Ex-title exec who defrauded Extell fights degree of punishment

The former title agency owner who pleaded guilty to scamming clients such as developer
Extell Development is objecting to the level of punishment being considered for his
actions, a recent filing in U.S. District Court in Manhattan reveals.

Brian Madden, the former president of the shuttered Uniondale, L.I.-based Liberty Title
Agency, admitted in a court hearing Dec. 14, 2010 to committing wire and insurance
fraud. But in a filing from last week he sought to reduce the level of punishment the
government is considering levying against him, court papers say.

Madden’s case and this April 8’ s sudden unexplained closure of Titleserv, a large title agency headed by James Conway and based in Woodbury, L.I., put a
spotlight on the traditionally low-profile title insurance industry.

In April 2009, Liberty Title, one of the largest title firms in the region reportedly with
about 60 employees, closed its doors amid allegations of fraud, and the following month,
Madden was arrested. Prosecutors in August 2010 filed an indictment accusing him of
absconding with escrow funds and illegally co-mingling money between Liberty Title
and two other firms he controlled, Skyline Title and GNY Liberty Abstract.

In one instance, Madden is accused of misusing $2.1 million in funds that Extell
Development wired Liberty Title to pay off mortgage taxes related to the luxury
development at 535 West End Avenue, the 2009 indictment says.

Extell was not identified by name in the indictment, only as “victim-1,” but the firm is
the developer of 535 West End Avenue. The company was not immediately available for
comment.

In December 2010, Madden pleaded guilty to wire and insurance fraud, but not to a third
count of money laundering.

In the court filing from April 13, he objected to the level of punishment being laid out by
the prosecution in a document known as the pre-sentence investigation report. He makes
several claims, including that the losses caused by his actions amounted to between
$1 million and $2.5 million, not up to $4.7 million. The larger dollar amount of loss
increases the amount of possible jail time and fines he faces, based on a federal point
system.

In his objection, he indicates that his punishment should be between 41 and 51 months
(for 22 points) and not 63 to 78 months (for 26 points), although judges retain discretion
in sentencing, legal experts say. The sentencing has been scheduled for May 5, court
records show. His attorney did respond to requests for comment.

Madden’s case highlights the power title agencies hold, as they are entrusted at times with
millions of dollars for the closing of real estate transactions. Despite the large sums of
money, title agents are not licensed by New York State, while barbers, appraisers and real
estate brokers are.

It remains unclear why Titleserv closed. There have not been private lawsuits filed
against the company, as occurred when Liberty Title closed, or any criminal charges
filed in New York by state or federal prosecutors, according to a review of public records
by The Real Deal. Last week, a company official, who asked not to be identified, said
Titleserv was winding down operations while most of the estimated 200 employees had
been dismissed.

But the closure still points to the need for more transparency and regulation, said Rafael
Castellanos, managing partner at Midtown-based Expert Title, who said most of the
industry was honest. He added that the bundling of closing services, a controversial
practice known as controlled business, was another reason for more oversight.

“I think [licensing] would serve the property owners and other people against potential
losses that might result from unethical or illegal practices,” he said.

For years there have been efforts to license title agents, with the most recent push starting
in 2006. There are currently competing bills in Albany to license title agents — some
backed by the New York State Insurance Department and some by lawmakers such as
Oneonta’s State Senator James Seward — but disagreements have held them up.

Jeff Bishop, a spokesperson for Seward, said the recent news pointed to the need for
licensing, but he was not aware of the bill being moved along to committee.

In fact, the recent closure of Titleserv did not put more pressure on the Legislature to
pass any bills, in part because the industry wants to find out why the business closed, said
Robert Trueber, executive vice president of the trade group New York State Land Title
Association.