Legislators look at his links to title firms

San Francisco Chronicle

CALIFORNIA — State Insurance Commissioner Chuck Quackenbush, already in hot water for going soft on the insurance industry, is facing new questions on whether he went too easy on title and escrow companies accused of ripping off California’s home buyers.

Interviews and confidential memos show Quackenbush‘s Insurance Department turning a blind eye to possible evidence, giving title com- panies the inside track in helping rewrite the very rules they are accused of breaking, and letting firms get off cheap with tax-deductible contributions to a “consumer education” program — money that has yet to be spent.

State legislators are curious to know details of Quackenbush‘s arrangements, given his wheeling and dealing with insurance companies accused of stiffing Northridge earthquake victims and paying “penalties” to a foundation that helped out Chuck Quackenbush.

In this case, the story begins in 1997, when a lawyer for Old Republic Title Co. turned in one of its executives in San Francisco for allegedly embezzling more than $1 million from the company.

The executive, Donald Barr, eventually pleaded guilty to two tax charges, but not before implicating other top executives in the company.

“His story basically was, `Yes, I’m a thief, but I’m stealing from other thieves,’ ” San Francisco City Attorney Louise Renne said.

A joint investigation by Renne’s office and the San Francisco district attorney found just that and led to a civil suit charging Old Republic with grabbing up millions of dollars in unclaimed escrow funds.

The city invited Quackenbush‘s Insurance Department to join the suit, along with the state controller’s office — which in turn brought in the state attorney general.

The attorney general eventually filed suit against all the state’s title companies, saying they engaged in such practices as pocketing “secret interest” on home-buyer accounts, routinely charging home buyers for services the title companies knew they would never perform, and charging customers for services the companies knew were not needed.

A similar investigation by the Insurance Department found all of the above, plus evidence that title companies were paying kickbacks to real estate agents for steering home buyers their way.

For a while, it looked like a big showdown was brewing with California’s biggest title companies on one side and the state and San Francisco on the side of consumers.

But then things started getting funny — at least in the eyes of the city attorney.

First, the Insurance Department opted out of the lawsuit, saying new regulations it was planning would accomplish the same goals.

And on February 16, Quackenbush said his office had reached its own settlement with one of the companies under investigation, Fidelity National Title.

Under the deal, Fidelity agreed to stop its questionable practices, pay $607,500 in fines and put an additional $425,000 into the nonprofit Title and Escrow Consumer Education and Outreach Foundation.

`CONSUMER EDUCATION’ FOUNDATION

The foundation, which Fidelity created the next day, was to spend the money on “consumer education and outreach on title insurance issues.”

Back in April, when state Sen. Jackie Speier said she would look into the affair, Quackenbush said, “This particular foundation is going to be under tighter control than the earthquake one.”

Must be. To date, not a dime has been spent on consumer education or anything else.

San Francisco Deputy City Attorney Matt Davis — who was acting as the city’s point man in the investigation — first heard of the settlement when a lawyer for the title company read Quackenbush‘s press release to him over the phone.

Davis was floored.

For months he’d been trying to get the Insurance Department to interview a former high-level Fidelity employee who had described widespread practices through which the company had charged fees to customers for services never performed.

“The (Insurance) Department not only failed to contact us before settling with Fidelity, but your staff neglected to return my calls,” Davis wrote in a blistering memo to Quackenbush on February 28.

ONE SETTLEMENT AFTER ANOTHER

Over the next couple of weeks, Quackenbush and the Insurance Department entered into a parade of settlements with the biggest title companies.

On February 22, Quackenbush announced a settlement with First American Title Insurance Co. for $840,000 to go to the same nonprofit foundation. At the same time, he said his office had settled with Chicago Title Co. for $650,000 plus investigation costs.

On March 10, Quackenbush approved the merger of Fidelity National and Chicago Title into one of the largest title companies in the state.

On March 16, in “another victory for California consumers,” Quackenbush announced a settlement with Old Republic Title. The deal was for $513,499, of which $350,000 was a tax-deductible donation to the same “consumer protection” fund.

In all, Quackenbush takes credit for levying $4.2 million in penalties against title companies. Of that, $3.2 million consisted of donations to the tax-deductible fund. None of it has been spent.

According to Renne’s office, the fines and settlements could have been much higher — maybe millions of dollars higher.

CHUMMY TACTICS

And not just the settlements have Renne’s people upset. Quackenbush‘s clubby way of coming up with new regulations for the title companies also has them steaming.

In the summer of 1998, lawyers for the city told the Insurance Department that they wanted to comment on any rule changes proposed for dealing with the problems exposed by San Francisco’s investigation.

The department initially said the documents on the proposed new regulations were confidential.

“This was astonishing, given the department had given a copy to the industry,” Davis wrote.

When the Insurance Department finally did issue the “emergency regulations,” it was the title companies that sent copies to the city attorney’s office, Davis said.

Insurance Department spokesman Scott Edelen said he didn’t know why the city attorney’s lawyers hadn’t been alerted, but he said their “comments are still welcome” at hearings scheduled for this week.

ATTORNEY GENERAL IN PURSUIT

It should also be noted that the attorney general’s office is still pursuing cases against the state’s five largest title firms and is in the midst of its own settlement talks.

The whole affair has left the city attorney stunned.

“Frankly, we were appalled,” Renne said of the Department of Insurance‘s conduct.

“You hand over what you have in the spirit of cooperation, and then they have no interest in pursuing it,” she said. “It just shows how little consumer protection there is out there.”

Insurance Department spokesman Edelen’s response: “Look at our overall record.”

