Four
title
insurance
firms
have
agreed
to
pay
nearly
$3.3
million
to
settle
civil
claims
that
they’ve
engaged
in

kickbacks
with
real
estate
agents
through
joint
ventures
in
the
Washington,
D.C.
area,
according
to
the
Attorney
General
for
the
District
of
Columbia

Allied
Title
&
Escrow,
LLC
(Allied),

KVS
Title,
LLC
(KVS),

Modern
Settlements,
LLC
(Modern),
and

Union
Settlements,
LLC
(Union)
will
pay
$1.9
million,
$1
million,
$325,000
and
$65,000,
respectively.
D.C.
Attorney
General’s
Brian
Schwalb
said
that
up
to
$1.75
million
from
the
settlements
will
go
toward
restitution
payments
for
affected
consumers.

All
of
the
firms
denied
any
wrongdoing
in
their
settlement
agreements.

The
four

title
companies
involved
in
the
settlements
were

affiliated
businesses
that
were
created
by
real
estate
professionals
and
brokerages
investing
in
the
start
up
costs
of
the
firms.
As
investors,
the
real
estate
agents
then
received
profit
payments
distributed
based
on
their
ownership
interest.

However,
due
to
D.C.
code,
including

Section
31-5031.15, which
states
that
the
insured
“shall
not
give
or
receive,
directly
or
indirectly,
any
consideration
for
the
referral
of
title
insurance
business
or
escrow
or
other
service
provided
by
a
title
insurer,”
and
makes
no
exceptions
for

joint
ventures
of
affiliated
businesses,
the
attorney
general’s
office
found
these
companies
to
be
in
violation
of
local
law.

“As
part
of
the
scheme,
title
companies
offered
real
estate
agents
discounted
ownership
interests
and
lucrative
profit
sharing
in
exchange
for
business
referrals
that
boosted
the
companies’
revenues,”
Schwalb
said
in
a
statement.
“OAG’s
investigations
found
that
Allied,
KVS,
Modern,
and
Union
violated
District
law
by
providing
real
estate
agents
exclusive,
lucrative,
and
discounted
investment
opportunities
either
in
the
companies
themselves
or
in
shell
entities
they
created
to
induce
the
real
estate
agents
to
make
business
referrals
that
generated
increased
revenues
for
the
companies.
In
return
for
the
referrals,
the
agents
received
kickbacks
in
the
form
of
a
split
of
the
profits.”

The
civil
charges
were
brought
only
under
the
D.C.
code,
as
the
federal
law
governing
these
businesses,
the

Real
Estate
Settlement
Procedures
Act
(RESPA),
allows
for
affiliated
business
agreements
that
meet
certain
criteria.

“The
affiliated
title
agencies
were
formed
and
operated
in
complete
compliance
with
the
Real
Estate
Settlement
Procedures
Act,
which
expressly
permits
the
existence
of
title
agencies
with
investors
who
are
business
referral
sources,
such
as
real
estate
sales
associates
and
provides
that
they
payment
of
profits
to
those
investors
is
not
an
impermissible
referral
fee
or
kickback,
pursuant
to
section
8(c)(4),”
said
Francis
“Trip”
Riley,
a
partner
at Saul
Ewing
LLP who
represented
Allied.
“Allied
and
its
affiliates
met
all
the
requirements
for
this
section
to
apply. That
is
why
the
DCOAG
never
alleged
a
violation
of
RESPA,
but
rather
asserted
that
Allied’s
affiliated
business
violated
a
section
of
the
DC
Code
which
in
reality
addresses
only
impermissible
referral
fees
and
kickbacks
of
premium
to
the
insured.”

The
attorney
general’s
office
also
claims
that
the
affiliated
title
companies
created
anticompetitive
arrangements
and
limited
homebuyer’s
ability
to
shop
around
for
a
title
insurance
provider,
harming
consumers
and
“law-abiding
competitors.”

Riley
took
issue
with
this
characterization,
stating
that
the
agents
at
Allied
always
provided
consumers
with
the
necessary
disclosures
about
their
ownership
interest
in
Allied
and
suggested
that
they
shop
around
for
a
title
provider.

The
disclosure
also
expressly
encourages
those
being
referred
to
the
affiliated
business
to
compare
the
rates
and
services
of
the
affiliated
with
other
title
agencies
and
goes
as
far
as
identifying
its
rates
as
part
of
the
disclosure
so
the
consumer
can
in
fact
comparison
shop. 

The
rates,
fees
and
charges
of
non-affiliated
title
agencies
many
times
are
in
excess
of
those
charged
by
Allied’
affiliated
title
agencies,
Riley
said.
“In
effect,
by
getting
rid
of
affiliated
businesses
in
D.C.,
they
haven’t
increased
competition,
they
have
decreased
competition
and
they
have
handed
consumers
to
non-affiliated
companies
who
have
higher
fees.”

He
also
noted
that
many
of
the
investor
agents
referred
less
than
half
of
their
customers
to
their
affiliated
title
business.

“They
viewed
the
ability
to
invest
as
a
thing
of
value
(“kickback”)
that
the
title
companies
were
providing
to
agents
and
then
the
payment
of
the
profit
distribution
as
a
fee
for
referrals;
which
is
categorically
wrong,”
Riley
wrote.
“The
dollars
invested
by
investor
agents
was
a
legitimate
payment
for
ownership
interest
and
based
was
solely
on
a
their
pro
rata
capital
contribution
requirement
based
on
their
ownership
interest.
So
that
investment
amount
is
not
arbitrary
chosen
or
based
on
how
many
referrals
they
made.”

Riley
also
noted
that
the
D.C.
Department
of
Insurance
had
approved
all
of
the
title
firms
in
questions
knowing
that
some
of
the
investors
were
referral
sources.
Additionally,
up
until
recently
the
department
maintained
a
webpage
describing,
but
not
prohibiting,
title
insurance
affiliated
businesses.

“District
residents
are
entitled
to
make
fully
informed
decisions
about
how
to
spend
their
hard-earned
money,
especially
when
it
comes
to
making
the
high
stakes
purchase
of
a
home,”
Schwalb
said
in
a
statement. “These
four
companies
violated
the
most
fundamental
principles
of
a
free
and
fair
marketplace:
they
hid
information
from
consumers,
limited
their
choices,
and
hurt
other
businesses
that
play
by
the
rules.
Today,
we’re
exposing
and
putting
an
end
to
these
elaborate,
secretive,
and
illegal
kickback
schemes.”

Only
one
other
firm
returned
HousingWire’s
request
for
comment.
KVS
Title
said
it
“strongly
disagreed”
that
its
JVs
operated
improperly
or
harmed
consumers,
but
settled
the
claims
to
avoid
costly
and
protracted
litigation.

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