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Real estate kickback probe launches in Colorado

June 1, 2005

Insurance Division investigates Horizons Title, RE/MAX brokerage

By Janis Mara
Inman News

A Broomfield, Colo., title insurance company is under investigation by the Colorado Division of Insurance and the Colorado Real Estate Commission for allegedly overcharging consumers and giving real estate agents kickbacks in exchange for business.

The investigations, which launched Wednesday, target Horizons Title, which does business under the name American Liberty Title Co. The state agencies are probing the company's business practices and relationship with RE/MAX brokerage offices in Broomfield and Denver, Paige Tyler, assistant to Erin Toll, Colorado's deputy insurance commissioner, confirmed.

"The last thing I want is to do business incorrectly," said Mark Marone, one of the owners of Horizons. Until he'd heard about the investigation, Marone said, "I didn't think we were doing anything wrong." Marone said he spoke on the phone with Toll Friday and will meet with her this week.

"I'm going to meet with the Division of Insurance and clear this up ASAP," Marone said. Marone, a licensed real estate agent, said he has been selling real estate in Colorado since 1980.

"We spent a long time developing a good reputation," Marone said of his business.

An individual who answered the telephone at RE/MAX Horizons Group, the real estate brokerage that shares office space with American Liberty, had no comment on the investigations and referred questions to Marone.

Charlie Kerr, regional vice president for RE/MAX's Mountain States Region, said, "Each (RE/MAX) office is independently owned and operated. We are in the franchising business, not the real estate business, and we have no involvement with title insurance."

"Mark Marone advised us he had not yet received any formal notification whatsoever of any investigation," Kerr said. "We are conducting our own investigation into the franchisees' activities and at this point we really don't have any facts or anything else to go on to allow me to comment any further."

The state agencies are probing American Liberty for allegedly overcharging consumers and giving real estate agents kickbacks in exchange for business. Paying, receiving or exchanging unearned fees for rendering settlement services is a violation of the Real Estate Settlement Procedures Act, known as RESPA, as well as Colorado laws.

Title insurance companies are under intense scrutiny nationwide in the wake of Colorado's investigation of other major title insurers, including First American Title Co., Land America and Fidelity Title. In that investigation, First American agreed to refund about $24 million to consumers nationwide without admitting liability or wrongdoing.

The improper activities alleged in the American Liberty investigation are somewhat different from those alleged in Colorado's investigation of First American Title in that they are not alleged to involve captive insurance.

The alleged captive insurance schemes involved phony reinsurance contracts between title companies and subsidiaries of real estate agents, developers and lenders. Under these elaborate arrangements, title insurers allegedly agreed to give about half of the premium on title insurance policies to captive reinsurance companies created by the other conspirators. The parent companies of those captives would in turn refer business to the title insurer.

Though there are slight differences, according to Geoffrey Hier of Colorado's Department of Regulatory Agencies, the issues under investigation are fundamentally the same because they involve possible kickback violations of RESPA and state laws.

Copyright 2005 Inman News



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