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Court docs: Suspect in McStay murder case owed victim money

SAN BERNARDINO, Calif. - A California man charged with murder in the killing of his business partner and the partner's family owed $30,000 to the victim, who planned to fire him, according to court documents released Wednesday.

The newly unsealed documents indicate Joseph McStay lent Chase Merritt money to cover a gambling debt before McStay and his family disappeared in February 2010.

The 58-year-old Merritt is charged with four counts of murder in the deaths of McStay, 40; McStay's wife, Summer, 43; and the couple's two sons, Gianni, 4; and Joey, 3. He has pleaded not guilty and faces the death penalty if convicted.

The McStays, of Fallbrook, Calif., were last seen alive on February 4, 2010.

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Charles "Chase" Merritt at an arraignment hearing on Friday, Nov. 7, 2014, in Victorville, Calif. AP Photo/The Inland Valley Daily Bulletin, Jennifer Cappuccio Maher

When police first responded to the home to conduct a welfare check, they found no signs of forced entry and it appeared the family had left the house in a rush. Their dogs were in the backyard, two bowls of popcorn were on a couch in the living room and a carton of raw eggs along with a bag of microwave popcorn were found on the kitchen counter, earlier released search warrants said.

The family's Isuzu Trooper was eventually found abandoned near the Mexico border and the San Diego County Sheriff's Department said it was convinced people seen on dimly lit surveillance video walking into Tijuana, Mexico were the McStays.

It wasn't until more than three years later, in November 2013, that the family's remains were found in shallow graves in the Mojave Desert, about 100 miles north of where the family lived.

The San Bernardino County Sheriff's Department then became the lead investigative agency on the case and in November 2014, Merritt - a sub-contractor who worked for Joseph McStay's fountain manufacturing business - was arrested and charged with the killings.

Man was penning book about family he's accused of killing

In announcing the arrest, San Bernardino County Sheriff John McMahon said authorities believe the McStays were bludgeoned to death in their home on February 4, 2010.

Patrick McStay, Joseph McStay's father, told 48 Hours' Crimesider in the days after Merritt was arrested that he was thankful the San Bernardino County Sheriff's Department investigated the case, something he said the San Diego County Sheriff's Department failed to do.

"San Bernardino says that they believe that it all happened in the home. You mean to tell me that they can figure that out and San Diego can't?," he said.

At a preliminary hearing last month, witnesses testifying on behalf of the prosecution said Merritt's DNA was found in the McStay family's vehicle and shortly after the family was reported missing, Merritt spoke of them in the past tense.

Testimony also revealed that a sledgehammer - believed to be the murder weapon - was found at the remote desert location where the family's remains were found buried in 2013.

Witnesses also testified that cellphone records linked Merritt to the grave sites and also to a call a few days after the family was last seen to trying to transfer and close out Joseph McStay's online bookkeeping account.

The QuickBooks account was used by McStay to write checks to vendors connected to his water fountain business.

Authorities testified that Merritt was added as a vendor to the account on Feb. 1, 2010 in an update that did not appear to be created by McStay.

The next day, they testified, Merritt cashed a check from the account and two days after that, McStay - after logging on to the account - called his bank. The next day he and his family disappeared.

According to authorities, shortly after the McStay family's disappearance, checks for more than $13,000 backdated to the day the family was last seen were cashed or deposited by Merritt from the QuickBooks account.

Warrants released Wednesday indicate Dan Kavanaugh, another business associate of Joseph McStay, told investigators McStay lent Merritt $30,000 to cover a gambling debt and that McStay planned to fire Merritt.

According to the warrants, Merritt also owed over $20,000 in back taxes.

It is evident from the warrants that Merritt began making statements that raised red flags in the minds of investigators early on in the investigation. In the days after the McStay family's disappearance, Merritt told investigators he didn't like Summer McStay or Dan Kavanaugh and said, "If I were ever going to commit murder, it would be with him," referring to harming Kavanaugh. But according to the warrants, at the time Merritt made that statement, there was no evidence that the McStays had been murdered.

After the McStay family's remains were found, Merritt quickly became the center of the San Bernardino County Sheriff Department's investigation. Court documents reveal they interviewed him, wiretapped his phones and searched his home. It was during that search that authorities say they seized a book written about the McStay case, computers, several other electronics, and notes, including "quotes to do with remorse, forgiveness and murder."