Posted by Donna LaBelle on 9/26/06 11:16pm
Msg #148701
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State accuses title firm of illegal kickback ploy
By Jim Wasserman - Bee Staff Writer
Last Updated 12:01 am PDT Tuesday, September 26, 2006
Story appeared in BUSINESS section, Page D1
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Houston-based Stewart Title Guaranty Co. illegally channeled payments to home builders and lenders in exchange for steering their title business to the firm, California Insurance Commissioner John Garamendi alleged in a formal accusation Monday.
Garamendi is seeking millions of dollars in penalties, saying the company engaged in the practice from 1999 to 2005. Last year the insurance commissioner won $37.8 million in fines and penalties against nine title insurers after leveling similar accusations.
Calling the practice a kickback, Garamendi said it forces consumers to pay higher prices for title insurance.
In a statement Monday, Stewart Title said the state of California hasn't issued clear guidance and said its practices meet guidelines of the U.S. Department of Housing and Urban Development. The company called Garamendi's allegations "the result of a misunderstanding of Stewart's business."
The commissioner said Stewart gave up to 50 percent of its title insurance premiums to "shell companies" created by home builders and lenders that steered the title business its way.
The commissioner said participants included Folsom-based Elliott Homes Inc. and several national home builders and mortgage companies. Elliott Homes could not be reached for comment.
Garamendi's office said Stewart has approximately 15 days to respond to the accusation. The matter eventually will be decided by the state Office of Administrative Hearings unless it is settled earlier.
Stewart said Monday it has met with representatives of the commissioner's office "and is providing additional information to overcome these allegations."
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