FLORIDA DEPARTMENT OF FINANCIAL SERVICES os TOM GALLAGHER ° . CHIEF FINANCIAL OFFICER AUG 30 2006 STATE OF FLORIDA. IN THE MATTER OF: f l, 7) YI G Backeted b= . CASE NO.: 80878-06-AG RESIDENTIAL TITLE SERVICES, INC. ADMINISTRATIVE COMPLAINT TO: Residential Title Services, Inc. 1910 8. Highland Ave., Ste. 202 Lombard, Illinois 60148-6161 ehh Hd 01 19090 . Residential Title Services, Inc. ("RESIDENTIAL"), license I.D. #D063851, is hereby notified that the Chief Financial Officer of the State of Florida has caused to be made an investigation of its activities while licensed as an insurance agency in this state, as a result of which it is alleged: GENERAL ALLEGATIONS 1. Pursuant to Chapter 626, Florida Statutes, RESIDENTIAL is currently licensed in this state as a Nonresident Title Insurance Agency (4-13). 2 At all times pertinent to the dates and occurrences referred to herein, RESIDENTIAL was licensed in this state as a Nonresident Title Insurance Agency (4-13). 3. Pursuant to Chapter 626, Florida Statutes, the Florida Department of Financial Services (hereinafter “Department”) has jurisdiction over RESIDENTIAL's insurance licenses and appointments. 4. RESIDENTIAL is a foreign corporation authorized to do business in the State of Florida by the Florida Secretary of State, Division of Corporations. 5. RESIDENTIAL maintains, or has maintained, branch offices in three separate Florida locations: Clearwater, Jacksonville, and Fort Lauderdale. - 6. Anthony Latham, license ID# E090728, is a licensed title agent (4-10) who works, or has worked, for RESIDENTIAL. Mr. Latham became licensed as a title agent on January 15, 2004. According to corporate filings with the Florida Department of State, Mr. Latham is the Registered Agent of RESIDENTIAL. 7. Deborah Dorenkott, license ID# E042599, is a licensed title agent (4-10) who works, or has worked, for RESIDENTIAL. 8. Linda Desmyter, license ID# E008868, is a licensed title agent (4-10) who works, or has worked, for RESIDENTIAL. Ms. Desmyter became licensed as a title agent on June 14, 2004. Ms. Desmyter has never had an appointment to transact title insurance. a "Barbara Devlin is a licensed title agent (4-10) who works, or has worked, for RESIDENTIAL. Ms. Devlin became licensed as a title agent on June 14, 2004. Ms. Devlin has never had an appointment to transact title insurance. Ms. Devlin became employed by RESIDENTIAL on or before September 5, 2003. Ms. Devlin is or was an office manager for the _ Fort Lauderdale, Florida office of RESIDENTIAL. . 10. RESIDENTIAL has an account with Wachovia bank. This account number is 2000014327748. This account is listed as RESIDENTIAL's escrow account. COUNT I 11. The above general allegations are hereby realleged and fully incorporated herein by reference. Ww. . 12. Prior to January 6, 2003, there was not a licensed title agent, in active full-time charge, at the Fort Landerdale branch office of RESIDENTIAL. 13. On January 6, 2003, Deborah Dorenkott came to work for RESIDENTIAL. She was the only licensed agent in the Fort Lauderdale branch office of RESIDENTIAL during the period of ber employment with RESIDENTIAL. On or before May 18, 2004, Ms. Dorenkott ceased working for RESIDENTIAL. 14, At the time of Ms. Dorenkott's departure from RESIDENTIAL, Anthony Latham replaced Ms. Dorenkott as the active full-time agent in charge of the Fort Lauderdale branch . office of RESIDENTIAL, based upon representations made to the Department by Mr. Latham. However, Mr. Latham's home, mailing, and business addresses, according to Department records, have never been in Fort Lauderdale, Florida, or the surrounding area. Mr. Latham's home, mailing, and business addresses, according to Department records, have always been in the Tampa Bay area of Florida. . 15. Mr. Latham represented to the Department that on or about June 14, 2004, Ms. Desmyter replaced Mr. Latham as the agent in full-time active charge of the Fort Lauderdale ’ branch office of RESIDENTIAL. Ms. Desmyter ceased working for RESIDENTIAL on or about December 20, 2004, whereupon Mr. Latham, according to representations made by Mr. Latham to the Department, again became the agent in full-time active charge of the Fort Lauderdale branch office of RESIDENTIAL. . | 16. ~ Ms. Devlin has been employed at the Fort Lauderdale branch office of RESIDENTIAL at least since the departure of Ms. Desmyter. 