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Insurer To Pay $5 Million In Penalties

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By SHANNON BEHNKEN, The Tampa Tribune

Published: November 17, 2007

TAMPA - First American Title Insurance Co. has agreed to pay $5 million in penalties after the state said it paid "kickbacks" to real estate professionals who referred business to its affiliated title agencies in Florida.

In a settlement agreement, First American denied violating federal or state law and said it "attempted in good faith to comply with the federal regulations."

The settlement agreement resolves a yearlong investigation by the state Department of Financial Services, the U.S. Department of Housing and Urban Development and the Florida Office of Insurance Regulation.

The investigation centered on whether First American created limited partnership entities "to act as sham title insurance agencies as a means of funneling prohibited payments for the referral of business." This, according to a statement from the financial services department, is in violation of the Florida Insurance Code and federal law.

Bill Tharpe, managing attorney with the division of legal services for the Department of Financial Services, said First American had 87 such partnership title companies in Florida, including several in the Tampa Bay area.

"We believe the money that is used to pay back these agencies drive up other costs for title insurance," Tharpe said.

Most people who buy homes also buy title insurance. It is required by lenders and protects homeowners and financial institutions from real estate ownership disputes.

In a statement issued Friday, Santa Ana, Calif.-based First American admits no wrongdoing and said, "homeowners who purchased title insurance through these joint venture companies were charged premiums consistent with the valid, filed rates for title insurance in Florida."

The company's affiliate entities enlisted real estate agents, mortgage brokers, banks and home builders who referred business to First American's affiliate title insurance agencies, resulting in unfair financial gains to First American and the affiliated agencies.

Under the agreement, First American will sever its relationships with the 87 limited partnership title agencies, and business activities will be monitored monthly for a year, according to a statement from Florida Chief Financial Officer Alex Sink's office.

Reporter Shannon Behnken can be reached at (813) 259-7804 or sbehnken@tampatrib.com.

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