Settlement Reached in Conn. Kickback Scheme

By | December 11, 2007

A Connecticut law firm, mortgage company and real estate broker have agreed to pay $700,000 in fines, forfeitures and restitution to settle allegations that they engaged in kickback schemes that cheated hundreds of home buyers for mortgage-related services, state officials said Monday.

The allegations expose an “uneven playing field” between the real estate industry, which is involved in numerous property transactions, and less-experienced home buyers, state Attorney General Richard Blumenthal said.

He sued the Farmington law firm of Reiner, Reiner & Bendett in October, accusing it of concealing $142,200 in kickbacks and inducements between 2002 and 2005. The law firm, which also sells title insurance, used sham service, rental and other agreements to conceal the payments, Blumenthal said.

Michael D. Reiner, president of the law firm, said he disagrees with Blumenthal’s characterization of his firm’s actions.

“We were engaged in business relationships which were no different than those developed by nationally acclaimed real estate lawyers and which we believe fully comply with the law,” he said in a statement. “We want to be perfectly clear that these arrangements never caused our clients or any party to be charged any more for closing services than they were charged before these relationships were formed.”

The law firm agreed to the settlement to avoid “protracted and costly litigation,” Reiner said.

Reiner agreed to pay mortgage broker Absolute Mortgage Solutions of East Hartford $200 per customer for closing services, including ordering a title search, assembling closing documents and coordinating the closing, Blumenthal said. Reiner paid Absolute $76,200 in 2004 under the agreement.

However, consumers had already paid Absolute for the services, Blumenthal said. The arrangement was a ruse to conceal illegal payments to Absolute for steering customers to Reiner for its title insurance, Blumenthal and Insurance Commissioner Thomas Sullivan said.

Absolute Mortgage said in a statement that it believed it was “acting in the best interest of the many prospective homeowners who were seeking an efficient means of seeking mortgages.”

Century 21 Access America of Wethersfield also is accused of steering title insurance business to Reiner, Reiner & Bendett. Connecticut law prohibits title insurance agents from paying for referrals.

John Zubretsky, a spokesman at Century 21 Access America, said consumers did not pay any money as a result of the business relationship.

Blumenthal said Reiner, Reiner & Bendett hid “illicit payments” to Access in phony marketing and rental agreements.

“These steering schemes increased consumers’ costs and denied choice while unjustly enriching the lawbreakers,” he said.

The matter has not been referred to the state’s attorney’s office for criminal prosecution, Blumenthal said, but his office has not ruled that out.

The allegations came to Blumenthal’s attention with complaints from consumers and a lawyer who questioned why Reiner, Reiner & Bendett was receiving so much business from Absolute Mortgage Solutions, Blumenthal said.

Of the $700,000 settlement, $125,000 will compensate customers of Absolute Mortgage Solutions, $425,000 will be deposited into the state’s General Fund and the remainder will be used for consumer education by the attorney general’s office and Insurance and Consumer Protection departments.

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