Ex-owner of title company to be tried in fraud case

Balto. Co. man admits he stole $3 million

January 15, 2002|By Dennis O'Brien | Dennis O'Brien,SUN STAFF

Having admitted that he stole $3 million, the former owner of a Towson title company will be tried in Baltimore County Circuit Court this spring on charges that he defrauded insurance firms and homebuyers in a scheme that cost him his reputation and his business.

Edwin J. Kirby Jr., 66, of Lutherville is accused of running a pyramid scheme at Bankers Title Co. that court papers say began in 1993 and grew into one of the largest insurance fraud cases in Maryland history. State regulators shut down the business in 2000.

"It's been a big case for us," said Karen Barrow, a spokeswoman for the Maryland Insurance Administration.

Prosecutors allege that Kirby stole millions by taking cash that banks had transferred into his company's accounts. The money was to be used to pay off home sellers' mortgages and cover other expenses for real estate transactions.

Initially, Kirby was able to avoid detection by paying off the mortgages from previous property sales using money transferred to Bankers Title accounts for more recent transactions, according to court papers and lawyers familiar with the case.

Kirby, a father of three whose office was in the 100 block of West Road in Towson, was indicted by a Baltimore County grand jury last month on counts of felony theft, insurance fraud and fraudulent misappropriation by a fiduciary. Each count carries a 15-year maximum sentence. No trial date has been set, but lawyers expect the case to be tried this spring.

The state attorney general's investigation into Kirby's operation began in February 2000, when lenders alerted the state insurance administration, court records show. On Feb. 14, 2000, the administration won approval from a Baltimore City Circuit Court judge to place Bankers Title in receivership and essentially shut it down.

The indictment charges Kirby with operating the scheme for a three-year period that ended when the company was placed in receivership.

In court papers, Kirby admitted that he had been taking settlement monies since 1993. He said the money was being used to help cover payroll and other expenses at his firm, which employed 20 people, records show.

Kirby made the admission in a handwritten note to co-workers after a shortfall in his accounts caused a $200,000 check to bounce at a local bank, according to court papers.

"I alone have committed the acts that have caused the financial loss," Kirby wrote, according to court papers.

Kirby did not return repeated phone calls last week and has refused to discuss the case with prosecutors and with insurance company lawyers, who sued him to recoup their losses.

"He's taken the Fifth [Amendment] on everything he's been asked," said Emmet C. Davitt, an assistant attorney general who is prosecuting the case.

Kirby's lawyer, Aron U. Raskas, declined to discuss the case but said that Kirby had an excellent reputation among real estate lenders and has pleaded not guilty.

The criminal charges are the latest of Kirby's problems. Davitt said that property owners whose mortgages went unpaid because of Kirby's alleged scheme were compensated by insurance firms that underwrote Banker's Title. Those firms - identified in separate suits as Fidelity National Title Insurance Co. in Greenbelt and Commonwealth Land Title Co. in Baltimore - have won $3 million in separate judgments in Baltimore County Circuit Court.

Records in those cases show that Kirby's alleged scheme unraveled Feb. 9, 2000, when the account he used to fund real estate transactions came up short of cash and he was forced to admit to Fidelity supervisors that he had stolen funds. He told Fidelity officials in a phone call that he had transferred at least $1 million into Bankers operating accounts to keep Bankers Title afloat. Fidelity officials came to Kirby's office that afternoon and spent hours poring over his accounts.

David Cox, a Washington lawyer for Fidelity National Title Insurance Co. of New York, said that Fidelity arranged to have Kirby sign papers admitting liability within a day or two of Kirby's call.

Court records show that Fidelity paid $2.5 million to cover losses to about 90 property owners whose mortgages and other bills went unpaid because of Kirby's actions.

"We felt it was our obligation to honor those debts," Cox said.

Commonwealth spent $460,180 to cover outstanding mortgages on two properties, one sold in Cockeysville and one in Baltimore. Commonwealth also secured a judgment against Kirby in Baltimore County Circuit Court on Sept. 21, ordering him to compensate Commonwealth for its loss.

But lawyers for the insurance firms say they believe Kirby's claims that he spent much of the missing money to prop up his company and that collecting any significant sum on those judgments may be difficult.

Kirby's business began to fail when the real estate market faltered in the early 1990s. Court records show that the number of settlements handled by his firm dropped from 80 per month to about 30 by the end of the decade.

Kirby has few assets and rents his Lutherville townhouse, and there is little evidence that he spent the money on a lavish lifestyle, the lawyers said.

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