A Virginia title insurance agency has agreed to pay more than $30,000 to settle accusations that it formed 10 sham businesses to enrich attorneys, real estate brokers and agents, and mortgage lenders who provided business referrals.
Officials with the Department of Housing and Urban Development alleged that American Land Title LLC, Big Spring Farm Inc. and Mark D. Gunn of Pearisburg, Va., violated provisions of the Real Estate Settlement Services Act (RESPA) that prohibit kickbacks for referrals or fee splitting for services that aren’t actually performed.
HUD alleged that between 2002 and 2006, American Land Title created 10 limited liability companies, or LLCs, granting minority interests in the affiliated businesses to local real estate attorneys, real estate brokers and agents, and mortgage brokers and lenders who profited when they referred business to the companies.
Although each of the affiliated businesses had a separate checking account, Gunn was the only one authorized to use them, HUD determined. The affiliated businesses did not have separate office spaces or employees, and all settlement services supposedly performed by the companies were actually provided by American Land Title, HUD claimed.
The affiliated businesses were all voluntarily closed between December 2003 and December 2006. Gunn disputed HUD’s findings that his companies’ operations violated RESPA, and agreed to pay $35,250 to settle the allegations without admitting wrongdoing, liability or legal fault to avoid the expense of a formal proceeding, according to the settlement agreement.
The agreement requires Gunn to cooperate in any future investigations of other real estate settlement service providers in Virginia.
American Land Title is a title insurance agency authorized to issue title policies on behalf of The First American Corp. and Fidelity National Title Insurance Co., HUD said. Gunn, as the sole owner of Big Spring Farm Inc., was the 50 percent owner of American Land Title.
HUD said the remaining interest in American Land Title was held by two real estate attorneys, John N. Dalton and Patrick K. Moore, who each owned 25 percent. Gunn allegedly performed all of the title work for American Land Title. Dalton and Moore were not named as parties in the settlement, which Gunn signed on Feb. 16. Assistant Secretary for Housing Brian Montgomery signed the agreement on April 30.
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