California Escrow Industry Group Seeks Uniform Regulation

In late May, the Santa Clara County, Calif. District Attorney’s Office charged a former escrow officer with 32 counts of embezzlement and grand theft for allegedly living “high on the hog” on the tab of her clients.

Melanie Melim, a former escrow officer with Alliance Title Co., faces up to 21 years in prison for allegedly stealing more than $1 million from client escrow accounts — funds that were considered to be guarded by a neutral third-party to the real estate transaction.

Instead, Melim used the funds to attend concerts and sporting events, take trips to Las Vegas and go on shopping sprees, authorities alleged.

As much as the allegations against Melim are personally troublesome, they also raise questions about the security of the escrow industry, a staple of the real estate business in California for more than a century.

But as the California escrow industry juggles confronting incidents such as these, waiting for the filing of a controversial rulemaking that would drastically cut its rates and pacing the floor of the state Capitol, one trade group has hinted that the industry may be gearing up for its toughest challenge yet.

‘An aligning of the stars’

Members of the Escrow Institute of California (EIC), a trade group that represents the state’s licensed, independent escrow industry, are laying the groundwork for a cross-industry meeting of the minds to bring stability to an industry confounded by a confusing maze of uneven regulatory oversight.

The EIC has officially opened the door for formal discussion of a proposal to bring California’s escrow practitioners — who, depending on their primary real estate business, must answer to one of five different state regulators — under the umbrella of a comprehensive, uniform escrow law with a single regulator.

According to EIC President P.J. Garcia, it’s a system that could do much to solve the escrow industry’s problems and relieve it of the burden of a regulatory structure that “just doesn’t make sense.”

“There is a broad array of bureaucracries that regulate escrow in California, to the extent that not even the regulators have an integral grasp of the picture,” Garcia said. “If that is the case, how can the consumer possibly understand it and know who to turn to? It’s a question of enhancing consumer protection and streamlining government, both of which we think are good goals.”

However, it’s an idea that has been tossed around before, without much agreement. Still, Garcia describes initial discussions among the various affected industries and regulators as “encouraging.”

“There’s the sense that there is an aligning of the stars,” she said. “But the devil is in the details. What we have to do is build a consensus.”

In the beginning

Independent escrow corporations have been providing closing services to California consumers in California since the late 1940s. The state Escrow Law, which was enacted in 1947, defines escrow providers as neutral, third-party agents for all principals in a real estate transaction.

The Escrow Law requires all corporations engaged in the escrow business as escrow agents to be licensed as independent escrow companies by the California Department of Corporations (DOC). However, in order to reach California’s more rural consumers, the state began to allow other real estate practitioners to provide escrow services to give consumers greater flexibility.

Thus, the state excluded the following groups from the licensure requirements of the Escrow Law:

“Any person whose principal business is that of preparing abstracts or making searches of title that are used as a basis for the issuance of a policy of title insurance by a company doing business under any law of this state relating to insurance companies.” These individuals are regulated by the Department of Insurance (DOI).

“Any real estate broker licensed by the real estate commissioner while performing acts in the course of or incidental to a real estate transaction in which the broker is an agent or a party to the transaction and in which the broker is performing an act for which a real estate license is required.” These individuals are regulated by the Department of Real Estate (DRE).

“Any person doing business relating to banks, trust companies, building and loan or savings and loan associations.” These individuals are regulated by either the DOC or the DRE.

“Any person licensed to practice law in California who has a bona fide client attorney relationship with a principal in a real estate transaction and who is not actively engaged in the business of an escrow agent.” These individuals are regulated by the state bar.
Garcia argued that while the current regulatory structure may have made sense when it was created, times have changed, and so should the system.

“I think the market has changed over the last 60 years or so, particularly in the last 10 or 15 years,” she said. “Technology has made a lot of changes. We’re no longer a predominantly rural state. Even the rural areas aren’t just rural anymore.”

Moreover, escrow practitioners licensed by the DOC are subject to a higher regulatory standard than those who are exempt from the Escrow Law, Garcia said. DOC licensees undergo background checks and fingerprinting by the Department of Justice and are bonded by the Escrow Agents’ Fidelity Corp., while those who are exempt from the Escrow Law get the all-clear from their primary industry regulator.

Such uneven standards may be a factor contributing to incidents such as the one involving Melim, Garcia said.

