CFPB sues firm over real estate kickbacks
Oct. 25, 2013 – CFPB said it is suing Borders & Borders PLC and its principals for illegally paying kickbacks for real estate settlement referrals through a network of shell companies.
In a suit filed in federal district court, the bureau said the Kentucky law firm violated the Real Estate Settlement Procedures Act by operating a network of affiliated companies to pay kickbacks for referrals of mortgage settlement business. RESPA prohibits giving and receiving kickbacks for referrals of settlement service business involving federally related mortgages.
“Today’s action sends a clear message that companies cannot design business structures to hide illegal kickbacks,” CFPB Director Richard Cordray said in an announcement. “The CFPB will continue to pursue companies that seek to profit from convoluted arrangements that limit competition and hurt honest businesses.”
The bureau alleges the firm operated nine joint ventures with the owners and managers of local real estate and mortgage broker companies and that it used the joint ownership to disguise illegal kickbacks as legitimate profit sharing. A firm in one of the joint ventures might refer its client to Borders & Borders for a specific service, then the proceeds were shared by everyone in the joint venture, including the referring firm.
According to the complaint, the nine joint ventures were not bona fide entities and did not have their own office space, email addresses, or phone numbers, and all nine companies shared a single independent contractor who was also an employee of Borders & Borders.
The investigation that led to Thursday’s lawsuit was begun by the Department of Housing and Urban Development.