A Baltimore, Maryland-area title insurance agent was sentenced to five years in prison and ordered to pay $2,500 in restitution for diverting thousands of dollars in client escrow funds for her personal use.

But Carole Tilghman, former agent of Client 1st Title in Randallstown, Maryland, will serve only six months of home detention, as the Circuit Court in Baltimore County last week suspended her five-year incarceration after she pleaded guilty to one count each of felony theft and felony theft scheme.

According to Maryland authorities, from 2007 to 2010 Tilghman engaged in a scheme in which she overcharged buyers and sellers recording taxes and title abstract fees, keeping the additional money. In at least one transaction, Tilghman falsified a buyer’s financial statement and used excess funds to pay for her car, mortgage and credit card, among other personal debt.

In 2011, the Maryland Insurance Administration (MIA) revoked the licenses of both Tilghman and Client 1st Title, fined them each $500 and ordered them to repay consumers more than $51,700. Tilghman’s conviction was the result of a joint investigation by the insurance fraud division of the MIA and the Office of Attorney General Brian E. Frosh.

Frosh did not say how many consumers were defrauded by Tilghman’s schemes, but said in a statement, “Simply put, these consumers were ripped off by someone who they trusted. Hopefully, this conviction serves as a deterrent to fraudsters who attempt to steal from hard-working Marylanders.”

MIA Commissioner Al Redmer Jr. pointed out that “bad actors” such as Tilghman “hurt consumers, as well as the reputations of all insurance producers, who overwhelmingly are an honest group.”

Indeed, cases like Tilghman’s involving escrow theft — or defalcation, the nomenclature the title insurance industry often uses — have plagued the title insurance and escrow industry for years. One of the most well-known and costly cases involved Chicago-based Intercounty National Title Insurance Co., in which company executives stole $91 million from client escrow accounts and falsified financial reports to hide the stolen money. Lawsuits related to the fraud continued for years.

In 2011, three companies — Washington Title Insurance Co. of New York, New Jersey Title Insurance Co. and Southern Title Insurance Corp. — were actually barred from issuing new title policies because of solvency issues stemming from defalcations and an increase in claims.

A 2012 report by financial analysis firm Demotech Inc. examined this trend and concluded that “escrow theft is a serious problem for the title insurance industry, though not because of its frequency, but rather because of the egregious breach of trust, the amount of money lost and the damage to the industry’s reputation. When theft of escrow funds occurs, consumers are harmed, business partners lose trust and the credibility of the entire title industry is damaged. This is of significant consequence for an industry that is also plagued by a negative public perception.”

Depending on state law, underwriters may have to replace missing funds that were intended for closing protection letters, commitments and policies, and other purposes. Title agents may also have their own fidelity insurance policy or surety bond. Some cases produce civil litigation. If a bank where the settlement agent maintained his accounts was involved, it may also face charges.

Defalcations often have disastrous or even horrific consequences for those involved in the fraud, too. In February 2014, for example, Richard Taller, founder and CEO of American Title Services in Centennial, Colorado, was found dead at his home, the result of self-inflicted wounds from a nail gun. Taller and American Title Services were being investigated after $2 million in escrow funds went missing.

In response to these concerns, state regulators have enacted stricter laws for insurance companies, while legislators have passed bills to increase oversight of the industry. Underwriters have also adjusted their escrow accounting standards.

Discover what escrow means here!

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription