Monday, July 11, 2016

Owners Of Denver-Area Title Insurance Agency 'Abruptly Announce Their Retirement' After Employee Blows Whistle To State Regulators On Firms' Financial Irregularities; Bank Flags As Many As 30 Real Estate Deals That Were Closed With Rubber Checks Amidst Allegations That $600K+ In Escrow Money Went AWOL

In Denver, Colorado, The Denver Post reports:
  • The mother-daughter owners of a pair of Cherry Creek title insurance companies that abruptly closed last month are under investigation over allegations that more than $600,000 is missing from client escrow accounts.

    The state has suspended the licenses held by Elizabeth Newell-Williams, 63, and her daughter, Michelle Hernandez, 43, while investigators unravel transactions between more than a dozen different bank accounts the pair used to run Foresight Title and Williams Title and Escrow Company.

    The orders of suspension issued by the state Division of Insurance provide the first details of how the two businesses for months maneuvered millions of dollars between the various bank accounts in order to give the appearance that all was well.

    In reality, however, the bank handling the accounts flagged as many as 30 different real estate transactions that couldn’t be properly closed because of insufficient funds in the accounts, division documents show.

    It’s unclear how many additional transactions were impacted in the scheme.

    Title companies typically hold millions of dollars in escrow. The money is used to pay for final water and utility bills or other costs after closing, including paying mortgage balances.

    Neither Hernandez nor Williams could be reached for comment.

    The two companies were underwritten by Alliant National Title Insurance Company in Texas. A spokeswoman for the company refused to offer any details of the investigation.

    State regulators first learned of the money problems in April when an employee at Williams Title told them of the irregularities.

    The unidentified employee, who had worked as a sales and marketing person soliciting title business for about six months, “had serious concerns about the business practices … especially the handling of escrow funds,” the suspension paperwork shows.

    The employee told investigators she was aware of at least two instances where escrow accounts didn’t have enough money to pay off a mortgage the company was closing the sale on. Mortgage payoffs can often run into the hundreds of thousands of dollars, or much higher for pricey homes, such as those near Cherry Creek.

    The employee told investigators that the owners and a company bookkeeper “were aware of problems with account shortages … and that … if the shortages were discovered, they would be in trouble.”

    Several consumers have since complained to regulators about checks they received as part of the closing process, which later bounced.

    Investigators have pegged nearly 40 bank transfers that co-mingled more than $2 million in the companies’ accounts, the suspension orders show.

    Alliant auditors have told investigators they’ve identified more than $500,000 in shortages in Williams Title accounts and an additional 100,000 in Foresight accounts.

    State insurance regulators would not discuss any details of the ongoing investigation.

    State incorporation records show Foresight was formed in 2014 by Hernandez, who also was chief operating officer at Williams Title under the name Michelle McCollum, according to that company’s website.

    Hernandez and her mother co-founded Williams Title in 2004 in the basement of Williams’ home.

    Williams Title announced on its website that the principals were retiring and offered no explanation for the closing.

    Both women had filed for personal bankruptcy at one time, federal bankruptcy record show, but neither company nor its ownership appeared to have any recent history of financial troubles.

    Title companies can quickly run into financial trouble with millions of dollars floating between dozens of transactions. In the most recent example, in 2014, American Title Services was forced into bankruptcy when its owner, Richard Talley of Aurora, committed suicide with a nail gun after years of misappropriating more than $2.8 million of company funds was discovered.
Source: $600,000 missing from escrow accounts of Cherry Creek title companies (Owners licenses suspended while state investigates allegations of misappropriation).

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