Title Firm to Pay $2.5-Million Fine

First American Title Insurance Co., accused of providing Las Vegas vacations and other illegal kickbacks to real estate agents in exchange for business referrals, agreed Thursday to pay a record $2.5 million in fines to the state Department of Insurance.

State Insurance Commissioner Chuck Quackenbush announced that Santa Ana-based First American, the state’s largest title insurance company, agreed to pay the fine, which is more than 10 times greater than any levied against a title company in the past.

First American, while not specifically admitting wrongdoing, also said it will not offer real estate agents a wide range of illegal inducements enumerated by the state Department of Insurance, including computers, printing services and gifts.

“Any type of inducement you can think of, [agents] probably got,” Quackenbush said. “Consumers lose in this particular practice [because] the real estate agent is not looking for the best price for the consumer; they are looking for the biggest kickback.”

The names of more than 100 real estate agents in Los Angeles, Orange and San Diego counties who were implicated in the investigation were to be submitted Thursday to the state Department of Real Estate, which licenses and regulates real estate agents.

First American Title, a division of century-old First American Financial Corp., provides title insurance to home buyers nationwide. Title insurance protects buyers from losses caused by unrecorded claims on a piece of property and is required by mortgage lenders.

The investigation, begun in May 1998, focused on activities in Los Angeles, Orange and San Diego counties. “We found massive violations everywhere,” Quackenbush said.

The alleged kickbacks took the form of cash payments amounting to hundreds of dollars, tickets to sporting events, Utah ski vacations, parties, training sessions unrelated to the business of title insurance and even monthly allowances to real estate agents who used First American computer screen-savers.

Investigators said they found that employees in the Los Angeles office made efforts to cover up the illegal inducements paid to real estate agents.

First American will pay $1.25 million in penalties to the Department of Insurance and the same amount to fund a state-sponsored consumer insurance awareness program.

In addition, First American’s Los Angeles office was prohibited Wednesday from accepting new business or marketing its services for a five-day period, beginning Monday.

In a 1996 interview with The Times, First American President Parker S. Kennedy said his company planned to take an active role in cleaning up title industry abuses.

A statement issued by First American on Thursday said the company had cooperated fully with the investigation and plans to establish compliance and educational programs and expand its audit procedures.

“Given our company’s 110-year history of integrity, we are embarrassed by this current situation,” the statement read. “However, we trust that the sanctions imposed on us . . . [will] bring the marketplace back to earning each customer’s business on the basis of product and performance.”

Betty Ludeman, chief of the DRE’s enforcement division, did not comment on whether or how the real estate agents would be disciplined because she had not yet received any information from the Department of Insurance, she said.

The investigation into First American was spurred in part by complaints from competitors, said Insurance Department officials, who called kickbacks a chronic problem in the title insurance industry.

In the last three years, the Department of Insurance has fined seven title companies a total of more than $3 million, including the First American fine. The highest previous fine was levied against Chicago Title Co. this year for $235,000.

Officials said the industry’s self-policing efforts have failed, but investigations into other title insurance companies are ongoing.

Home buyers have the right to use any title insurance company they wish, but frequently take the advice of realty agents about which to use, Quackenbush said.

State law prohibits inducements, or kickbacks, to help ensure that real estate agents place the interests of consumers--not title companies--first during real estate transactions.

First American Financial shares fell 19 cents to close at $12.13 on the New York Stock Exchange.