2007 The Year in Business, No. 3: Title agency closure disturbs development community

When the Nixa-based title insurance agency suddenly closed its doors June 19, ramifications from the company’s alleged mishandling of money rattled southwest Missouri business.

Landlords, developers, banks and builders lamented the title company for leaving them in a financial lurch after shutting down at least nine regional offices – primarily in Greene and Christian counties – that employed some 45 people. The agency was co-owned by Rick Burton, Kathy Allen and Stephanie Gray.

Guaranty Title’s underwriter, LandAmerica Financial Group (NYSE: LFG), pulled the plug on its agent after evidence of an alleged check-kiting scheme surfaced. The Virginia-based company immediately launched an audit that found at least $5.1 million missing from Guaranty Title’s various escrow accounts at area banks.

Allen 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 an affidavit filed by LandAmerica’s lead auditor.

A civil lawsuit filed by the underwriter against Guaranty Title is still unfolding in Christian County Circuit Court, where a judge recently said he wasn’t sure how to proceed with the case. Attorneys representing those wronged by Guaranty Title are pursuing the money left behind by the title agency, which is estimated to be $693,000 at best.

Meanwhile, the Missouri Department of Insurance, Financial Institutions and Professional Registration continues its investigation into Guaranty Title and LandAmerica, which uncovered a $500,000 shortage in the title company’s escrow accounts in a February 2006 audit. DIFP learned of the audit findings in August 2006, but the department deferred to the underwriter instead of shutting down Guaranty Title.

“Certainly, there were red flags,” DIFP Director Doug Ommen recently told Springfield Business Journal. “The underwriter was aware of that and allowed Guaranty Title to continue to operate.”

On Dec. 6, Ommen filed a formal complaint against Guaranty Title’s owners on behalf of his department. An administrative commission will hear the complaint early next year to determine whether DIFP should discipline the owners, who stand to lose their insurance producer licenses.

The complaint alleges that the owners failed to uphold their fiduciary responsibility to LandAmerica, disbursed money from escrow accounts without corresponding deposits, and improperly withheld premiums paid by Missouri consumers.

Additionally, the state alleged that Guaranty Title’s owners used dishonest practices and demonstrated incompetence by failing to conduct “reasonable reconciliations of escrow and construction disbursement accounts to ensure solvency of those accounts.”

Allen was singled out in the complaint for operating without an insurance producer license. Her license was revoked in 2004 for failing to file state income tax returns, according to DIFP records.

Guaranty Title’s owners have remained silent throughout the scandal, which has spanned more than six months with no arrests or criminal charges.[[In-content Ad]]