Phillip Matier, Andrew Ross, Chronicle Staff Writers

Wednesday, June 21, 2000

©2000 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2000/06/21/MN11402.DTL

CALIFORNIA — State Insurance Commissioner Chuck Quackenbush, already in hot water for going soft on the insurance industry, is facing new questions on whether he went too easy on title and escrow companies accused of ripping off California’s home buyers.

Interviews and confidential memos show Quackenbush‘s Insurance Department turning a blind eye to possible evidence, giving title com- panies the inside track in helping rewrite the very rules they are accused of breaking, and letting firms get off cheap with tax-deductible contributions to a “consumer education” program — money that has yet to be spent.

State legislators are curious to know details of Quackenbush‘s arrangements, given his wheeling and dealing with insurance companies accused of stiffing Northridge earthquake victims and paying “penalties” to a foundation that helped out Chuck Quackenbush.

In this case, the story begins in 1997, when a lawyer for Old Republic Title Co. turned in one of its executives in San Francisco for allegedly embezzling more than $1 million from the company.

The executive, Donald Barr, eventually pleaded guilty to two tax charges, but not before implicating other top executives in the company.

“His story basically was, `Yes, I’m a thief, but I’m stealing from other thieves,’ ” San Francisco City Attorney Louise Renne said.

A joint investigation by Renne’s office and the San Francisco district attorney found just that and led to a civil suit charging Old Republic with grabbing up millions of dollars in unclaimed escrow funds.

The city invited Quackenbush‘s Insurance Department to join the suit, along with the state controller’s office — which in turn brought in the state attorney general.

The attorney general eventually filed suit against all the state’s title companies, saying they engaged in such practices as pocketing “secret interest” on home-buyer accounts, routinely charging home buyers for services the title companies knew they would never perform, and charging customers for services the companies knew were not needed.

A similar investigation by the Insurance Department found all of the above, plus evidence that title companies were paying kickbacks to real estate agents for steering home buyers their way.

For a while, it looked like a big showdown was brewing with California’s biggest title companies on one side and the state and San Francisco on the side of consumers.

But then things started getting funny — at least in the eyes of the city attorney.

First, the Insurance Department opted out of the lawsuit, saying new regulations it was planning would accomplish the same goals.

And on February 16, Quackenbush said his office had reached its own settlement with one of the companies under investigation, Fidelity National Title.

Under the deal, Fidelity agreed to stop its questionable practices, pay $607,500 in fines and put an additional $425,000 into the nonprofit Title and Escrow Consumer Education and Outreach Foundation.

`CONSUMER EDUCATION’ FOUNDATION

The foundation, which Fidelity created the next day, was to spend the money on “consumer education and outreach on title insurance issues.”

Back in April, when state Sen. Jackie Speier said she would look into the affair, Quackenbush said, “This particular foundation is going to be under tighter control than the earthquake one.”

Must be. To date, not a dime has been spent on consumer education or anything else.

San Francisco Deputy City Attorney Matt Davis — who was acting as the city’s point man in the investigation — first heard of the settlement when a lawyer for the title company read Quackenbush‘s press release to him over the phone.

Davis was floored.

For months he’d been trying to get the Insurance Department to interview a former high-level Fidelity employee who had described widespread practices through which the company had charged fees to customers for services never performed.

“The (Insurance) Department not only failed to contact us before settling with Fidelity, but your staff neglected to return my calls,” Davis wrote in a blistering memo to Quackenbush on February 28.

ONE SETTLEMENT AFTER ANOTHER

Over the next couple of weeks, Quackenbush and the Insurance Department entered into a parade of settlements with the biggest title companies.

On February 22, Quackenbush announced a settlement with First American Title Insurance Co. for $840,000 to go to the same nonprofit foundation. At the same time, he said his office had settled with Chicago Title Co. for $650,000 plus investigation costs.

On March 10, Quackenbush approved the merger of Fidelity National and Chicago Title into one of the largest title companies in the state.

On March 16, in “another victory for California consumers,” Quackenbush announced a settlement with Old Republic Title. The deal was for $513,499, of which $350,000 was a tax-deductible donation to the same “consumer protection” fund.

In all, Quackenbush takes credit for levying $4.2 million in penalties against title companies. Of that, $3.2 million consisted of donations to the tax-deductible fund. None of it has been spent.

According to Renne’s office, the fines and settlements could have been much higher — maybe millions of dollars higher.

CHUMMY TACTICS

And not just the settlements have Renne’s people upset. Quackenbush‘s clubby way of coming up with new regulations for the title companies also has them steaming.

In the summer of 1998, lawyers for the city told the Insurance Department that they wanted to comment on any rule changes proposed for dealing with the problems exposed by San Francisco’s investigation.

The department initially said the documents on the proposed new regulations were confidential.

“This was astonishing, given the department had given a copy to the industry,” Davis wrote.

When the Insurance Department finally did issue the “emergency regulations,” it was the title companies that sent copies to the city attorney’s office, Davis said.

Insurance Department spokesman Scott Edelen said he didn’t know why the city attorney’s lawyers hadn’t been alerted, but he said their “comments are still welcome” at hearings scheduled for this week.

ATTORNEY GENERAL IN PURSUIT

It should also be noted that the attorney general’s office is still pursuing cases against the state’s five largest title firms and is in the midst of its own settlement talks.

The whole affair has left the city attorney stunned.

“Frankly, we were appalled,” Renne said of the Department of Insurance‘s conduct.

“You hand over what you have in the spirit of cooperation, and then they have no interest in pursuing it,” she said. “It just shows how little consumer protection there is out there.”

Insurance Department spokesman Edelen’s response: “Look at our overall record.”