17. The above demonstrates that the Fort Lauderdale office of RESIDENTIAL was in operation at various times without being in the active full-time charge ofa licensed title agent. - ITIS THEREFORE CHARGED that you, RESIDENTIAL, have violated or are accountable under the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services which constitute grounds for disciplinary action against your license(s) and appointment(s): . (a) Each branch place of business established by an agent or agency, firm, corporation, or association shall be in the active full-time charge of a licensed [title agent] who is appointed to represent one or more insurers. Any agent or agency, firm, corporation, or association which has established one or more branch places of business shall be required to have at least one licensed [title agent]. who is appointed to represent one or more insurers at each location of the agency including its headquarters location. Section 626.747, Florida Statutes. (b) The following provisions of part II, as applicable to general lines agents or agencies, also apply to title insurance agents or agencies: (c) Section 626.747, relating to branch agencies. Section 626.8411(1), Florida Statutes. (c) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment. Section 626.8437(5), Florida Statutes. (d) Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this act. Section 626.8437(9), Florida Statutes. (e) Violation of any provision of this act in the course of dealing under the license or appointment. Section 626.844(2), Florida Statutes. COUNT II 18. The above general allegations are hereby realleged and fully incorporated herein by reference. 19, The Jacksonville branch office of RESIDENTIAL has operated at various times, ifnot always, without a licensed title agent in active full-time charge. IT IS THEREFORE CHARGED that you, RESIDENTIAL, have violated or are accountable under the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services which constitute grounds for disciplinary action against your license(s) and appointment(s): . (a) Each branch place of business established by an agent or agency, firm, corporation, or association shall be in the active full-time charge of a licensed [title agent] who is appointed to represent one or more insurers. Any agent or agency, firm, corporation, or association which has established one or more branch places of business shall be required to have at least one licensed [title agent] who is appointed to represent one or more insurers at each location of the agency including its headquarters location. Section 626.747, Florida Statutes, (b) The following provisions of part IT, as applicable to general lines agents or agencies, also apply to title insurance agents or agencies: (c) Section 626.747, relating to branch agencies, Section 626.841 1(1), Florida Statutes. (c) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment. Section 626.8437(5), Florida Statutes. (d) Willful failure to comply with, or willful violation of, any proper order or rule of | the department or willful violation of any provision of this act. Section 626.8437(9), Florida . Statutes. ) (e) Violation of any provision of this act in the course of dealing under the license or appointment. Section 626.844(2), Florida Statutes. COUNT III 20. The above general allegations are hereby realleged and fully incorporated herein by reference. 21, In and around the end of August and the beginning of September, 2003, RESIDENTIAL participated in the closing of a real estate transaction involving J.F. of Hollywood, Florida. 22. Pursuant to a refinance of the home mortgage of J.F., Fairbanks Capitol Corp. (Fairbanks), the lender for the original home mortgage of J.F., issued a payoff quote on August 22, 2003. This payoff quote stated that payment was due on September 1 2003, and that the quote statement expired on September 16, 2003. Fairbanks notified RESIDENTIAL of this payoff quote. This payoff quote stated that the principal balance of J.F.'s mortgage with Fairbanks was $241,906.51. However, the total amount due, as stated on this payoff quote statement, in order to satisfy the mortgage with Fairbanks, was $253,318.58. The total amount due included interest calculated to September 16, 2003, a pre-payment penalty, and other fees. 23. . The closing for J.F.'s mortgage refinance occurred on August 29, 2003, at the Fort Lauderdale, Florida location of RESIDENTIAL. According to the HUD settlement statement relevant to that closing, the mortgage payoff to Fairbanks was listed as $241,906.51. 24. Pursuant to the closing of J.F.'s mortgage refinance, RESIDENTIAL issued check number 34740, payable to Fairbanks, as payoff for J.F.'s original mortgage, for $241,906.51. This check was signed by Barbara Devlin, and was drawn on the Wachovia escrow account of RESIDENTIAL. This check was negotiated by Fairbanks a few days later. 25. On September 9, 2003, Fairbanks notified RESIDENTIAL that funds received for the payoff of J.F.'s mortgage were insufficient by $11,114.83. As of at least December 15, 2004, this insufficient amount (or at least a portion of it, plus possible interest and late fees) remained outstanding to Fairbanks. 