Suit says real estate firms took kickbacks

Federal regulators have sued Coldwell Banker, Prudential and other real estate giants, contending that their brokers took kickbacks for steering Californians to a company that reports on earthquake and other hazards for homes being sold.

Brokers got $25 out of each $100 fee that the company, Property I.D., charged home sellers for creating a report, according to the suit filed Thursday in federal court.

“There are thousands of referrals,” Brian Sullivan, a spokesman for the Department of Housing and Urban Development, said Friday. “We estimated this could be several million dollars.”

State law requires sellers to disclose to potential buyers whether a home is in an area that is at risk from earthquakes, fires and other hazards.

HUD contended that real estate brokers formed sham joint ventures with Los Angeles-based Property I.D. that shared bank accounts, had no employees and existed only to refer customers to the company.

HUD began investigating in 2005.

The Justice Department sued on behalf of HUD, alleging violations of the Real Estate Settlement Procedures Act, known as RESPA.

The suit filed in federal court in Los Angeles seeks to recover “illegitimate profits.” It names Parsippany, N.J.-based Realogy Corp., which owns the Coldwell Banker and Century 21 franchises. It also names Prudential California Realty and Property I.D.

A call to a representative for Prudential California Realty seeking comment was not immediately returned Friday.

Property I.D. sued Tuesday in federal court, seeking to end HUD’s investigation.

Realogy and Property I.D. representatives said the companies believed that hazard reports weren’t regulated by RESPA.

“Property I.D. has done nothing unethical and nothing illegal,” Andrew Gilford, an attorney representing Property I.D. in its suit, said Friday.

“We dispute the factual and legal allegations in the complaint,” Realogy spokesman Mark Panus said in a statement.