Businesses freeze deals with title insurers Madison and Riverside 

The tri-state insurance companies were mentioned in a recent DOJ fraud suit

Businesses pause on deals with Major Title Insurers
(Riverside Abstract, Madison Title, Getty)

Some sellers and servicers have paused doing business with two of the tri-state’s largest title insurers, according to an email from a lawyer at Troutman Pepper.

The email did not disclose which sellers or servicers are pausing their business with Madison or Riverside. Madison ranked fifth on The Real Deal’s 2018 list of New York’s largest title insurance companies with $2.3 billion in transaction volume. Riverside ranked 10th with $1.56 billion in volume. 

Title insurers comprise a multi-billion-dollar-a-year industry, but have long been an opaque corner in commercial real estate. The business is designed to protect buyers from dubious real estate deals.

The pause on Madison and Riverside’s title business comes weeks after the two were mentioned in a Department of Justice investigation into real estate investor Boruch Drillman. 

The Department of Justice alleges Drillman engaged in a multi-year scheme to obtain over $165 million in loans to fraudulently acquire multifamily and commercial properties. Drillman pleaded guilty to one count of conspiracy to commit wire fraud. Neither Madison nor Riverside were named as defendants.

Drillman, 36, conspired to dupe lenders into giving him loans, according to the DOJ. In one example, in March 2019, Williamsburg of Cincinnati was acquired for $70 million. Drillman and his partner allegedly used a stolen identity to convince a lender and Fannie Mae that the purchase contract was actually $96 million. According to the DOJ, Madison Title performed two closings: One for the actual $70 million sale, and another for the fraudulent $96 million sale presented to the lender.

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Drillman used a similar tactic with a Troy, Michigan, commercial property. In September 2020, the Troy Technology Park was acquired for $42.7 million. But Drillman and his partners presented the lender with a fraudulent sale contract for $70 million. To support the inflated purchase price, Drillman showed the lender and appraiser a fraudulent letter of intent to purchase the property from another party for $68.8 million.

To conceal the fraud, Drillman and his co-conspirators arranged for a short-term $30 million loan to show he had the funds to close on the loan. On Sept. 25, 2020, Riverside Abstract performed two closings, one for the true $42.7 million sale and another for the fraudulent $70 million sale presented to the lender, according to the DOJ.

Drillman did not return a request to comment. Madison and Riverside also did not return a request for comment.

Troutman Pepper said Friday that its email about Madison and Riverside contained “inaccurate statements” and that it “deeply regrets” that they became public.

“Those statements, made in confidential emails addressed to two sponsor/borrower clients of the law firm, were not intended or expected to be publicly disseminated, and they were not endorsed or approved by the law firm,” the law firm said in a statement. “Troutman Pepper apologizes for any confusion or distress that such email may have caused to Madison Title, Riverside, or the other title company mentioned in the emails.”

This article has been updated with a statement from Troutman Pepper.