“Whenever something is reported, it is just reported as escrow. There is no distinction made as to who the regulator is,” Garcia said. “We all sort of get painted with the same broad brush, and that is not something we have been happy about.”

Mike Belote, legislative advocate for the California Escrow Association (CEA), a trade group representing all escrow practitioners, agreed change is needed, but said the discussion has been simmering for 25 years without coming to a boiling point.

“We think if you were creating an escrow regulation system from scratch, you wouldn’t do it this way,” Belote said. “Everyone understands it’s a weird system we have now, but it’s been this way for over 50 years. The question is, how do you conform all of that if there is no political will to do that?”

Winds of change

It’s no secret that for more than a year, the DOI has been focused on implementing regulations to drastically reduce title insurance premiums and escrow rates by $1 billion annually. The DOI has been colorful in its depiction of the title insurance industry as “a system rife with illegal kickbacks and gratuities,” and the department was generous enough with its brush to paint the escrow industry as “middlemen” who only further drive up prices for consumers.

This included DOC licensees, who were baffled that they were lumped into a regulation proposed by a regulatory authority other than their own. The EIC spent most of last year fighting the proposal — and standing beside the group was the California Land Title Association (CLTA), which linked arms with the EIC on many occasions, including a contentious day-long DOI hearing last August.

Bridges built and alliances formed, the EIC is hopeful it will be able to bring the CLTA, the California Association of Mortgage Brokers (CAMB) and the California Association of Realtors (CAR) together to hash out a proposal in time to introduce legislation in the 2008 session. While details are still sketchy at this point, Garcia said one suggestion is to bring all escrow providers under the DOC’s jurisdiction.

“Logistically speaking, all of the people who know escrow best are at the Department of Corporations,” Garcia said. “But again, the devil’s in the details. I couldn’t give any commitment on how that might look in the end. Of course, it will have to be done collaboratively because if the other industries are flat-out opposed to it, it would obviously be a lot more difficult to do.”

Craig Page, executive vice president and counsel of the CLTA, and Jack Williams, president of CAMB’s executive board, both said their groups are open to the discussion, but as pen hasn’t yet been put to paper, they declined to state formal opinions on the proposal. Garcia said the DOC and DOI have also been receptive to initial talks.

CAR and the DRE, which historically have been the most resistant to the idea, did not respond to a request for comment by press time.

“The process of going through the Department of Insurance hearings really brought home to us once again that this is a very fractionated and confusing process,” Garcia said. “2007 is paving the way. We’re pleasantly surprised by the response we have received so far.”

Criminal Law – Keep the Public Safe From Felons

Criminal law involves different rules that can cause the prosecution of a person for acts identified as crimes by the government. People found guilty of committing a criminal act would be incarcerated, fined, or both. Committing a crime means violating public laws which are established by the federal government, the state or the local government. These include felonies such as murder and rape as well as misdemeanors such as petty theft or jaywalking. Most felonies are punishable by one to two years imprisonment while misdemeanors are punishable by less than a year inside the slammer or other lighter punishments such as community services depending on the weight and kind of crime committed.

Ancient civilizations such as the Sumerians were the first to write codes of laws but did not distinguish civil and criminal laws. Most violations of the written laws were punished accordingly by physical punishment such as whipping or caning, incarceration which may vary from a day to life, house arrest, paying damages, or execution. As the written laws developed and distinguished civil laws from criminal laws, criminal sanctions are enforced according to five objectives:

  • Retribution – the aspect of making criminals pay for the crime they committed by placing them at some unpleasant disadvantage
  • Deterrence – this aims to sufficiently penalize offender to discourage him and other offenders from committing the crime and other criminal behavior
  • Incapacitation – criminals are taken away from the society so that the public can be safe from them. Prison sentences as well as death penalties serve this purpose.
  • Rehabilitation – involves transforming an offender into a better citizen
  • Restitution – this aims to repair any hurt inflicted to the victim by the offender such as paying for damaged properties or embezzled money.

