Local company accused of illegally giving luxury yacht parties, other kickbacks to real estate agents in exchange for business (2024)

WASHINGTON — A local company will pay almost $2 million to settle allegations that the company threw lavish parties for area real estate agents on a luxury yacht as part of an illegal kickback scheme in the DMV’s title insurance market.

Title insurance is required by most lenders for home loans, and real estate agents commonly suggest title companies to their clients. But both federal and District law prohibits kickbacks for the referral of specific title insurance companies.

On Thursday, D.C. Attorney General Brian Schwalb said as part of the scheme, title companies offered real estate agents discounted ownership interests in companies created specifically to direct payments to agents in exchange for customer referrals.

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

“It's incentivizing the agents to drive their clients to select closing companies, and that violates D.C. law to regular people,” Schwalb said.

Despite the $1.9 million Allied agreed to pay to settle the case with D.C., company CEO Latane Meade says the allegations aren’t true.

“Allied Title & Escrow denies that it engaged in any sort of ‘kickback scheme’ or that it did anything to prevent customers from choosing from any of the hundreds of title companies in the area,” Meade wrote in an email to WUSA9.

Schwalb said Allied provided real estate agents with compensation going along with the plan by organizing and hosting parties for agents on yachts in the Chesapeake Bay on three occasions in the summer of 2023.

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

In those videos, area real estate agents can be seen partying on board the “Cynderella,” a 101-foot luxury yacht, complete with luxurious amenities, ornate fixtures, and a bartender.

The real estate agents involved in the scheme were not formally accused of breaking the law and did not face penalties from OAG.

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

Schwalb called the actions unlawful and anticompetitive schemes that limited District homebuyers’ ability to shop for the best price and service when purchasing title insurance and escrow services, hurting law-abiding competitors, in violation of the District’s Consumer Protection Procedures Act.

“We know that the settlement costs here in the District of Columbia are some of the highest in the country when it comes time to already making a very substantial purchase in the form of a new home,” Schwalb said. “And what we want to have in our city is making sure that the closing companies are competing with one another on price and service, providing the lowest cost and the best service for clients who come to them.

Meade disputed that allegation in his email to WUSA9, claiming Allied formed “affiliated business arrangements” with real estate agents to be able to provide title services to customers.

“These were hard-working people going into business together,” Lamade wrote in a statement. “At the end of the year, if there were profits to share, those were shared in accordance with each person’s share in the business, just as losses would be shared. This was not a “scheme” for referrals, as customers were always informed that they could choose any title company they wanted. These are common business arrangements that take place across the country.”

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

As part of the settlement agreement with OAG, KVS Title, Union Settlements and Modern Settlements will also make payments to the District to resolve claims the title companies dolled out financial kickbacks in return for referrals.

None of those companies were involved with the yacht parties.

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

A KVS Title spokesperson told WUSA9 in a statement:

KVS Title strongly disagrees that its joint ventures operated improperly or harmed consumers, and denied any wrongdoing in its agreement with the Office of the Attorney General. KVS Title is proud of the work its joint ventures performed for consumers, but ultimately decided it was in the best interests of the company to settle these claims and avoid costly and protracted litigation.

We do not agree with the allegations made by the Attorney General. Modern Settlements has always been and continues to be committed to playing by the rules and providing customers with an exceptional experience at competitive prices. We made a business decision to pay DC $65,000 rather than go through the drawn out process of a more extensive legal battle.

A spokesperson for Modern Settlements echoed those sentiments telling WUSA9 in a statement:

We do not agree with the allegations made by the Attorney General. Modern Settlements has always been and continues to be committed to playing by the rules and providing customers with an exceptional experience at competitive prices. We made a business decision to pay DC $65,000 rather than go through the drawn out process of a more extensive legal battle.

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 claims made by the AG without any admission of wrongdoing,” he wrote in his email to WUAS9. “It was not an easy decision, because Allied believes that it did nothing wrong. Allied made the decision to settle the claims to avoid years of very costly litigation and so that its team could continue to focus on providing the best customer service in the title industry.”

Schwalb said the OAG’s investigation revealed that the financial incentives the companies provided to real estate agents led to those agents aggressively steering their homebuying clients to the companies in ways that reduced buyers’ ability to shop for the best price or service.

Schwalb said all four companies agreed to end the practice of giving real estate agents consideration for the referral of title insurance business and either divest real estate agents from their ownership interests in the companies or cease the companies’ title insurance operations in the District.

OAG said it is continuing to investigate the issue of kickbacks across the title insurance industry.

The District will be devoting up to $1.75 million from the settlements to provide restitution to affected consumers. OAG will share more information with homeowners in the coming months.