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Colorado title company to pay $10,000 in probe

June 29, 2005

Insurer accused of paying for business referrals

Janis Mara
Inman News

A Broomfield, Colo., title insurance company under investigation for allegedly attempting to give kickbacks for referrals today agreed to pay a penalty of $10,000 to the Colorado Division of Insurance.

"While we don't believe our actual practices violated any laws…we now know that parts of our internal marketing have been vague and confusing, especially when read by an outside audience. Therefore, we have agreed to a settlement with the Division of Insurance," said Mark Marone, one of the owners of Horizon Title, which does business as American Liberty Title.

The settlement was set forth in a stipulation for entry of final agency order posted today on the insurance department's Web site.

According to that document, newsletters sent by American Liberty in 2004 were "attempts to give or receive remuneration for the referral of title business," citing Section 8(a) of the Real Estate Settlement Procedures Act, known as RESPA, as well as Colorado laws.

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

The Division of Insurance didn't return calls asking for comment by press time.

Marone said he has "absolute respect" for the Division of Insurance and that "through this exercise we have become a better title company, more able to serve the public." Saying that his company's cooperation with the Division was intended to further benefit its clients, Marone said, "Small title companies like ours make the market more competitive, in the long run benefiting the consumer."

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.

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 RESPA, as well as Colorado laws.

American Liberty denied the Division's assertions in the order, and did not admit wrongdoing.

The Division's investigation of American Liberty focused on offers allegedly made in American Liberty Title newsletters.

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.

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 are fundamentally the same because they involve possible kickback violations of RESPA and state laws.

Copyright 2005 Inman News



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