Investigation concludes Gerwing misappropriated $2.1 million - - Columbia, South Carolina

Investigation concludes Gerwing misappropriated $2.1 million

HILTON HEAD ISLAND, SC (WTOC) - Dennis Gerwing, the man named as a person of interest in the disappearance of John and Elizabeth Calvert and former CFO of Club Group, Ltd., is believed to have killed himself on March 11.

Club Group, Ltd., announced an investigation by an independent firm discovered $2.1 million in misappropriated funds from eight of Gerwing's clients. Below is the complete text of the announcement: 

Hilton Head Island, SC (Apr 22, 2008) -- Club Group, Ltd. announced here today that the firm of FTI Consulting, Inc. ("FTI") of Baltimore, Md. has completed a thorough, independent accounting investigation of the company's financial records and those of its ten Hilton Head clients.  The investigation shows approximately $2.1 million was misappropriated from eight of its ten clients by the late Dennis Gerwing, the company's former Chief Financial Officer, over a period of approximately four years.

The FTI report concluded the primary misappropriation method used by Gerwing was a sophisticated commingling scheme which involved the mixing of clients' investment monies through the use of a secretly maintained bank checking account, which was maintained by Dennis Gerwing off the company's books using hand-written checks, bank teller transactions and wire transfers.   This secret checking account was not subject to the company's controls and oversight used for the rest of the Club Group's financial operations.

The report concluded that no other company individuals were involved in these misappropriations and Gerwing acted solely on his own. What Gerwing did with the misappropriated funds is still being determined and under investigation by law enforcement authorities.

Mark King, Club Group Ltd.'s President, who had ordered the investigation shortly after he uncovered what he thought might be irregularities, said "I am still in shock over the betrayal of trust and the death of my partner of 21 years. I have no idea what might have prompted Dennis to engage in this behavior, but as chief executive, I want to apologize on behalf of our company to all who were adversely affected and to assure all parties that we firmly believe we will have a very workable plan to repay the monies which were taken."

King reported that last Thursday and Friday, he. his advisors, and representatives of  FTI  met with the Boards of Directors of all eight affected clients where FTI presented its findings and the Club Group presented a preliminary recovery plan to repay all misappropriated amounts.

Stu Rodman, a local financial advisor who is assisting with the preparation of the recovery plan, said "King and the company are working closely with Fred Gerwing, the executor of Dennis Gerwing's estate, on the development of the plan."

Rodman said, "The preliminary plan discussions with the clients were very productive and the company will be presenting a more finalized plan to each client within 30 days."  King said assets from Gerwing's estate, assets owned by Club Group Ltd., a portion of King's personal assets and some insurance proceeds would be included in the funds to repay the misappropriated amounts. He said arrangements have been discussed with local lenders to provide bridge financing until the estate is settled.

"I want to stress that it has been our primary objective, from the moment I became aware there may have been irregularities in the financial handling of our accounts by Dennis Gerwing, to be as thorough as possible in digging out the full details of what went wrong" said King.  "And now, with the professional help of FTI Consulting we feel this objective has been accomplished."  King noted that law enforcement agencies have been provided FTI's full report on the findings, and with the help of FTI and other accounting professionals, the company has instituted new procedures to ensure this kind of activity cannot happen again.

"Our immediate company objective is to restore what was taken and to begin moving again in a positive direction," said King.  "I sincerely hope the Hilton Head Island community will understand this situation, and that the conduct that was conceived and perpetrated by a single individual will not reflect poorly on the more than 65 outstanding members of our company, many of whom have been with us for 15-20 years. Being a 21-year-old company that has built its reputation on quality customer service, we look forward to the continuation of serving our clients in an attentive and fully-professional manner."

BACKGROUND - Dennis Gerwing, vice president and chief financial officer of Club Group, Ltd committed suicide on March 11 after being named "a person of interest" by law enforcement authorities in the disappearance of John and Liz Calvert which had occurred seven days earlier. Gerwing was allegedly the last person to see the Calverts before their disappearance. Following Gerwing's suicide Mark King, the company's president and chief executive, began looking into the financial records and determined that there may be irregularities that needed to be reviewed. Upon consultation with his attorneys, King initiated a full audit investigation by hiring an internationally renowned forensic auditing firm (FTI Consulting Inc. of Baltimore, MD) to review all of the company's financial records including those of its custodial responsibility.

CLUB GROUP, Ltd - Founded in 1986, Club Group Ltd. manages property associations and various rental and commercial properties in South Carolina. It is headquartered on Hilton Head Island, SC with approximately 65 employees. Mark King is president and chief executive.

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