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Kickback Allegations Highlight Gray Area For Title Companies

Kickback Allegations Highlight Gray Area For Title Companies


Staff Reporter

A Long Beach title company faces $2.3 million in fines and the possible loss of its license after state insurance regulators accused it of giving kickbacks to real estate agents.

Diversified Title & Escrow Services Co., formerly known as South Coast Title Corp., allegedly provided cash payments, food, office supplies, gifts and other illegal inducements to gain the business of agents, as well as some commercial brokers and lenders.

The investigation, part of a statewide insurance-industry crackdown, also has prompted criminal bribery charges against the company’s former San Diego County manager, two real estate agents and a fourth person. The case is being prosecuted by San Diego County’s district attorney.

Diversified Title is the latest target of the state Department of Insurance, which has been seeking to stem what it calls an industry-wide practice of giving inducements, particularly to residential real estate agents, causing consumers to pay higher than necessary title fees.

“Consumers have no idea,” said Rebecca Westmore, a Department of Insurance staff counsel. “They go to the title company they are told to by the real estate agent.”

A company spokesman declined to comment on the specific allegations, but said Diversified was cooperating with the investigation and hopes the outcome will give it a better understanding of the law which many in the industry consider a gray area.

“This is an effort by both the title insurance industry and the Department of Insurance to clean up some of the practices within our industry,” said Diversified executive vice president Joseph McCabe.

It is illegal for title companies to provide inducements, yet it is still a common practice for the companies to offer gifts, dinners, tickets to sporting events and other gratuities to real estate agents, Westmore said.

Lawrence Green, executive vice president of the California Land Title Association, an industry trade group, contended that companies have difficulty complying because the law is unclear.

The law allows for reasonable expenses for food, beverages, educational programs and promotional materials that are routinely employed by all companies in marketing and selling their services, he said.

However, Westmore said that in the current case, the allegations also include the establishment of a bogus messenger service company that was used to pay out blatantly illegal cash payments.

The four individuals in the case have pleaded not guilty and were released from custody as they await a preliminary hearing this fall.

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