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This post is one in a partnership between the Rochester Beacon and veteran reporter Gary Craig, featuring articles published on his Substack site.
The court-appointed receiver in a lawsuit against embattled restaurateur Kathy Mott ignored offers from Five Star Bank that could have helped sniff out the trail of the millions of dollars targeted by Mott in her criminal fraud, attorneys for Five Star say.
In court papers filed last week, Five Star Bank attorneys fired their own salvos at receiver Mark Kercher, who, as I reported earlier, maintained in his recent report—his 11th and expected final one—that the bank had been slow to discover Mott’s check-kiting fraud. Five Star has alleged in a lawsuit that Mott stole $18.9 million from the bank.
“The Bank’s confidence in the Receiver was plainly misplaced, despite a professional background that includes decades with a top global accounting firm as a lead audit partner,” Five Star attorney James Milbrand, a lawyer with Barclay Damon, wrote in an April 2 court filing.
“Short on information and long on invective and baseless speculation, the Receiver’s Eleventh and Final Report, at bottom, is little more than the disappointing conclusion to a disappointing receivership by a disappointing receiver.”
The bank offered “to pay for the expert forensic accountants (Kercher) claimed necessary” and encouraged him to “issue subpoenas, which would have provided critical and timely documentary evidence allowing him to locate the Bank’s missing money, from the outset of his appointment,” Milbrand wrote.
But Kercher did not seek out forensics specialists, despite his claims in his recent report that he needed them, and didn’t pursue subpoenas, Milbrand added.
Soured relationship
It was Five Star that successfully sought the appointment of a receiver in the bank’s litigation against Mott, who has pleaded guilty to a check-kiting scheme. But the relationship between the bank and Kercher has clearly soured, so much that the bank is now opposing some payments sought by Kercher for his work and the work of others who assisted him.
Kercher and others who helped him have already been paid nearly $260,000 and another $40,164 now requested should be denied, the bank contends.
In its recent filing, the bank said Kercher’s report was “incendiary and improper.”
One role of Kercher was to help the bank identify and recoup its losses, but instead, he focused more on liquidating the assets of Mott, who owned the still-shuttered Crescent Beach restaurant in Greece, Monroe’s in Pittsford, and other dining and event operations, the bank maintains.
Appointed in 2024, Kercher said that the struggling businesses owned by Mott needed to be salvaged or sold for there to be any money for anyone to recover. He ensured that taxes were paid as well as were employees, landlords, and vendors, he said in his report.
Kercher said in his recent report that he was not tasked with gathering money for the bank.
In the report, Kercher said the businesses were kept afloat by the illegal movement of funds, making it appear that they were operating successfully while debts were accumulating. Had he pulled the plug on the business operations with his appointment, the money available for Five Star would have been “inconsequential in the best case,” he said.
Mott’s admissions
In her plea in December 2024, Mott acknowledged kiting hundreds of checks between 2022 and 2024. The plea says she ultimately defrauded Five Star out of nearly $21 million and that the bank’s loss was, as it has alleged, $18.9 million.
However, Mott reserved the right to contest at sentencing the estimated scope of the fraud. Her sentencing has been postponed multiple times as a criminal investigation continues.
At its peak, Mott-owned businesses were engaging in single transactions of over $900,000 and the total daily float grew from $10 million to $22 million, according to Kercher.
The “float” is the time delay between an initial transaction, such as a deposit at a bank, and the actual transfer of funds, say from another financial institution. It is that delay used in check-kiting fraud to make it appear that one account holds more money than it actually does.
“This case is, in the end, the story of most all financial fraud I am familiar with,” Kercher wrote. “The fraud ended when the enterprise collapsed under its own weight.”
Gary Craig is a Rochester Beacon contributing writer. A retired Democrat and Chronicle reporter, he now writes on Substack.
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