Title company accused of illegally paying bribes to brokers

WASHINGTON — A local company must pay nearly $2 million to settle allegations that it hosted lavish parties for area real estate agents on a luxury yacht as part of an illegal bribery scheme in the DMV's title insurance market.

Most lenders require title insurance on their home loans, and real estate agents often recommend title companies to their clients. However, both federal and county laws prohibit bribes for referrals to certain title insurance companies.

On Thursday, Washington Attorney General Brian Schwalb said that as part of the plan, title companies would offer real estate agents discounted ownership interests in companies created specifically to make payments to agents in exchange for client referrals.

“In the District of Columbia, you can't pay any kind of compensation or consideration for an endorsement,” Schwalb told WUSA9. “And whether it's a cash payment, whether it's a payment disguised as an interest in a joint venture in the form of a distribution or dividend, or whether it's lavish yacht parties that people are invited to, all of that is illegal.”

“Agents are encouraged to pressure their clients to select closing companies, and that violates DC law against ordinary citizens,” Schwalb said.

Despite the $1.9 million Allied agreed to pay to settle the case with DC, company CEO Latane Meade says the allegations are untrue.

“Allied Title & Escrow denies being involved in any type of 'kickback scheme' or doing anything to prevent customers from selecting from one of the hundreds of title companies in the area,” Meade wrote in an email to WUSA9.

Schwalb said Allied compensated real estate agents under the plan by organizing and hosting parties for agents on yachts in the Chesapeake Bay three times in the summer of 2023.

Schwalb said the yacht parties were rewards for referrals and were intended to encourage agents' continued loyalty and future referrals to Allied. As part of the investigation, OAG investigators collected photos and videos posted on social media.

These videos feature local real estate agents partying aboard the Cynderella, a 31-meter luxury yacht with luxurious amenities, ornate furnishings, and a bartender.

The real estate agents involved in the plot were not accused of any formal violation of the law, nor were they punished by the OAG.

Schwalb also alleged that Allied gave the real estate agents a share of the profits the companies made, including a portion of the profits from the home buyers they referred, through shell companies created for the alleged “kickback scheme.”

Schwalb called these actions unlawful and anti-competitive schemes that limit the ability of homebuyers in the District to shop for the best price and service when purchasing title insurance and escrow services, harming law-abiding competitors and violating the District's consumer protection law.

“We know that settlement costs here in the District of Columbia are among the highest in the country when it comes to a very large purchase in the form of a new home,” Schwalb said. “And what we want to do in our city is make sure that settlement companies compete with each other on price and service and provide the lowest cost and the best service to the customers who come to them.”

Meade denied that claim in his email to WUSA9, claiming Allied had entered into “business agreements” with real estate agents to provide title services to clients.

“These were hard-working people who opened a business together,” Lamade wrote in a statement. “At the end of the year, if there were profits to share, they were split according to each person's share of the business, just as losses were shared. This was not a 'scheme' for referrals, as clients were always informed that they could choose any title company they wanted. These are common business arrangements made across the country.”

In his statement, Meade also wrote that “the DC Department of Insurance, Securities, and Banking (“DISB”) officially recognizes these agreements as legal.”

As part of the settlement with OAG, KVS Title, Union Settlements and Modern Settlements will also make payments to the District to settle claims for which the title companies paid financial kickbacks in exchange for referrals.

None of these companies were involved in the yacht parties.

KVS will pay the district $1 million, Union will pay $325,000 and Modern will pay $65,000.

A KVS Title spokesperson told WUSA9:

KVS Title does not believe its joint ventures operated improperly or caused harm to consumers and denied any wrongdoing in its agreement with the Attorney General's Office. KVS Title is proud of the work its joint ventures have done for consumers, but ultimately decided it was in the company's best interest to settle these claims and avoid costly and lengthy litigation.

We do not agree with the Attorney General's allegations. Modern Settlements has always strived to play by the rules and provide its customers with an exceptional experience at competitive prices. We made a business decision to pay DC $65,000 rather than go through the lengthy process of more extensive litigation.

Linday Reishman, founder and owner of Modern Settlements, shared this sentiment. She told WUSA9 in a statement:

We do not agree with the Attorney General's allegations. Modern Settlements has always strived to play by the rules and provide its customers with an exceptional experience at competitive prices. We made a business decision to pay DC $65,000 rather than go through the lengthy process of more extensive litigation.

Meade made a similar claim about why Allied agreed to pay $1.9 million to settle the case with the DC OAG.

“Allied, like other title companies, made the decision to settle the Attorney General's claims without admitting wrongdoing,” he wrote in his email to WUAS9. “It was not an easy decision, as Allied believes it did nothing wrong. Allied made the decision to settle the claims to avoid years of very costly litigation and so its team can continue to focus on providing the best customer service in the title industry.”

Schwalb said the OAG's investigation found that the financial incentives the companies offered to real estate agents caused them to aggressively direct their clients seeking to purchase a home to the companies in a way that made it difficult for buyers to shop for the best price or service.

Schwalb said all four companies have agreed to end the practice of paying real estate agents a fee for arranging title insurance business and to either divest the real estate agents of their ownership interests in the companies or cease the companies' title insurance activities in the district.

OAG said it continues to investigate the issue of kickbacks in the title insurance industry.

The district will allocate up to $2 million from the settlements to compensate affected consumers. OAG will provide additional information to homeowners in the coming months.