26. RESIDENTIAL, because it was put on notice by Fairbanks of both the principal balance and payoff amounts of J.F.'s mortgege. knew or should have known that the monies disbursed to Fairbanks by RESIDENTIAL were insufficient to satisfy the Fairbanks mortgage.: IT IS THEREFORE CHARGED t that you, RESIDENTIAL, have violated or are , accountable under the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services which constitute grounds for disciplinary action against your license(s) and appointment(s): (a) All premiums, return premiums, or other funds belonging to insurers or others received by an ... insurance agency .. . in transactions under the license are trust funds received by the licensee in a fiduciary capacity. Section 626.561(1), Florida Statutes. (b) Demonstrated lack of fitness or trustworthiness to represent a title insurer in the issuance of its commitments, binders, policies.of title insurance, or guarantees of title. Section 626.8437(4), Florida Statutes. (c) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment. Section 626.843 7(5), Florida Statutes. ‘(d) =“ Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this act. Section 626.8437(9), Florida Statutes. ) (e) Violation of any provision of this act in the course of dealing under the license or appointment. Section 626.844(2), Florida Statutes. (Gi) A title insurance agent may engage in business as an escrow agent as to funds received from others to be subsequently disbursed by the title insurance agent in connection with real estate closing transactions involving the issuance of title insurance binders, commitments, policies of title insurance, or guarantees of title, provided that a licensed and appointed title. insurance agent complies with the requirements of $.626.8417, including such requirements added after the initial licensure of the agent. Section 626.8473(1), Florida Statutes. (g) All funds received by a title insurance agent as described in subsection (1) shall be trust funds received in a fiduciary capacity by the title insurance agent and shall be the property of the person or persons entitled thereto. Section 626.8473(2), Florida Statutes. COUNT IV 27. The above general allegations, as well as the COUNT III allegations, are hereby realleged and fully incorporated herein by reference. 28, On September 9, 2003, Fairbanks not only notified RESIDENTIAL that funds received for the mortgage payoff of J.F., of Hollywood, Florida, were insufficient by $11,114.83, but also notified J.F. directly of said insufficiency. J.F. promptly sought legal representation relevant to this matter. 29. On September 12, 2003, Kevin Hagen, Esq., of Hagen & Hagen, P.A., of Fort Lauderdale, Florida, provided notice to RESIDENTIAL that he represented J.F, and that JF. took issue with the amount of payoff funds sent to Fairbanks. 30. On September 15, 2003, RESIDENTIAL received a document from Fairbanks - titled, "Letter of Authorization." This letter was meant to authorize Fairbanks to keep the funds drawn from the aforementioned RESIDENTIAL escrow account check number 34740, for $241,906.51, and to apply the stated amount towards the balance of J.F.'s mortgage with Fairbanks. 31. This "Letter of Authorization" stated, in pertinent part: . "This firm [RESIDENTIAL] represents [J.F.] ("Mortgagor") as closing agent .. .. _On behalf of Mortgagor, we hereby authorize [Fairbanks] to apply the check in the amount of $241,906.01, sent to Fairbanks in the manner set forth below . . . This does not constitute payment in full of the Loan. The next payment will be due on or before November 1, 2003. If this Letter of Authorization is not received by Fairbanks on or before September 15, 2003, the above referenced check will be returned and will not be applied as set forth herein." 32, This "Letter of Authorization" was immediately signed and returned to Fairbanks by Barbara Devlin on September 15, 2003, without giving notice to or seeking the permission of J.F., or his legal counsel. 33. Because RESIDENTIAL was put on notice that J.F. had legal representation and disputed the funds that RESIDENTIAL paid to Fairbanks, RESIDENTIAL knew, or should have known, that it did not have authorization to speak for J.F. on September 15, 2003. IT IS THEREFORE CHARGED that you, RESIDENTIAL, have violated or are accountable under the following provisions of the Florida Insurance Code and Rules of the Department of Financial Services which constitute grounds for disciplinary action against your license(s) and appointment(s): (a) All premiums, return premiums, or other funds belonging to insurers or others received by an... insurance agency .. . in transactions under the license are trust funds received by the licensee in a fiduciary capacity. Section 626.561(1), Florida Statutes (b) Demonstrated lack of fitness or trustworthiness to represent at title insurer in the issuance of its commitments, binders, policies of title insurance, or guarantees of title. Section 626.8437(4), Florida Statutes. (c) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment. Section 626.8437(5), Florida Statutes. (d) . Fraudulent or dishonest practices in the conduct of business under the license or appointment. Section 626.8437(6), Florida Statutes. . (e—) Misappropriation, conversion, ot unlawful withholding of moneys belonging to title insurers or insureds or others and received in conduct of business under the license or appointment. Section 626.8437(7), Florida Statutes. ® Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this act. Section 626.8437(9), Florida Statutes. | (g) Violation of any provision of this act in the course of dealing under the license or appointment, Section 626.844(2), Florida Statutes. (h) A title insurance agent may engage in business as an escrow agent as to funds received from others to be subsequently