The state has levied one of the largest civil penalties it has ever imposed on an Alaska title agency.

Alyeska Title Guaranty Inc. recently agreed to a penalty of $400,000 for insurance code violations. In its settlement with state officials, the company also agreed to pay $160,000 to a customer who was given a worthless title insurance policy in 2005.

The state said its investigation is still "ongoing and confidential."

However, in the legal settlement, signed in late December, the state's Insurance Division agreed not to take future criminal action against the title agency, which employs 40 at its three offices in Midtown, Eagle River and Anchorage.

The code violations are linked to an ongoing legal dispute between Alyeska and the customer who received the worthless insurance policy -- Ralph Feriani, a retired Anchorage dentist.

Alleging fraud and negligence, Feriani is suing the title agency for $750,000 plus punitive damages.

"In my opinion, there should be a criminal investigation," said Feriani's attorney, Bill Ingaldson.

Court records show that Feriani and Alyeska agree on some basic facts: In 2005, a former Alyeska employee, Jan Prescott, secured the $750,000 loan that Feriani made to a local developer with a deed of trust on the developer's eight undeveloped lots in a Lower Hillside subdivision.

When the developer, Kaylen LeBaron, defaulted on the loan, Feriani found out he couldn't collect insurance because of a prior lien on the eight lots that hadn't been disclosed to him. The insurance policy was worthless. A month earlier, Prescott had secured a hefty loan that another investor had furnished to LeBaron using a similar deed of trust on the same piece of property, according to the court records.

Feriani wants his $750,000 back.

Alyeska doesn't deny Prescott's alleged misconduct -- she was fired in early 2007 -- but disputes Feriani's demand for the money. In its legal filings, the title agency says the dentist's title insurance didn't actually exist. By issuing him "a document that purports to be a title insurance policy," the employee went beyond the scope of her duties and violated company rules, Alyeska said in its court filing.

Feriani contends that Alyeska was negligent and did not properly police its own employees.

Though the state's civil penalties against Alyeska are connected to the Feriani case, they hinge on paperwork errors. The insurance code violations cited by the state involve the disappearance of 14 files from the title agency, said Linda Hall, the insurance division director.

Division investigators discovered that the files were missing after the company contacted the division in early 2007 to report an employee's "possible misconduct."

Alyeska says the files went missing when they fired Prescott. Her name is revealed in Feriani's court filings but not the state's settlement.

"A few problems were discovered with transactions she had closed," said Alyeska company president Ryan Strong.

Feriani is also suing Prescott, and in her response to his suit, she denies wrongdoing. Her attorney, Allen Dayan, declined to comment for this story.

In a press release issued several weeks ago, state officials praised Alyeska for cooperating with their investigation and accepting responsibility.

But Feriani's attorney said it seems clear that the violations weren't just a matter of missing files. It's fraud, he said.

The legal settlement signed by the Alyeska and the state insurance division requires the title agency to:

• Provide its employees training in fraud detection and ethical business practices;

• Hire an independent auditor to evaluate its compliance with state insurance law and provide a report to the division; and

• Form a board-level committee to monitor the title agency operations for compliance with state law.

If the company complies with these requirements, $250,000 of the $400,000 civil penalty will be suspended, state officials said.

Strong, the Alyeska president, said that he believes these steps will prevent "anything like this from happening again."

Feriani's case against the company is scheduled to go to trial in May.

Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

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