Guaranty Title underwriter wraps up audit

The financial underwriter for a Nixa-based title insurance agency that abruptly closed in mid-June has completed an audit of the defunct company’s records and forwarded its findings to the Missouri Department of Insurance.

For two-and-a-half months, auditors with Virginia-based LandAmerica Financial Group audited the remnants of Guaranty Title Co., which closed its doors without warning June 19. Guaranty Title employed about 45 people at several southwest Missouri offices, primarily in Greene and Christian counties.

Department of Insurance officials received LandAmerica’s audit report Aug. 31 and have requested supplemental information from the underwriter, said department spokeswoman Emily Kampeter. Because the department is investigating Guaranty Title’s closure, Kampeter declined to disclose details from the audit report.

Growing file

As of late June, at least $4.5 million was missing from numerous escrow accounts maintained by Guaranty Title at area banks, according to a sworn affidavit from Land-America senior auditor Kevin Hickey. The affidavit is among the documents in a growing file in Christian County Circuit Court, where LandAmerica – through subsidiaries Commonwealth Land Title and Transnation Title and Escrow – filed suit against Guaranty Title in late June.

Judge Mark Orr granted the underwriter’s request to freeze Guaranty Title’s accounts and prohibit owners Kathy Allen, Rick Burton and Stephanie Gray from interfering with an ongoing audit. Allen allegedly admitted to a “scheme of commingling and transferring funds between and among different banks and multiple accounts to replenish shortages and to also mask shortages,” according to Hickey’s affidavit.

A recent motion filed by St. Louis attorney William Sauerwein, who represents LandAmerica, asked Judge Orr to appoint a “master” who would oversee the resolution of claims made by former Guaranty Title customers.

About $693,000 from Guaranty Title’s various bank accounts has been deposited into a court registry, according to court records. So far, LandAmerica already has paid more than $2 million to claimants and expects to pay “additional significant amounts” to those with valid claims, records state. The underwriter also has established a system to issue hundreds of title insurance policies Guaranty Title failed to issue.

LandAmerica’s attorneys have alleged that Guaranty Title misappropriated earnest money deposits from real estate buyers and funds escrowed for 1031 exchange transactions, which allow buyers and sellers to defer capital gains taxes on investment properties. Contractors whose construction disbursement checks bounced also have made claims for reimbursement.

Investigation continues

In July, Springfield Business Journal reported that Land-America had knowledge of the problems at Guaranty Title well before the agency shut down.

The underwriter audited the title company in February 2006, and six months later, a complaint about Guaranty Title’s business practices prompted the Department of Insurance to open the investigation.

Shortly thereafter, Land-America shared the results of its audit with department officials: Guaranty Title’s escrow accounts were short $500,000, and the company had failed to report 5,323 policies totaling some $400,000 in premiums.

LandAmerica also has accused the agency’s ownership of attempting to hide evidence from auditors, according to records.

Once the state’s investigation is complete, the department will determine whether to take any disciplinary action against the licensed parties involved, Kampeter said, noting that LandAmerica is among the entities under investigation. At the appropriate time, officials will decide whether to forward evidence to a county prosecutor or the U.S. Attorney’s Office for criminal charges, she said.

LandAmerica spokeswoman Lloyd Osgood said in an e-mail that the company would not comment in light of the pending litigation against Guaranty Title.

Attempts to reach Allen, who lives in Jasper County, have been unsuccessful, and Burton’s Springfield attorney, Devon Sherwood, declined to comment.

Burton recorded three warranty deeds in Christian County just days after Guaranty Title closed. The three Nixa properties were deeded from Burton and wife Carol to Security Properties Inc., a real estate development and property management company formed by Rick Burton in 2002. Carol Burton became the company’s registered agent in 2004, according to the Missouri secretary of state’s office.[[In-content Ad]]