The Maryland Insurance Administration has launched an investigation into a title company’s role in facilitating sales of homes in distressed Baltimore neighborhoods by ABC Capital and its related businesses.
The Baltimore Banner reported Monday that an attorney representing dozens of clients from across the globe says he has uncovered instances of fraud and other irregularities in transactions overseen by Castle Title, a Lutherville-based title company that has hired attorneys and is conducting its own review.
The questions prompted major insurance underwriters First American Title Insurance Co. and Old Republic Title to issue warnings against doing business with ABC Capital and scores of related companies and individuals.
Craig Ey, a spokesman for the Maryland Insurance Administration, said Tuesday that the agency’s Market Regulation and Professional Licensing Division has opened an investigation as a result of The Banner’s reporting.
“Because it is now a formal investigation, we cannot comment any further at this time,” he said.
Attorneys for Castle Title said their client had not been contacted by the insurance administration and declined comment.
The Maryland Insurance Administration licenses and regulates insurers, insurance agents and brokers, with its licensing division performing regulatory oversight of domestic and foreign insurance companies, insurance producers, title agents, public adjusters and bail bonds for compliance with state laws and regulations.
Baltimore City Councilwoman Odette Ramos, who works on housing issues, welcomed the insurance probe and said title companies in general need to be held accountable for their role in facilitating transactions that harm city neighborhoods.
“We’ve always had problems with title companies selling houses to people that still have vacant building notices, or not waiting for lien sheets and other work to be done. There has to be some responsibility for the title companies,” Ramos said.
Baltimore attorney Thomas C. Valkenet said he’s been deluged by disgruntled ABC Capital investors and discovered a slew of instances in which property was not received or a buyer signed documents for one home and got another. Others claim transactions were conducted in their names without their knowledge, and paperwork was drawn up involving property owners who did not want to sell. Valkenet said he has also uncovered documents with forged signatures.
“It’s three-card monte, with rowhouses,” Valkenet told The Banner, referring to the card game trick used by hustlers.
Investors from Asia, South America, Europe and across the United States were enticed by a business model in which they were told ABC Capital, and later a spinoff called IPP USA, would, on the investors’ behalf, incorporate limited liability corporations, acquire homes, renovate and maintain them and collect rent. The companies said would be guaranteed for a period of time.
The homes were in Baltimore’s most disinvested areas, many in need of serious repair, and ABC Capital owner Jay Walsh has said his company helped those neighborhoods.
But The Banner reported in November that the company was facing mounting lawsuits in Baltimore, Philadelphia and Miami in which people said ABC hadn’t made rent payments, and that they later discovered the homes had not been renovated. Some of those lawsuits claim that the company has been running a Ponzi scheme.
Walsh, who is now living in Aruba, has denied intentionally misleading anyone and said the coronavirus pandemic had upended his business. In many cases, he said, the investors themselves were to blame, and that others were just trying to get money out of him.
ABC filed for Chapter 7 bankruptcy protection in December, and as of last week is being fined $500 daily for not complying with the bankruptcy proceedings and providing required documents.
Walsh said the warnings issued by title insurance companies have effectively put him out of business, though he says he will continue to offer real estate consulting services.
A title company supervises and ensures that real estate transactions are carried out properly, including recording of documents, disbursement of funds and payments covering city and state taxes and other fees. Valkenet says Castle “utterly failed” to scrutinize the transactions in which questions have arisen.
So far, no regulatory action has been taken against ABC Capital or IPP. In addition to the Maryland Insurance Administration probe, the Pennsylvania Office of Attorney General has also been conducting a noncriminal consumer protection investigation of the Philadelphia-based company for well over a year, but has declined to discuss where it stands.
Ramos, the councilwoman, said the city needs to try to acquire as many of the abandoned homes as possible, through receivership or “in rem” foreclosure.
“There’s almost nothing we can do other than work on trying to acquire these properties, and we should be doing it immediately,” she said.