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FARMINGTON — The investigation into New Mexico Title Escrow Co. grew so expensive in June that the state Financial Institutions Division obtained a $458,000 emergency loan from another state agency to continue a forensic audit of the failed Farmington business.

Following the loan, additional staff were hired to complete the audit, receiver Darryl Millet disclosed in a June 27 report to District Court in Santa Fe.

Millet, an Albuquerque attorney who is leading the audit, reported that he expects "significant additional progress" to be made this month.

The loan to continue the investigation was approved June 21 by a 4-0 vote of the state Board of Finance, which provides emergency funding to state government agencies.

It was the largest emergency loan ever received by the New Mexico Regulation and Licensing Department, Superintendent Dee Dennis said.

The loan was necessary because the funding shortfall became apparent after the Legislature appropriated money to agencies for the fiscal year, said Stephanie Schardin Clarke, director of the Board of Finance.

"The timing of when this all came to light couldn't have been worse as far as getting funding through the normal appropriations process," she said.

The Regulation and Licensing Department may request an appropriation from the Legislature during its next session to repay the loan.

Millet said funding has been a "significant issue" in the investigation.


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"The proposed budget for fiscal year 2012 proved inadequate due to the disorganized condition of the (New Mexico Title Escrow) files, and due to the substantial cost of the forensic accounting process," he said in the report.

It is not clear how much the investigation has cost to date. An initial bill from Millet has not been finalized, Dennis said.

Investigation's end months away

It has been more than five months since New Mexico Title closed abruptly Jan. 30, leading to revelations of missing funds and scrutiny from state regulators and law enforcement.

Millet and state officials will hold a public meeting in Farmington to detail their progress on the investigation by Aug. 1, Dennis said.

State officials expect the investigation will stretch for several more months.

"We anticipate having our reconciliation of accounts and a report ready that we can pass to law enforcement either in November or December," Dennis said.

The audit is being conducted by an Albuquerque accounting firm, REDW.

The investigations center on two related businesses, New Mexico Title Co. and New Mexico Title Escrow Co., which shared an office building at 650 W. Main St., Suite C.

Millet has attempted to contact 2,260 possible account holders by letter, with a reply rate of approximately 40 percent. Millet said he was following up to contact those who didn't respond.

Auditors have recovered nearly $493,000 in funds linked to New Mexico Title Escrow, Millet said. He reported auditors found $15,160 cash in a file drawer at the business, and numerous undeposited checks in drawers and unopened mail. The money is deposited in the receiver's account in Albuquerque, Millet said.

State investigators arrived Feb. 3 to look into New Mexico Title in the wake of customer complaints and published accounts of problems at the business.

After leaving Santa Fe at 4 a.m., investigators arrived to find a line of angry customers stretching down the sidewalk, and more inside demanding answers. An investigator in the case likened the scene to a run on a bank, according to an account given to the Board of Finance.

When investigators obtained a court order to enter locked rooms in the business, they found an ornate wooden bar, a large pool table and refrigerated beer kegs.

"It was a business that was run fairly loosely," Dennis said. "The people that were at the establishment did not appear to have the proper training and experience requirements. Accounts had not been reconciled for two years, and by statute they're to be reconciled monthly."

Investigators later learned New Mexico Title Co. funds paid for a $132,880 executive suite at the Denver Broncos' football stadium.

They also found some accounts were filed using only the first names of account holders, making it next to impossible for investigators to track down account holders who are owed money.

"We run across stumbling blocks continuously that make it more difficult for us to identify transactions," Dennis said.

Closure ripples through community

The receiver's report provides a glimpse into the wide effects of New Mexico Title Escrow's collapse. The 2,260 account holders included local banks, churches, developers and oil and gas companies, many of which lost money when the escrow company collapsed.

Investigators believe at least $1 million is missing from escrow accounts.

Animas Valley Land & Water Co., a Crouch Mesa rental and development company, lost $16,000 to $20,000 when New Mexico Title Escrow collapsed, said Fred Whistle, general manager.

Animas Valley minimized its losses by regularly collecting its payments from the escrow company, Whistle said. "It didn't kill us," he said.

Animas Valley later transferred its accounts to another escrow company. "We're looking forward to getting it completely resolved," Whistle said.

San Juan College also may be out money for an escrow account it had at New Mexico Title Escrow Co.

"We had made a payment in the amount of $12,998 right before the announcement was made that New Mexico Title had collapsed," spokeswoman Rhonda Schaefer said. "At this point, it is still part of the ongoing investigation as to what the outcome will be regarding any losses."

New Mexico Title Co. was controlled by J.J. Bond Investments, and owned by Chadwin Cox, a Denver-area businessman who is cooperating with the investigation. Cox surrendered $336,000 in New Mexico Title Escrow-related funds, Millet said.

The neighboring escrow company was organized by Bobby Willis, a local businessman, through an entity registered as Golden Rule, LLC, state records show.

Willis previously raised eyebrows for unconventional business practices, including proposing a multibillion-dollar hospital project in Kirtland that went nowhere. He also floated the idea of starting a country music festival in Grand Junction, Colo., that would have competed with an established event, but that idea also ran aground.

Willis is represented by a Santa Fe attorney, Michael R. Comeau. Comeau did not respond to a request for comment.