost $3.4 million from the Cosmopolitan of Las Vegas, using similar arguments.
Hardwick’s attorney, high-profile defense lawyer Ed Garland, said his client was legitimately due money from the firm. He contends Hardwick was duped by a former employee, Asha Maurya, who was charged as a co-conspirator in the alleged embezzlement.
“He’s absolutely not guilty of any misconduct. He didn’t know about the money coming out of escrow,” said Garland.
Maurya, 40, was also arrested last year in Gwinnett County in another case and charged with theft by deception.
Maurya’s attorney, Page Pate, said she has pleaded innocent in both cases, and was released on her own recognizance.
“If (Hardwick) was legitimately entitled to this money, then nobody should be charged,” said Pate. “She worked for him.”
Hardwick’s former firm, then named Morris Hardwick Schneider, once funneled hundreds of millions of dollars through the escrow accounts. It handled the closings on thousands of real estate transactions a year.
More lawsuits could be coming. A number of other firms and people received similar wire transfers or payments from the law firm’s trust accounts, according to court filings in Hardwick’s criminal case. They included jet broker NetJets Aviation, the Las Vegas Sands casino, credit card companies, banks, Hardwick’s ex-wife, and himself.
But experts say Morris Schneider Wittstadt will likely have a hard time recovering those funds.
“Usually, once it’s gone, it doesn’t come back,” said John Warren, a lawyer for the American Institute of Fraud Investigators. In the organization’s latest survey of victims of embezzlement or other fraud, in 2014, less than half of the companies recovered “a single cent,” he said.
Jeff Windham, a lawyer and certified fraud examiner in Fairhope, Ala., said law firms’ trust accounts are “highly regulated,” but it may be stretch to expect casinos or other businesses to recognize they shouldn’t accept payments from them.
“It’s generally only lawyers that know that,” said Windham.
The latest lawsuit, against Apollo Jets, targets a company with ties to celebrities and a businessman/actor with a checkered past.
The man behind Apollo Jets is Al Palagonia, a convicted stock swindler and movie actor with high-profile friends such as movie maker Spike Lee and basketball celebrity Shaquille O’Neal. Lee cast Palagonia as a sleazy, fast-talking sports agent in his 1998 film, “He Got Game.” He’s appeared in over a dozen movies since, half of them by Spike Lee.
Palagonia was convicted of securities fraud in 2000 and spent two years in federal prison. He had been one of the biggest producers at D.H. Blair, a notorious investment firm that ran so-called “pump-and-dump” schemes, according to a Bloomberg profile.
After Palagonia did his time, he eventually starting his own firm, Apollo Jets.
Palagonia, Apollo Jets and its attorneys did not respond to several phone calls or emails.
According to the Bloomberg profile, Palagonia has been able to command tens of thousands of dollars for chartered jet flights by tapping his sports and celebrity connections to attract rich business owners and executives.
In court filings, Apollo Jets’ attorneys say the lawsuit should be dismissed because the company had no reason to suspect the money was stolen. It was the law firm’s responsibility to prevent the alleged embezzlement, they added.
“A fundamental obligation of a law firm is to diligently protect client funds deposited into a firm’s escrow account,” said Apollo Jets’ lawyers.
Lawyers in the other lawsuits against the casinos have made similar challenges to Morris Schneider’s allegations.
Garland said his client now lives in his parents’ basement, where he’s poring over the law firms’ accounting records to prove his innocence. He said Hardwick was the firm’s most profitable deal-maker, and that many of his casino visits and jet flights were with clients, and were legitimate business expenses. Other payments were his share of the law firm’s profits, said Garland.
Hardwick was deceived by “a crooked bookkeeper,” said Garland, referring to Maurya. Hardwick’s law firm’s partners then “sued him and blamed him,” said Garland, leading to the law firm’s collapse. “They shot the goose that laid the golden eggs.”
But the federal indictment shows that, even after Hardwick was being sued by companies over unpaid debt, several well-heeled friends, banks and other companies continued to lend to or do business with him.
The federal indictment hints that Hardwick was an increasingly desperate man, spending growing sums on gambling, jet flights and other expenses and lying to his partners. Meanwhile, the debts, lawsuits and thefts mounted.
According to investigators, Hardwick started crossing the line not long after his 2008 divorce, in which he had agreed to pay $550,000 a year in alimony, for five years.
Far exceeding his income due to the high alimony payments and his already extravagant lifestyle, investigators said, Hardwick got a personal loan from a bank, improperly backed by the law firm’s trust accounts.
In 2010 and 2011, Hardwick was hit with five court judgments ordering him to repay debts of over $7.9 million owed to two other banks, NetJets Aviation, American Express and the Bellagio casino in Las Vegas. He also owed $600,000 to an Atlanta bookie, according to investigators.
Meanwhile, between 2011 and 2014, Hardwick borrowed more than $7.9 million from Marietta-based First Landmark Bank and two individuals, Atlanta businessman Jim Pritchard and pro golfer Dustin Johnson. Investigators said he lied on the bank applications, a felony. Prichard and Johnson sued Hardwick and his former law firm.
That still wasn’t enough to cover Hardwick’s bills. So, Hardwick, who owned a bit over 50 percent of the law firm, tapped into its and clients’ accounts, according to the indictment.
Hardwick’s thefts were made easier, investigators said, because his two law firm co-owners worked out-of-state. At the Atlanta headquarters, Hardwick managed virtually all of the business and financial affairs of the law firm and title company.
By early 2011, investigators said in the indictment, Hardwick had teamed up with another executive in Atlanta, Maurya, to cook the books. They ladled out more than $20 million in excessive bonuses and profit-sharing payments to Hardwick— more than the law firm’s total profits, according to investigators.
Maurya also took about $900,000 to cover her credit card bills, according to the indictment.
At times, the pair siphoned roughly $1 million a month.
In three months in mid-2014, the pair wired nearly $2.5 million to casinos, corporate jet brokers and to Hardwick, investigators said. Hardwick paid himself more than $1.4 million through wire transfers to a company he owned.
Hardwick’s partners discovered account shortfalls about a month later. They ousted Hardwick and sued him in Fulton Superior Court.
After Hardwick was arrested on criminal charges this winter, federal prosecutors unsuccessfully pushed to keep him in jail without bond, arguing that he might commit suicide or flee rather than face a possible prison term into his 80s.
“Hardwick has extensive experience with private jet travel,” said prosecutors in a court filing. He “likely has assets with which to flee and … wealthy friends with access to private jets who could be manipulated into helping him.”
But Garland said his client isn’t going anywhere, except to court-allowed doctors’ or lawyers’ appointments.