The different crimes that fall under the criminal law statutes include:

  • Appellate law
  • White Collar Crime
  • Bribery
  • Counterfeiting/forgery
  • Embezzlement
  • Fraud
  • Healthcare fraud
  • Government fraud
  • Murder/homicide
  • Tax evasion
  • Violent crime
  • Theft/property crime
  • Drug crime
  • Juvenile crime
  • Child abuse crime

In the United States, prosecutions for criminal law offenses are initiated by complaints issued by a judge or an indictment issued by a grand jury. However, felonies in Federal courts require indictment or a formal accusation based on the Fifth Amendment to the United States Constitution. Furthermore, the Sixth Amendment provides the criminal defendant with a right to a speedy and public trial by an impartial jury of the State in both state and Federal courts, to be informed of the nature and cause of accusations, to be confronted with the witnesses against him, to obtain witnesses in his favor, and to be given a right to a Counsel for his defense but can defend himself and act as his own lawyer.

There is an excessive amount of traffic coming from your Region.

Types of Theft

From a young age, most people are told that stealing is wrong and can come with very heavy consequences. We are repeatedly told that we cannot take something that does not belong to us unless we have very clear permission to do so. Thus, people tend to have a good understanding of what is meant by the term “theft,” both in its everyday use and when it is used in courts of law. There are special terms that are used to define theft under specific circumstances, though. While many of these terms are widely used and understood, the details that separate the different classifications can be less clear.

Shoplifting is possibly the most common type of theft charge seen by courts, and also the first type that comes to mind when a person thinks of goods being stolen. It is defined as the stealing of goods from a retail establishment, from a department store in a shopping mall to a small grocery or convenience store. The consequences of being found guilty of shoplifting will depend largely on the value of the good stolen.

Robbery is the term used to describe theft accomplished through the use of violence, threat of violence, or use of other intimidation tactics. Robbery can run the gamut from a quick mugging to a detailed, violent, large-scale bank robbery. The sentence accompanying a guilty verdict in a robbery case will likely be more severe than another theft case dealing with similar values of goods, as threats or assault are often present, as well.

Where robbery is theft through violence, fraud is generally considered theft through deception (though there are types of fraud that do not necessarily involve theft). Common forms of fraud include identity theft, forgery, and bait and switch schemes. When an instance of fraud is defined by a individual or group’s gain through the appropriation of money or other assets they have been trusted to protect, it is known as embezzlement.

Burglary is a blanket term applied to instances where theft is accompanied by trespassing. Home invasion break-ins, stealing goods from closed stores, or taking property out of a parked car are all forms of burglary.

In many states, these sorts of theft charges may be further broken down into the categories of “petty theft” or “grand theft,” depending on the value of goods or assets stolen. The dollar amount where the line is drawn depends on the state.

For more information about theft charges, visit the website of Appleton criminal defense attorneys Kohler, Hart, & Priebe, LLC.

Laws Protecting Elder Financial Fraud Must Come With Stiff Penalties To Do Any Good

Everybody is worried about cyber attacks, identity theft, and hackers when it comes to their personal finances. Many senior citizens are so afraid that they will not do online banking, and they don’t even want to file their tax returns over the Internet. The IRS prefers online filing because they would rather have everything in a digital format, who can blame them, it cuts down on their administration costs, and it keeps everything very simple. That is of course until something goes wrong, something like identity theft and financial fraud.

Don’t think it can’t happen, it happens all the time. For instance, there was an interesting article in the Boston Business Journal on January 14, 2013 titled; “Citizens Bank teller could do 30 years for embezzling from elderly victims,” where a teller reportedly stole some $375,000 from three elderly bank customers. What is so unfortunate is that this is far too common a problem. What usually occurs is there is basically an inside job. The teller collects the information from the senior citizen when they make a deposit; their signature, bank account number, and all their information. They may even know how often they make deposits and withdrawals. They also know how much money is in the account.

Next, the bank teller slips this information to a friend who then carries out the fraud or identity theft by coming into the bank, cashing a large check, or creating a fake check or using information from the senior citizen’s online banking or ATM pin code. It often happens that seniors may not even know they’ve been ripped off for many months. This makes it even harder to catch the thieves because by the time the bank finds out or someone doing the accounting or tax return for the senior citizen notices something is missing, it is months after the fact.

By then the thieves are long gone, along with all of the elderly person’s money. Luckily, we have stiff penalties for those who would rip-off senior citizens, and that’s a good thing. Of course, this is only one way that seniors are ripped off every day, many of the other ways involve much more elaborate schemes, and some of those take years for anyone to ever catch. If you know of someone who may have been ripped off, someone who is a senior citizen, there are all sorts of local, regional, and federal authorities you can contact. It’s up to all of us to look out for our senior citizens.