State officials said they seized an Encino escrow company, the Escrow Shoppe, on Wednesday after alleging that the company made $3 million in unauthorized payments and was missing $87,000 it was supposed to be holding in a customer’s trust account.
Thomas H. Warden, a lawyer for the company and its owner, Sandra Bianco, denied the allegations by the state Department of Corporations and said no money was missing.
The lawyer acknowledged that there were some “unauthorized uses of escrow checks” but said that in most cases the checks were never cashed and money was never lost. He blamed the problem on some former employees and said the Escrow Shoppe is cooperating with state officials.
Escrow companies are used by buyers and sellers of real estate to help ensure that certain conditions are met, such as a property’s title search, before a sale is finalized. The escrow firms also hold any payments between the parties until then.
Handled Thousands a Year
The Escrow Shoppe was one of the biggest escrow firms in the San Fernando Valley and had operated since 1974, Warden said, and Judy L. Hartley, a lawyer with the Department of Corporations, said the firm handled thousands of escrows each year.
The department froze the Escrow Shoppe’s assets Monday and took possession of the firm Wednesday, Hartley said. The department also appointed a conservator to manage and eventually liquidate the firm, she said.
The actions came after a department audit of the Escrow Shoppe’s books revealed the alleged unauthorized payments and the missing cash, she said.
“We received some complaints into our office that prompted us to go out there and conduct a special examination of their books and records,” Hartley said.
She noted that the company had “stripped their premises. We don’t know where the accounting records are now. They even took the phones out of the walls. Our first task is to try and find everything.”
Warden, however, said Bianco had voluntarily closed the firm Friday and surrendered her operating license Tuesday, before the state took action. “The state technically does not have jurisdiction to appoint a conservator,” he said.
He also said the Escrow Shoppe had already sold its remaining escrow accounts and trust funds to the Santa Monica branch of another firm, Townsgate Escrow, which is based in Westlake Village. He declined to reveal the terms of the sale.
Warden said the Escrow Shoppe last week “had shown evidence” to auditors “that all monies in fact were in trust accounts for the benefit of buyers and sellers.” But Bianco “elected to go out of business” after discovering the alleged misuse of some escrow checks by former employees, he said.
Bianco knew “that she would ultimately have to bear the blame for any wrongdoing of her employees,” Warden said.
Warden alleged that some former employees used escrow company checks “to make misrepresentations . . . for their own personal gain,” but no money was ever lost from customer accounts. In most cases, he said, “the checks were never cashed and the money was never spent.” He declined to provide additional details but said the former employees allegedly involved were fired.