Auditors: Guaranty Title may have mishandled funds

Guaranty Title was abruptly shut down June 19 by St. Louis-based underwriter Commonwealth Land Title Insurance Co., a subsidiary of Richmond, Va.-based LandAmerica Financial Group. Guaranty operated at least nine title insurance offices in southwest Missouri, primarily in Greene, Christian and Lawrence counties. Guaranty Title is not affiliated with Springfield-based Guaranty Bank.

Two auditors with LandAmerica were still analyzing Guaranty Title’s financial records at press time.

“They were able to tell us that there is reason to believe there’s possible misappropriation of funds,” Missouri Department of Insurance spokeswoman Emily Kampeter said, adding that it was too early to comment on the scope of the alleged wrongdoing. “I think the audit will give us a clearer picture, because we will be able to see who is disbursing that money and where it’s going.”

Guaranty Title owners Rick Burton and Kathy Allen could not be reached for comment, but a civil lawsuit filed in Christian County Circuit Court in October 2003 offers some insight into the now-defunct title agency’s beginnings.

Acrimonious sale

In that suit, Randy and Teresa Bruns, of Nixa, accused Burton and Allen of fraud, negligent misrepresentation and breach of contract.

According to the suit, the Brunses entered into a contract in 1999 to sell their half of Christian County Closing Co. to Burton and half-owner Allen, previously known as Kathy Stanton. Under the agreement, Burton agreed to pay the Brunses $330,000 for their ownership in the company, their 25 percent share in Springfield Title Co. and property at 201 N. Main St. in Nixa.

Burton was majority owner of Springfield Title, which he created in March 1998, and Allen owned half of the Main Street property, court records show.

Under the agreement, Burton was to make a $50,000 down payment and monthly payments of $5,345 to the Brunses, who would in turn carry a $30,000 note for Burton. When the sale closed later that year, the parties agreed to divvy up about $18,000 in the closing company’s corporate checking account.

But in October 1999, Allen allegedly told the Brunses the account only had about $1,000 and asked them to contribute another $1,000 to cover bills, records show.

The Brunses, who did not return calls seeking comment, alleged in the suit that Burton used funds in the corporate checking accounts to cover his monthly payments to them.

“Upon information and belief, revenues generated by (the closing company) which should have been deposited into (company) bank accounts by defendant Burton and defendant Stanton were instead deposited … into their other business and personal accounts,” the suit reads.

The litigation is still pending.

Parting ways

Another colleague of Burton and Allen, Bill Saxton, is distancing himself from Guaranty Title, but doing so might prove difficult.

Saxton is president of Guaranty Appraisal Co., and until recently, he was working out of the Guaranty Title office at 2217 E. Kearney St. When Guaranty Appraisal was formed in 2003, the company’s organizers were Burton, Allen and Saxton, according to documents filed with the Missouri secretary of state’s office. An April filing lists Burton as Guaranty Appraisal’s president, and a fictitious registration filed June 21 for Guaranty Appraisal names Saxton as president and sole owner.

Despite the apparent connections, Saxton said Guaranty Title and Guaranty Appraisal were not affiliated.

“We’re totally separate from each other, and I have no idea what’s going on with them,” Saxton said. “I’m not under investigation. I’m not closed down.”

In the same interview, however, Saxton said Burton relinquished an unspecified amount of ownership in Guaranty Appraisal when Guaranty Title was shut down.

Saxton said he first became acquainted with Burton four years ago, when Burton had hoped to open a “one-stop closing shop” that would offer surveying, credit reporting, appraisals and title insurance. But federal legislation that would have paved the way for packaged closings never got off the ground, and Burton’s plan fizzled, Saxton said.

Saxton, who has been in touch with Burton and several former Guaranty Title employees since the company closed its doors, said he knew nothing about the alleged misuse of funds.

“Rick is a very personable man; he’s a marketing guy,” said Saxton, who plans to reopen in early July in Republic as The Appraisal Co. “Kathy was the one that ran the company.”

Title insurance crackdown

Late last year, investigators with the state Department of Insurance conducted an unannounced sweep of several title insurance companies in the St. Louis area.

The investigation found several instances of alleged wrongdoing, and the department’s consumer affairs division filed enforcement actions against 16 agencies. Alleged infractions included misrepresenting, concealing or suppressing information from consumers regarding the actual cost of title insurance as well as kickbacks, all-inclusive title fees and failure to prominently display premium schedules filed with the state in title company offices.

“While we don’t know the conclusions of this (Guaranty Title) investigation, a lot of the reasons that the title insurance agencies closed in St. Louis is because there was a misappropriation of funds,” Kampeter said. “Escrow funds … were, in fact, used for operating expenses for the agency or even used for personal use in some cases.”

In the wake of the sweep and high-profile cases prosecuted by the U.S. Attorney’s Office, the Department of Insurance renewed its push for title reform legislation earlier this year. A bill passed by Missouri lawmakers is now headed to Gov. Matt Blunt’s desk.

Under the legislation, every underwriter must audit its agents at least once a year. Buyers and sellers also will be able to buy an insured closing letter from underwriters to protect their side of the transaction if money is missing.

The legislation also requires licensed title insurance agents to attend eight hours of continuing education every two years.

Since 2005, the state insurance department has received seven complaints about Guaranty Title, Kampeter said, noting that several involved licensing issues. In December 2005, the department fined Guaranty Title $175 for employing unlicensed individuals.[[In-content Ad]]