Former president and co-founder of title insurance agency Liberty Title, Brian Madden, has been sentenced to 20 months in prison for misappropriating and embezzling escrow and other client funds from Liberty Title and two other agencies he controlled and operated in New York and Suffolk counties.
Liberty Title had been one of the largest independently-owned title insurance agencies in New York State until it ceased operations in 2009.
The sentencing was announced on Sept. 20 at the U.S. District Court for the Southern District of New York. Madden had pleaded guilty before the U.S. magistrate judge to charges of wire fraud and embezzlement of money held by an insurance agent on Dec. 14, 2010, according to a statement from the office of the U.S. Attorney for the Southern District of New York.
Title insurance is sold to purchasers of property or lenders financing the purchase of property, and is meant to protect the owner’s or lender’s financial interest in real property against loss due to title defects or liens.
Liberty Title issued title insurance policies on behalf of several title insurance underwriters in connection with commercial and residential real estate transactions. Madden also controlled and operated two other title insurance agencies: Skyline Title and GNY Liberty Abstract. Liberty Title closed operations in April 2009.
Beginning around early 2008, Madden misappropriated millions of dollars of escrow and other client funds by transferring and commingling those funds among various bank accounts held by Skyline Title, GNY Liberty, and Liberty Title, according to the office of the U.S. Attorney for the Southern District of New York.
Madden then used the misappropriated funds to sustain Liberty Title’s operations and to make significant withdrawals of monies for his personal use. In particular, between January 2008 and April 2009, he took more than $2 million in cash draws from Liberty Title.
Those cash draws, which at times amounted to hundreds of thousands of dollars in a single month, far exceeded Madden’s draws in prior years, and were taken despite the deteriorating real estate market and Liberty Title’s increasingly precarious financial position.
To sustain Liberty Title’s operations in the face of such withdrawals and to pay current client debts, Madden misappropriated escrow and client funds of other clients, essentially using new funds from clients to pay off debts on behalf of other clients.
In addition, because he misappropriated the funds of title insurance agencies, he failed to timely and properly record and pay taxes on dozens of mortgages and other real estate transactions, further exposing his clients to loss, the office of the U.S. Attorney for the Southern District of New York stated.
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