Justice Dept. targeting collusion in heir-tracing industry

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Posted: Jan 27, 2016 1:38 PM
Justice Dept. targeting collusion in heir-tracing industry

WASHINGTON (AP) — The Justice Department is investigating an industry that seeks out heirs to the recently deceased and is looking into whether price-fixing and other anti-competitive practices have ripped off relatives who have enlisted the companies' services, law enforcement officials said.

Federal prosecutors have announced plea agreements in the last month with two industry executives and a California company as part of an antitrust investigation that is likely to result in additional criminal charges.

"American consumers and businesses are entitled to the benefits of free competition," Kalina Tulley, assistant chief in the Chicago office of the Justice Department's antitrust division, said in an interview. "When you have competition, you expect that there will be lower prices and better products than when there is no competition."

The investigation spotlights a small and little-known industry that's been publicly defensive of its practices while boasting that it's helped heirs secure millions of dollars in inheritances that they otherwise may never have known they were entitled to.

"There's a long history of missing-heir search firms looking for windfall profits," said C. Tim Rodenbush, president of HeirSearch.com, which decries the "excessive fees of inheritances" sought by others in the business.

The investigation focuses on potential collusion among the firms, which specialize in locating family members of people who die without a will and without close family relationships. Such relatives, who typically have never met or even known of the deceased, are sometimes referred to as "laughing heirs" because of their windfalls.

"It's never a first cousin or a daughter. It's always someone who is far enough removed that they didn't keep in touch with a branch of the family," said Lori Perlman, a wills and trusts lawyer in New York.

The businesses employ workers to sift through probate filings in search of people who have recently died and who may have missing or unknown heirs.

Then, using court and census records, atlases, genealogical documents and other public data, they compete to track down potential beneficiaries of an estate and then sell their services — helping heirs prove their lineage and secure an inheritance — on a contingency-fee basis.

For competitive reasons, the firms typically withhold details of the estate — such as the name of the deceased or the amount of the inheritance — until after they secure a binding and exclusive contract with a client that guarantees them a cut of any inheritance they secure.

"The heir would be sitting there and getting, so to speak, 'offers' from these different services," said Gerry Beyer, a Texas Tech University law professor and expert in estate planning.

Though the companies tout their ability online to recover money for cousins far removed, they also acknowledge that their business practices have raised eyebrows. Rhetorical question-and-answer sections on some of the companies' websites include questions such as, "How do I know this is legitimate?" and "Is this some type of scam?" as well as answers meant to reassure potential customers that their methods are sound.

In a pair of criminal cases, Justice Department officials have accused the industry of being tainted by efforts to eliminate competition by colluding on contingency fees and sharing customer payments.

As part of the scheme, prosecutors allege, once a firm would contact with an heir, rival firms would agree to back off from approaching other heirs to the same estate, but still share in the contingency fees.

"If the companies compete, the contingency fees are going to go down in the country," Tulley said. "Eventually, you might reach a level that's a lot less profitable. If there's no competition, they can charge whatever rate they feel someone will pay and not ever have to worry about being undercut."

In December, prosecutors unveiled a plea deal with Brandenburger & Davis, a Sacramento, California-based firm that markets itself online as a company of private investigators, genealogists and historians with an "excellent track record of identifying and locating missing and unknown heirs throughout the world." The firm has agreed to an $890,000 criminal fine and one of its executives, Bradley Davis, has also agreed to plead guilty, according to the Justice Department.

The firm declined to comment, and a lawyer for Davis did not return repeated messages.

Then, this month, Richard A. Blake Jr., the president of a Braintree, Massachusetts heir-hunting firm was charged with allocating heirs with another, unnamed company, and with setting contingency fee rates at collusive and non-competitive rates. Prosecutors say Blake also has agreed to plead guilty. Blake and his attorney did not return phone messages seeking comment.

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Follow Eric Tucker at http://www.twitter.com/etuckerAP