State Closes Santa Clarita Escrow Firm : Investigation: Officials freeze the assets of the large company after more than $2 million is found to be missing.
State regulators shut down the city’s largest residential escrow company, disrupting thousands of home sales, after a routine examination uncovered more than $2 million missing from the firm’s $4.5-million trust fund.
Officials of the state Department of Corporations have frozen the remaining assets of the firm, Country Oaks Escrow, as inspectors comb the company’s financial books.
Shocked local realtors estimated that the firm handled from one-third to more than half of the city’s escrow transactions. Such firms are entrusted with holding money during the completion of real estate sales.
Regulators closed the Valencia office Friday afternoon after a company representative told them of the shortfall, said Dale Lucas, chief examiner of the state Department of Corporations.
“Right now, everything is frozen so we can determine the degree of the problem,” Lucas said. “The people who have funds in the escrow shouldn’t have any problem getting their funds back.”
Between 800 and 1,000 residences were in escrow in the Valencia office of the company, which also has branches in Palmdale, Lancaster and Arcadia, Lucas said.
Company officials said the total number of escrows being handled was several thousand.
The deposits of home buyers and sellers in the escrow trust fund are insured by the Escrow Agents Fidelity Corp., which was established 10 years ago to cover such emergencies. But sale transactions handled by Country Oaks will be delayed for at least several days and perhaps as long as several months, state officials said.
Neither the owners of Country Oaks, Kathy and Harold Wiener, nor their attorney could be reached for comment. The telephone to the Weiners’ residence in Santa Clarita was disconnected.
The manager of the Valencia office, Penny Voelker, said Kathy Wiener told her and other top company officers through a conference call Friday that her husband had “embezzled the money . . . that he had taken a large amount of money from the trust account for operating expenditures of the business” over the past four years.
Lucas said it is unclear what led to the shortfall or where the money was spent.
The 12-year-old Country Oaks is the third and largest escrow company in the state to be shut down this year, Lucas said. It is also the second failed escrow firm in Santa Clarita. Ruth Altman Escrows Inc. was shut down by regulators in January.
The Escrow Institute of California said Country Oaks was the 21st largest escrow company in the state, based on the size of its trust fund, out of 820 license holders.
Country Oaks’ $4.5-million trust account includes good faith deposits by home buyers, normally between $2,000 and $10,000. The money represents funds held while the property is being inspected and loan arrangements are being made.
Escrow companies make money charging a fee for handling the exchange between the home buyer and seller.
The money in the trust account is held until completion of the sale, when the seller receives the money and the buyer gets title to the property.
Bill Harrison and his family are one of thousands of Country Oaks’ clients whose home sale has been jeopardized.
Escrow on a $250,000 Saugus residence that Harrison was buying was scheduled to have closed Friday. Instead, all he and his family could do Monday was pace in front of the locked door of the Valencia branch of Country Oaks.
“We moved out here from Indiana, and we don’t know anyone here, and every dime we have is in there,” Harrison said, pointing at the door, adorned by a fax notice detailing the state’s closure of the company.
The Harrisons--who arrived from Evansville, Ind., on Saturday--are staying at a local hotel, waiting to find out what has happened to the $25,000 down payment they made on their house.
“If this is welcome to California,” Ann Harrison said, “I don’t like your red carpet.”
Paychecks for the 105 employees of the company were frozen, while some checks from the end of May bounced, company employees said.
“What he did was wrong and he should rot in jail,” said one angry employee as she left a morning meeting with Michael Djordjevich, a conservator assigned to the company by the state.
The conservators are looking for outside firms--such as Coastal Counties Escrow, a Fullerton-based firm with eight locations in Los Angeles, Orange and Riverside counties--to take over the company.
James Emery, chief executive officer of Coastal Counties, said Country Oaks “had an extremely good reputation, and it was a formidable competitor out there for us for many years.” Emery confirmed that his company is interested in buying Country Oaks.
“I would have thought that with the reputation that Country Oaks had, that their business would have been large enough to sustain their company,” said Emery, whose firm has taken over others in similar circumstances. “I can’t understand how any company would allow itself to dip into its trust fund.”
Local real estate agents and brokers were shocked by the news that such a trusted firm could go under so suddenly.
Co-owner Kathy Wiener had twice served as president of the Escrow Institute of California, and she and her husband had been active in community affairs. The couple were selected to serve as co-chairs of the 22nd annual benefit auction of the local Boys & Girls Club. Kathy Wiener had served on the organization’s board of directors for the past four years.
Marie Abernethy, president of the Santa Clarita Valley Assn. of Realtors, said the closure rocked those in real estate here.
“It’s something that we would never have expected at all,” said Abernethy, who said her first real estate transaction 20 years ago was handled by Kathy Wiener. “This is just such a shock to most of the people in this valley.”
