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Colorado title company agrees to stop alleged kickbacks

June 8, 2005

Owner to meet with Insurance Division today

By Janis Mara
Inman News

A Broomfield, Colo., title insurance company under investigation for allegedly attempting to give kickbacks for referrals has agreed to stop the practices targeted by the Colorado Division of Insurance.

"We agreed to stop doing the items in question until we meet with Erin Toll, Colorado's deputy insurance commissioner, (today)," said Mark Marone, one of the owners of Horizon Title, which does business as American Liberty Title. "If Erin's got a big problem with them, we're not going to do them anyway."

On June 3, Marone signed an order agreeing to refrain from "advertising and soliciting discounts and refunds" on title services to customers and giving or receiving discounts and refunds to and from settlement producers in violation of Section 8(a) of the Real Estate Settlement Procedures Act, known as RESPA, as well as Colorado laws.

American Liberty Title denied the Division's assertions in the stipulated order enjoining unlawful practices in the business of title insurance, and did not admit wrongdoing.

"It (the agreement) was something our attorney and hers came up with until we could get together in person," Marone said. "They were having a hard time coordinating everybody's schedule and we said, 'Why don't we agree to stop doing all these things until we get a chance to meet?'"

Marone said if Toll has a problem with the practices, his company will not engage in them. He anticipates that the situation will be resolved today.

The Division of Insurance didn't return a call asking for comment.

The Division of Insurance and the Colorado Real Estate Commission launched a probe of American Liberty on May 25 for allegedly overcharging consumers and giving real estate agents kickbacks in exchange for business. The probe targeted the company's business practices and relationship with RE/MAX brokerage offices in Broomfield and Denver.

Paying, receiving or exchanging unearned fees for rendering settlement services is a violation of RESPA, as well as Colorado laws.

The stipulated order focuses on offers allegedly made in American Liberty Title newsletters.

According to the order, the newsletters are "attempts to give or receive remuneration for the referral of title business, saying the newsletters offer various incentives to customers."

The offers allegedly were: to pay half of customers' advertising costs for ads in the Saturday Rocky Mountain News; to pay half of the closing coordinator fee; to waive the commission advance fee; to provide a "refund" of $175 when buying, selling or refinancing the customer's personal property; free Just Listed/Just Sold cards; free "Farm Packages;" free preparation of power of attorneys; and free training.

While denying the Division's assertions and not admitting that the newsletters constitute attempts to give or receive remuneration for the referrals, Marone and American Liberty Title's manager, Sherri Sajban, agreed to stop the practices named in the agreement.

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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