California issues 9 more subpoenas in title insurance probe
March 10, 2005
RE/MAX, KB Home, Wells Fargo among list of companies
California Insurance Commissioner John Garamendi has issued nine subpoenas to six companies as part of his ongoing investigation of illegal kickbacks in the title insurance industry, the agency said today. The subpoenas follow four others that were issued in February to LandAmerica companies and Fidelity National Title, two of the largest title insurers in the country.
"There is growing evidence that title insurers and others have scammed consumers in the name of greed," Garamendi said in a statement. "Through these subpoenas and through my investigation, I intend to find out how widespread this problem is and put a stop to this illegal activity."
Garamendi emphasized that the subpoenas, issued late last week, are not the final ones to be served. Other companies involved in the scandals will be compelled by future subpoenas to provide information for the investigation. Those served to date include: William Lyon Homes, KB Home, RE/MAX, United Home Mortgage Corp., Shea Financial Services and Wells Fargo Home Mortgage.
The Commissioner, co-chair of the Title Insurance Working Group within the National Association of Insurance Commissioners, has been working with Colorado and Washington state insurance regulators to probe a series of alleged phony reinsurance contracts between title companies and subsidiaries of real estate agents, developers and lenders. Under these alleged elaborate schemes, the title insurers 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.
The arrangements were designed to kick back a large share of the title-insurance premium in exchange for the referral of the customer to the title company, a violation of the law, and a practice that harms consumers by potentially forcing up title insurance rates, according to Garamendi.
As part of his investigation, Garamendi has scheduled an April 4 hearing at which he will hear testimony from executives of LandAmerica and Fidelity, which together control roughly 45 percent of the California market. First American Title, which has cooperated with investigators, controls about 30 percent of the market. Its executives will not be compelled to testify at the hearing.
The hearing will be held at the Ronald Reagan Building in Los Angeles, 300 S. Spring Street, in the building auditorium.
Copyright 2005 Inman News