HomeMy WebLinkAbout2015 09-04 Maplewood title company settles kickbac investigation of its boat cruise events - StarTribune 2/29/2016 Maplewood title company settles kickback investigation of its boat cruise events-StarTribune.com
EAST METRO
Maplewood title company settles
kickback investigation of its boat cruise
events
TitleSmart maintains events were for networking, not to solicit
business referrals.
By Jim Buchta(http://www.startribune.com/jim-buchta/10644536/)Star Tribune
SEPTEMBER 4.2015–8:25PM
A Twin Cities title company agreed to pay$45,000 to the Minnesota Department of
Commerce to settle an investigation into whether it violated state insurance laws and
federal kickback rules by hosting boat cruises in exchange for business referrals.
TitleSmart of Maplewood agreed to stop running cruises on the St.Croix River,events it
considered to be routine networking opportunities,as a result of the investigation,said
Cynthia Koebele,its president and owner.
"We didn't want the distraction of a protracted dispute,although we vigorously
disagreed with their interpretation of the code,and therefore reached an amicable
resolution with the commerce investigators,"said Koebele."We just wanted to
concentrate on what we do best—closing and title services."
In a consent cease-and-desist order,the state agency said that licensees who attended
"were in a position to refer settlement services business to TitleSmart,"and alleged that
the"cruises,food,drinks and gifts constituted payments of commissions or valuable
consideration for negotiating or soliciting insurance."
The settlement agreement includes a$45,000 payment,$20,000 of which may be stayed
if the company steers clear violations of the federal Real Estate Settlement Procedures
Act,or RESPA,for two years.RESPA is aimed at making mortgage transactions more
transparent and it prohibits settlement kickbacks.The company was also ordered to pay
$5,000 in investigation costs.
Prentiss Cox,associate professor of law at the University of Minnesota Law School,said
that such events are"rampant"and that the settlement is"groundbreaking"because it
suggests that anti-solicitation laws for insurance agents were violated.
"There are a variety of schemes by which real estate and mortgage agents receive value
from title and closing companies,"he said."It is an area in which law violations are
vaned and need much better enforcement."
Cox said that in addition to prohibiting companies from offering kickbacks,it holds the
recipients responsible as well,so the commerce department could have taken action
against licensees who participated in the cruises.
While the agency knows the identity of the real estate and mortgage licensees who took
part in the cruises,it decided to focus its investigation on TitleSmart"because of the
limited value of the benefit received by each individual on a pro rata basis,"said Ross
Corson,a department spokesman.
In 2012,Title Smart paid$14,297.87 for a cruise that included food,alcohol and door
prizes.The following year,it hosted another cruise with an almost$20,000 tab.
Attendees included 243 mortgage brokers,loan officers,real estate salespeople and real
estate brokers who were in a position to refer settlement services business to TitleSmart.
The department found that after the 2012 cruise,68 percent of the transactions closed by
TitleSmart were referred by someone who attended the cruise.After the 2013 cruise,75
percent of TitleSmart's transactions were referred by someone on the cruise.
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2/29/2016 Maplewood title company settles kickback investigation of its boat cruise events-StarTribune.com
Since starting TitleSmart in 2007,Koebele has grown the company to six offices and won
the Ernst&Young's Entrepreneur of the Year award.She said that many businesses in
real estate host similar events."Whether it be a boat ride on the river or Lake
Minnetonka,golf outing,baseball game...there are an endless number of networking
events where the venue and food are paid for by a hosting company,"she said.
The company's attorney,Greg Miller of the Minneapolis law firm Siegel Brill,agrees that
such events are prevalent in the industry.In the wake of the settlement,he expects many
companies will put their plans for such events on hold.
"This will have a quieting effect throughout the mortgage,real estate and title industry,"
he said.
jim.buchta @startribune.com 612-673-7376
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