Was it a sham or a business?

When is a kickback an illegal kickback? That is the question behind a lawsuit filed by federal regulators against L.A.-based Property I.D., which prepares natural hazard disclosure reports. Also named are Coldwell Banker Residential Brokerage Corp. and two other brokers doing business as Prudential California Realty. This is pretty complicated for the Friday afternoon before a holiday weekend, but basically here's the deal: Investigators from the Department of Housing and Urban Development say that Property I.D. was involved in a sham arrangement of joint ventures that "appeared to exist solely for the purpose of funneling payments in exchange for the brokers' referrals of business. The joint ventures are all located at the hazard reporting company's Los Angeles address, had no employees of their own, and shared bank accounts."

Federal law does allow real estate companies to form affiliated businesses and share in the profits they generate. But the companies must have their own employees, separate offices and phones. This can be a pretty lucrative arrangement because sellers in California are required to provide natural hazard disclosures for properties located in areas prone to flooding, fire, earthquake or landslides. Property I.D. has filed its own lawsuit against HUD, claiming that its natural hazard disclosure reports are not subject to the requirements cited by the feds. Everybody is denying there was any wrongdoing. Here's more from Inman News and here's the HUD press release. Also, here's Property I.D.'s press release on its suit.