disbursed by the title insurance agent in connection with 10 real estate closing transactions involving the issuance of title insurance binders, commitments, policies of title insurance, or guarantees of title, provided that a licensed and appointed title © insurance agent complies with the requirements of s.626.8417, including such requirements added after the initial licensure of the agent. Section 626.8473(1), Florida Statutes. @ All funds received by a title insurance agent as described in subsection (1) shall . be trust funds received in a fiduciary capacity by the title insurance agent and shall be the property of the person-or persons entitled thereto, Section 626.8473(2), Florida Statutes. | Gj) A title insurance agent or title insurer may not use, endanger, or encumber money held in trust without the permission of the owner of such money, given after full disclosure of the circumstances. Rule 690-186.008(1), Florida Administrative Code. COUNT V 34, The above general allegations are hereby realleged and fully incorporated herein by reference. — . 35. In and around the end of May and the beginning of June, 2003, RESIDENTIAL participated in the closing of a real estate transaction involving D.T. of Bozeman, Montana. 36. According to RESIDENTIAL 's escrow ledger for the real estate closing for D.T. of Bozemon, Montana, $352,956.53 was to have been collected by May 30, 2006, by ' RESIDENTIAL, to fund the necessary disbursements required for the closing of the real estate transaction. 37. On May 28, 2006, a deposit for the D.T. transaction was placed in RESIDENTIAL's escrow account for $319,247.87. 38. The remaining $33,708.66 for this transaction, was not deposited in RESIDENTIAL's escrow account until June 9, 2003. 11 39. Several checks, drawn on the escrow account of RESIDENTIAL, and used to fund disbursements associated with the D.T. transaction, were negotiated prior to all of the escrow deposits being made for this transaction. 40. Check Number 34235, dated May 29, 2003, for $57,572.24, was paid on June 6; 2003. 41, Check Number 34237, dated May 29, 2003, for $195.00, was paid on June 2, 2003. . 7 42, Check Number 34239, dated May 29, 2003, for $799.00, was paid on June 5, 2003.° 43, Check Number 34244, dated May 29, 2003, ‘for $254,211.57, was paid on June 6, 2003. 44, Check Number 34362, dated May 30, 2003, for $3,000.00, was paid on June 3, 2003. | ; 45, Check Number 34363, dated May 30, 2003, for $18,056.62, was paid on June 3, 2003. 46. The total amount for these six checks is $333,834.43. However, prior to June 9, 2003, only $319,247.87 had been deposited into the escrow account of RESIDENTIAL, leaving what would have been a negative escrow balance for the D.T. transaction of $14,586.56 ($319,247.87-$333,834.43). However, none of the above listed checks were returned for insufficient funds. 47. The above demonstrates that escrow funds, belonging to someone else, were used by RESIDENTIAL to make disbursements for this transaction prior to escrow funds being deposited to cover the amount of the disbursements, thus putting escrow funds at risk. IT IS THEREFORE CHARGED that you, RESIDENTIAL, have violated or are . accountable under the following provisions of the Florida Insurance Code and Rules of the - Department of Financial Services which constitute grounds for disciplinary action against your license(s) and appointment(s): (a) All premiums, return premiums, or other funds belonging to insurers ot others received by an... insurance agency .. . in transactions under the license are trust funds received ‘by the licensee in a fiduciary capacity. Section 626.561(1), Florida Statutes | (b) Demonstrated lack of fitness or trustworthiness to represent a title insurer in the _issuance of its commitments, binders, policies of title insurance, or guarantees of title. “Section 626.8437(4), Florida Statutes. (c) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment. Section 626.8437(5), ) Florida Statutes, ; , , ; : . . (d) Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this act. Section 626.843 7(9), Florida — Statutes. (e) Violation of any provision of this act in the course of dealing under the license or appointment. Section 626.844(2), Florida Statutes. ® A title insurance agent may engage in business as an escrow agent as to funds received from others to be subsequently disbursed by the title insurance agent in connection with real estate closing transactions involving the issuance of title insurance binders, commitments, policies of title insurance, or guarantees of title, provided that a licensed and appointed title 13 insurance agent complies with the requirements of s.626.8417, including such requirements added after the initial licensure of the agent. Section 626.8473(1), Florida Statutes. g) All funds received by a title insurance agent as described in subsection (1) shall be trust funds received in a fiduciary capacity by the title insurance agent and shall be the property of the person or persons entitled thereto. Section 626.8473(2), Florida Statutes. (h) A title insurance agent or title insurer may not use, endanger, or encumber money held in trust without the permission of the owner of such money, given after full disclosure of the circumstances. Accordingly, except as hereinafter provided, a title insurance agent or title insurer may not disburse funds unless the funds are collected funds. Rule 690-1 86.008(1), Florida Administrative Code WHEREFORE, you, RESIDENTIAL, are hereby notified that the Chief Financial Officer intends to enter an Order suspending or revoking your licenses and appointments as an insurance - agency or to impose such penalties as may be provided under the provisions of Sections 626. 