In the nation's largest ever suit against the title and escrow industry, California is making good on its half billion dollar claim against the state's title and escrow industry for allegedly bilking consumers out of escrow funds valued at as much as a half billion dollars.

State Controller Kathleen Connell's office, which filed the May 21, 1999 suit, says it has identified or recovered more than $13.6 million owed to home buyers and sellers following audits of some of the 200 title and escrow companies named in the suit.

"The $13 million we have already uncovered is significant, but we believe this amount will pale in comparison to what we expect to recover as the audits continue," said Connell.

"It is my intention to recover every cent illegally withheld."

She estimates California's title and escrow industry wrongfully withheld as much as $500 million from the state's housing consumers.

"My office mounted a massive audit effort that will eventually review every escrow and title company operating in California. They know we're coming and we've got their attention," she said.

Connell filed the class-action suit against the title and escrow industry in Sacramento Superior Court on behalf of Californians who purchased homes since 1970. The suit says, after escrows closed, the title and escrow companies retained possession of hundreds of millions of dollars of unclaimed escrow funds, a violation of California's Unclaimed Property Law. The companies should have turned over any unclaimed funds to the state so it can attempt to locate those owed the money. If the consumers don't claim the money it becomes state property.

"The filing of this lawsuit has finally exposed the decades of consumer abuse that was systematically occurring in title and escrow transactions," said Connell.

The suit also says the companies charged home buyers and others fees for services the companies never planned to provide and levied "illegal administration fees" supposedly for other charges, but kept the payments as company income, the suit says.

Similar private cases are also under consideration in California and a private attorney filed a federal suit against a title and escrow company earlier this year.

"As we complete audits and companies voluntarily forward unlawfully held funds to my office, we expect to see a tremendous surge in the amount of money owed to escrow customers. The bottom line is that many of these companies were aware they were engaged illegal business practices and we are beginning to see them step forward and sheepishly turn over funds," Connell said shortly after the suit was filled.

Since filing the suit, audits of 26 title companies and one escrow firm have identified more than $7.1 million owed to title customers. Of the 27, 13 have repaid more than $2 million to the state. Other title and escrow companies voluntarily remitted another $6.5 million.

Connell's office has audited 50 percent of California's title companies and will expand auditing to escrow firms by July 2000. There are 114 active title companies and 471 escrow companies registered in California.

"Anyone who has ever employed the services of title or escrow agents should periodically check our Web site to see if they are entitled to recovered funds since new names are added weekly," said Connell, whose office released a database of people currently owed funds.

"Home buyers should be acutely aware that at the close of escrow their accounts should total out at zero, with all charges and costs accounted for. Any remaining funds should be immediately returned to the buyers and sellers."

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Published: December 9, 1999

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.