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President of Title Insurance Agency Arrested
for Misappropriating Millions of Dollars
LEV L. DASSIN, the Acting United States Attorney for
the Southern District of New York, JOSEPH M. DEMAREST, JR., the
Assistant Director-in-Charge of the New York Field Office of the
Federal Bureau of Investigation ("FBI"), and ERIC DINALLO, the
Superintendent of the New York State Department of Insurance,
announced that BRIAN H. MADDEN, who controlled and operated three
title insurance agencies in New York and Suffolk counties, was
arrested today for misappropriating millions of dollars of escrow
and other client funds and embezzling a portion of those funds
for his own benefit. As alleged in the Complaint unsealed today
in Manhattan federal court:
MADDEN was the president and co-founder of Liberty
Title Agency, LLC ("Liberty Title"), one of the largest
independently-owned title insurance agents in New York State.
Liberty Title issued title insurance policies on behalf of
several title insurance underwriters in connection with
commercial and residential real estate transactions, primarily in
the northeastern United States. MADDEN also controlled and
operated two other title insurance agencies: Skyline Title, LLC,
and GNY Liberty Abstract, LLC. Liberty Title closed down in
April 2009 after several of its agency contracts with title
insurance underwriters were terminated.
Commencing around early 2008, MADDEN misappropriated
escrow and other client funds from Liberty Title, Skyline Title,
and GNY Liberty Abstract in order to sustain operations at
Liberty Title, and to support the significant cash draws he was
taking from the company. In particular, between January 2008 and
April 2009, MADDEN took approximately $2.2 million in cash draws
from Liberty Title. Those cash draws, which at times amounted to
$300,000 or more in a single month, far exceeded MADDEN's draws
in prior years, and were taken despite the deterioration in the
real estate market throughout 2008. To sustain Liberty Title's
operations in the face of such draws, and to pay current client
debts, MADDEN misappropriated escrow and client funds of other
clients, essentially using new funds from clients to pay off
older debts on behalf of other clients.
For example, Liberty Title provided title insurance
services to a large New York City developer in connection with a
closing in December 2008. Liberty Title received funds from the
developer to pay approximately $2.1 million in mortgage real
estate taxes for the transaction and to record the transaction.
However, Liberty Title did not use these funds for their intended
purpose. In February 2009, when Liberty Title issued a check for
approximately $2.1 million on the transaction, it lacked
sufficient funds to cover the check, even after moving funds from
another account. Therefore, Liberty Title used escrow funds
misappropriated from another of its clients, as well as escrow
funds entrusted to GNY Liberty Abstract, to pay a portion of the
tax due on the transaction. It was also later discovered that
Liberty Title had failed to timely record dozens of real estate
transactions, despite having already received payments to record
such transactions. Many of these recording files were kept in
MADDEN's office away from where Liberty Title typically kept such
files.
MADDEN, 55, of Greenlawn, New York, is charged with one
count of insurance fraud and one count of wire fraud. The
insurance fraud count carries a maximum sentence of 10 years in
prison and a maximum fine of the greater of $250,000 or twice the
gross pecuniary gain or loss from the offense. The wire fraud
count carries a maximum sentence of twenty years in prison and a
maximum fine of $1 million or twice the gross pecuniary gain or
loss from the offense. MADDEN is expected to be presented later
today before United States Magistrate Judge GABRIEL W.
GORENSTEIN, in Manhattan federal court.
Mr. DASSIN praised the investigative work of the FBI
and the New York State Department of Insurance.
Assistant United States Attorney AVI WEITZMAN is in
charge of the prosecution.
The charges contained in the Complaint are merely
accusations, and the defendant is presumed innocent unless and
until proven guilty.
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