Compass Broker Accused of “Kickbacks” From Lawyers, Lenders

A Compass broker is facing accusations of “kickbacks” taken from a lawyer and a mortgage lender in exchange for client referrals.

A whistleblower sued Ben Lalez in January claiming he was fired when he raised concerns.

The whistleblower is Lalez’s former transaction manager, Claude Cimino. He is suing Lalez for allegedly firing him in retaliation for speaking out and violating the whistleblower act in doing so.

Cimino alleged that Lalez, who leads a team of about 29 other agents, regularly received cash payments in exchange for “referring and steering” clients to work with a particular lender and attorney, a violation of the Real Estate Settlement Procedures Act or RESPA.

The lawsuit also claimed Lalez did not report these payments in annual tax filings, nor did he let clients know he was receiving them.

Cimino, who joined the Ben Lalez Team in May 2021, allegedly complained to Lalez about the “kickbacks” in June of last year and refused to participate in the alleged practices, according to the lawsuit.

Lalez allegedly fired Cimino less than six months later, which Cimino claims was in direct retaliation for his decision to speak out as there were no performance-based reasons for his termination.

Cimino claimed Lalez even admitted this in a note sent to him after his firing, though a note has yet to be produced as evidence in the case.

Attorneys for Cimino have asked a Cook County Circuit Court judge for at least $50,000 in damages and anything else Cimino may be entitled to, which could include backpay with interest and Cimino’s reinstatement to his former position with the team.

Lalez and his attorneys did not respond to requests for comment. A Compass spokesperson said the company doesn’t comment on active legal matters. Cimino’s lawyer Michael Leonard did not respond to requests for comment.

A Circuit Court judge gave Lalez until April 4 to file a response to the allegations in an order handed down earlier this month. The two parties are set to meet for a case management hearing on April 24.

How NAR’s antitrust settlement changed the playing field

RESPA is a federal law passed by Congress in the ’70s, when interest rates were high and instances of consumer fraud were increasing, revealing a need for more consumer protection measures in the industry, said real estate attorney Kelli Fogarty, of Fogarty & Fugate.

“You hire a real estate broker; you hire a lender; you hire an attorney; and you expect those professionals to be working in your best interest,” she said. “Well, if they suddenly have behind-the-scenes deals going on together, that’s a bit of a conflict.”

Fogarty said she has noticed an uptick in this kind of alleged consumer fraud since the National Association of Realtors’ $418 million settlement of antitrust lawsuits changed industry norms around commission splits between listing and buyer’s agents and barred commission splits from being advertised on multiple listing services.

“It made an opportunity for those who might not want to be on the up-and-up to start playing with things that were well-established and weren’t really things that could be played with before,” she said. “You have a vacuum where there once was a very established procedure.”

While the intent behind the lawsuit was good, “the settlement itself basically allows for the Wild West, because people are creating all these new ways of managing commissions and payments and money,” Fogarty said.

There are various ways that real estate professionals could circumvent RESPA protections or take advantage of some of the “gray areas” surrounding the federal law, she said. While the receipt of cash payments or gifts in exchange for client referrals is a cut-and-dried RESPA violation, kickbacks that come in the form of activities, like paying for a round of golf, or that form part of a relationship between two professionals can be harder to parse through.

It often takes a whistleblower speaking out to catch violations in those instances, she said.

Cimino’s allegations against Lalez, if proven true, are “your most straightforward RESPA violation, if [Lalez] didn’t perform any services other than the referral,” Fogarty said.

While violations of RESPA can be prosecuted criminally, that only happens in the most extreme cases, said Fogarty, who is also a former prosecutor. In most cases, an alleged violation of RESPA results in civil or regulatory action, or both. That could be a state attorney general or an affected client suing real estate professional or their company to seek fines and other penalties.

As Cimino was not directly affected by any alleged violations of RESPA, his lawsuit against Lalez is limited to his alleged firing from the team. It is unclear whether further litigation may be brought against Lalez related to the alleged “kickbacks,” but no other civil cases have been filed against him in Illinois.