Receiver: Mott floated $22M a day at height of check-kiting scheme

When Katherine Mott-Formicola announced in November of 2023 that she had purchased the Crescent Beach restaurant and would be reopening the once-revered waterfront property, the restaurateur already had an impressive hospitality portfolio.

Monroe’s Restaurant and Rare 3001 each had a reputation for exquisite upscale dining. Divinity Estate & Chapel was a premier hilltop event venue at the former Colgate Rochester Crozer Divinity School.

Add to that a downtown event space, The Wintergarden, and the catering contract at Ridgemont Country Club and Mott-Formicola was front and center in Rochester’s hospitality industry.

But just four months after closing on the Crescent Beach purchase, her empire collapsed under the weight of as much as $22 million in daily fraudulent banking transactions, according to a court filing this week by the receiver in the Five Star Bank civil check-kiting case.

Over a period of 15 months between December 2022 and March 2024, Mott juggled hundreds of phony bank transactions. Each individual transaction, either a check deposit or check withdrawal, “grew from roughly $400,000 to over $900,000 and the total daily float grew from $10 million to $22 million,” according to the latest report filed by court-appointed receiver Mark R. Kercher.

Still, the scheme wasn’t detected until March 2024, when Kinecta Federal Credit Union rejected checks drawn on its accounts, Kircher’s report states. By that time individual transactions approached $1 million.

Soon after, Five Star Bank filed a complaint in U.S. District Court in the Western District of New York, alleging the check-kiting cost the financial institution $18.9 million.

By December of 2024, a criminal investigation by federal authorities led to a guilty plea by Mott-Formicola on financial institute fraud and money laundering charges. Her sentencing, already postponed three times, is now scheduled for April 30.

Kercher’s latest report was filed on Monday. He summarized his duties as receiver and has asked the court to approve payment for his work, as well as the work of his lawyers.

For overseeing daily operations of the Mott businesses, liquidating assets and closing down her ventures, the receiver says he is owed $54,919.72, his assistant is owed $3,862.37 and his court-approved lawyers are due $78,220.

How, or when, they get paid is unclear. Other than $56,290.98 secured through the recent sale of a Mott-owned Livingston County property, the defendant entities have no cash or liquid assets, Kercher told the court.

Because of that, Kercher has asked that the court grant priority to his request for payment of receiver fees, as well as the payment of his lawyers.

Five Star Bank, however, has objected to that preferred status in the hierarchy among creditors. In a filing back in February, attorneys from Barclay Damon LLP representing the bank argued Kercher and his legal team have already been paid “at least $166,480 in professional fees directly from the defendant entities’ assets between April 2024 and February 2025.”

Five Star argued that while Mott’s scheme led to a nearly $19 million loss by the bank, a significant portion of her debts were paid through the liquidation of assets.

“To date, the victim of Mott’s actions has not been paid a penny from any actions of the receiver or by the defendants,” the February filing says. “In particular, the record reflects that the receiver efforts, whatever their intent, resulted in substantial payments on behalf of the defendants and the resolution of substantial liabilities to everyone for the benefit of everyone but the bank.”

Five Star further argued that because Mott admitted in her criminal plea agreement that she spent a portion of the fraudulently obtained funds on real estate, Kercher should have been able to trace that money before “retiring defendant’s liabilities and compensating himself and counsel.”

But Kercher’s filing on Monday said by the time he was appointed receiver, “the trail was already cold, and was further complicated by thousands of interbank transactions, numbering in the millions of dollars occurring over this 15-month period.”

He added the tracing the missing funds required forensic services and further noted that Five Star Bank has spent “at least $1.4 million with their team of lawyers and forensic accountants” and “has fared no better than I did.”

Crescent Beach, located off Edgemere Drive in Greece, is the one remaining Mott-Formicola asset with some value. One under-contract sale fell through. Others have kicked the tires and walked away.

Thus, how much money can be generated from a sale is unclear, Kercher wrote. Secured creditors must accept any deal and the U.S. Attorney must decide whether the property is to be forfeited as part of Mott’s plea deal.

Of immediate concern: There is no money to pay property taxes, and the property is delinquent for February. There also is no money for upkeep, so there is the risk “for damage and continued degradation,” Kercher wrote.

As it stands, Five Star Bank’s shareholders are the victims of Mott’s fraudulent activities, Kercher wrote.

“The actions I took during the receivership had little bearing on the ultimate mitigation of those losses,” he said. “The opportunity for detection and mitigation existed during the 15 months immediately prior to my appointment. By the time I was appointed, there was little to be done but try to right-size the businesses and try to preserve the status quo while the litigation unfolded.

“But as it turns out, even that relatively modest aim was unattainable.”

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