8437, 626.844, 626.8457, and 626.846, Florida Statutes, and under the other referenced sections of the Florida Statutes as set out in this Administrative Complaint. NOTICE OF RIGHTS You have the right to request a proceeding to contest this action by the Department pursuant to Sections 120.569 and 120.57, Florida Statutes, and Rule 28-107, Florida Administrative Code. The proceeding request must be in writing, signed by you, and must be filed with the Department within twenty-one (21) days of your receipt of this notice. Completion of the attached Election of Proceeding form and/or a petition for administrative hearing will suffice as a written request. The request must be filed with the General Counsel as acting Agency Clerk, at the Florida Department of Financial Services, 612 Larson Building, 200 East 14 Gaines Street, Tallahassee, Florida 32399-0333. Your written response must be received by the Department no later than 5:00 p.m. on the twenty-f -first day after your receipt of this notice. Mailing the response on the twenty-first day will not preserve your right to a hearing. YOUR FAILURE TO RESPOND IN WRITING WITHIN TWENTY-ONE (21) DAYS OF YOUR RECEIPT OF THIS NOTICE WILL CONSTITUTE A WAIVER OF YOUR RIGHT TO REQUEST A PROCEEDING ON THE MATTERS ALLEGED HEREIN AND AN ORDER OF REVOCATION WILL BE ENTERED AGAINST YOU. If you request a proceeding, you must provide information that complies with the requirements of Rule 28-107.004, Florida Administrative Code. As noted above, completion of the attached Election of Proceeding form conforms to these requirements. Specifically, your response must contain: (a) The name and address of the party making the request, for purpose of service; (b) A statement that the party is requesting a hearing involving disputed issues of material fact, or a hearing not involving disputed issues of material fact; and (c) A reference to the notice, order to show cause, administrative complaint, or other communication that the party has received from the agency. . If a hearing of any type is requested, you have the right to be represented by counsel or other qualified representative at your expense, to present evidence and argument, to call and cross-examine witnesses, and to compel the attendance of witnesses and the production of documents by subpoena. If a proceeding is requested and there is no dispute of material fact, the provisions of Section 120.57(2), Florida Statutes, apply. In this regard, you may submit oral or written evidence in opposition to the action taken by the Department or a written statement challenging "the grounds upon which the Department has relied. While a hearing is normally not required in 15 the absence of a dispute of fact, if you feel that a hearing is necessary, one will be conducted in Tallahassee, Florida, or by telephonic conference call upon your request. However, if you dispute material facts, which are the basis for the Department’s action, you must request an adversarial proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes. These proceedings are held before a State administrative law judge of the Division of Administrative Hearings. Unless the majority of witnesses are located elsewhere, the Department will request that the hearing be conducted in Tallahassee, Florida. Failure to follow the procedure outlined with regard to your response to this notice may result in the request being denied. All prior oral communication or correspondence in this matter shall be considered freeform agency action, and no such oral communication or correspondence shall operate as a valid request for an administrative proceeding. Any request for an administrative proceeding received prior to the date of this notice shall be deemed abandoned unless timely renewed in compliance with the guidelines as set out above. Mediation of this matter pursuant to Section 120.573, Florida Statutes, is not available, No Department attorney will discuss this matter with you until the response has been received by the Department of Financial Services. 16 CERTIFICATE OF SERVICE: THEREBY CERTIFY that a true and correct copy of the foregoing ADMINISTRATIVE COMPLAINT and ELECTION OF RIGHTS has been furnished to: Residential Title Services, Inc., 1910 S. Highland Ave., Ste. 202, Lombard, Illinois 60148-6161, by Certified Mail this 2% day of ae AS a , 2006. Michael T. Ruff Jp Florida Bar Number 688541 Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-033 Phone: (850) 413-4134 Fax (850) 487-4907 Attorney for Department 17

Docket for Case No: 06-003918