Calif. Commissioner Seizes $500,000 from Title Company

California Insurance Commissioner John Garamendi seized $500,000 in escrowed funds from a Southern California title insurer Tuesday after an investigation by the California Department of Insurance reportedly uncovered numerous instances of suspected illegal rebates.

Southland Title Corporation and its subsidiaries, Southland Title of Orange County, and Southland Title of San Diego, came under investigation in March after numerous complaints surfaced concerning alleged illegal rebates and other inducements. The actions were taken to generate more business for the companies. In 2002 the firm was fined $1.5 million for similar violations.

“Consumers count on brokers to help them find the best deals at the best prices for their insurance transactions,” said Garamendi. “When illegal rebates are offered to entice brokers to steer business to a dishonest firm, there is very little hope that the best interests of the consumer will be served.”

The investigation uncovered suspected illegal activity including: the compensation of employees for fraudulent and/or fabricated invoices and expense reports in excess of $47,000; providing food, beverages, and entertainment in excess of $174,000; providing gifts and gift certificates in excess of $62,000; and providing business support services in excess of $218,000, all to benefit real estate agents and brokers.

In April 2002, after similar violations were unearthed, former Commissioner Harry Low ordered Southland to comply with California’s anti-rebate statutes.

He ordered the company to suspend the marketing efforts of all marketing and/or sales representatives for five business days, to pay a $1.5M fine, and to deposit $500,000 in an independent escrow account for two years.

This escrow account was subject to immediate seizure by the Commissioner in the event of further illegal rebate activities.