Alleged title insurance kickback scheme explained

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So-called scheme said to involve title insurers, reinsurers, builders

Wednesday, February 23, 2005

By Janis Mara
Inman News

The alleged title insurance kickback scheme under investigation by California and Colorado insurance officials isn't simple. In fact, it's extremely complicated – some might say devious, which isn't too surprising given that the so-called scheme is said to violate the Real Estate Settlement Procedures Act.

But Erin Toll, deputy insurance director of the Colorado Department of Insurance and leader of that state's investigation, has a simple explanation:

Picture a triangle with the broadest part at the top, like a pyramid.

Now picture the homebuilder at the top left corner of the triangle. The title insurance company is across from the homebuilder, at the top right corner of the triangle.

The homebuilder approaches the title insurance company. The homebuilder knows the title insurance company is eager for the volume business the homebuilder has to offer.

So, the homebuilder makes an offer, Toll alleges. According to Toll, if the title insurance company will agree to sign up for reinsurance with a certain reinsurance company, it'll get the homebuilder's business. That reinsurance company is a "captive" – a subsidiary of the homebuilder.

The title insurance company agrees. The homebuilder uses the title insurance company's services, and that's the line that connects the two.

At the bottom of the triangle is the reinsurer. The title insurer makes payments to the reinsurer, and that's the line that connects them. There's one more step, but let's stop for a minute.

This all sounds simple, yes?

What's wrong with this picture?

Several things, according to Toll. First of all, the reinsurance is most likely unnecessary. "Over 99 percent of the transactions involving title insurance don't require reinsurance," Toll said. "We typically see reinsurance for hugely expensive commercial properties or tiny title insurance companies." But these arrangements involved residential properties and huge insurance companies.

Second, Toll says that the title companies paid the reinsurers a premium so high, it was grossly disproportionate to the risk the reinsurers were taking. Toll says the title companies were paying the reinsurers half the title insurance premiums they got from the builders.

And now for the last step – what's really wrong with this picture.

According to Toll, the reinsurers then funnel the payments from the title insurance companies back to their parent companies – the builders. And that's the line connecting the reinsurers with the builders. The title companies are returning, or "kicking back," half their fees to the builders via the reinsurers, Toll said.

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Send news tips or a letter to the editor to janis@inman.com; (510) 658-9252, ext. 140.

Newest U.S. cathedral rises to Oakland skyline

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Rebecca Rosen Lum

Jun. 3--It happens throughout the day: Traffic slows near the corner of Grand Avenue and Harrison Street in Oakland as motorists glimpse Christ the Light Cathedral climbing skyward. Cell phones and cameras emerge from car windows to snap photos.

For now, its warm blond bones lie bare. Soon, glass panels will cloak the massive ark-shaped sanctuary. It will anchor a landscaped complex encompassing an open plaza, smaller chapels, offices, a rectory and residence for Bishop Allen Vigneron, gathering places, gardens and a conference center.

It is the newest cathedral in the nation, and only the second most expensive in American history.

The $190 million, 224,000-square-foot complex replaces St. Francis de Sales, fatally damaged by the 1989 Loma Prieta earthquake.

When it opens in fall 2008, the cathedral will bring together two parishes, St. Francis and St. Mary's, also in downtown Oakland.

The sanctuary's pivotal feature is its use of light, which architect Craig Hartman said he introduced in "the most poetic ways" possible.

"It makes the presence of God manifest," he said. "The promise is of a glowing, luminous space -- very spiritual in the way (of) a redwood forest, with light coming through the trees, diffuse and luminous. As the sun moves across the building, (the light) will constantly change."

It's not like anything Hartman has ever built, or has ever seen, and that's no accident.

The plan won Hartman the San Francisco American Institute of Architects Design Award. Hartman has been jetting between projects here and in Beijing, where he designed the U.S. Embassy building on one end of town and the 22-building Beijing Finance Street on the other.

Critics say the money could have been better spent elsewhere, but proponents say the sight of the soaring sanctuary has stirred beatitude throughout the diocese -- and helped spawn a construction renaissance along Lake Merritt. Within a short span, developers plan to build a restaurant, a Whole Foods Market, and hundreds of business and residential units nearby.

"What Lake people have been talking about for years is finally happening," said Mike Brown, cathedral communications director.

"It's an act of hope and commitment," said Arthur Holder, dean of the Graduate Theological Union in Berkeley. "It's a kind of positive statement about the future of the church, especially in the downtown area."

The structure is hewn from 26 110-foot curved Douglas fir ribs and 768 horizontal struts, spaced by 26 101-foot high laminated mullions. The curved supports are cemented at the root and held in place at the top by a steel ring; outward pressure exerts a third type of support.

The entire structure rests on a foundation of base isolators intended to protect the cathedral in an earthquake by giving it some flexibility of movement.

"It's really quite interesting and exciting," said Richard Kieckhefer, a professor at Northwestern University who has studied church architecture. "I am particularly interested in the treatment of light."

Only eight curved pieces remained to be set in place Wednesday. Workers prepared to pour the last bit of concrete into a mold for the main entryway. Two sets of massive double doors will open out onto Lake Merritt. By July, crews will begin cloaking the frame in hundreds of glass panels.

Each day, engineers who work in nearby buildings wander over to check the building's progress.

"They're out here every day like locusts," chuckled Brown about the curious engineers.

It may not be the most adventurous cathedral architecture in the world. That honor may belong to the Catedral de Maringa in Brazil, whose conical tower and surrounding geometric protrusions were inspired by Russian sputnik satellites.

And it certainly isn't taking the longest time to build: Construction on France's Notre Dame broke ground in 1163 and wrapped up 182 years later in 1345.

Nor is it the first cathedral to rise from the wreckage of an earthquake: A magnitude 9.5 temblor battered Chile's Valdivia Cathedral in 1960. The structure has been rebuilt 15 times since the 16th century because of damage from quakes and fires.

But of all those, Christ the Light is the priciest, and it's the cost that has ignited discord.

Estimates skyrocketed from $131 million in 2003 to $190 million in 2007.

The costs rose partly because of inflation, and partly because some figures could not be pinned down accurately before construction began, Brown said.

Parents in the San Ramon Valley had long hoped the diocese would make building a new parochial high school a priority over the cathedral.

"It might be more prudent and productive to build fewer grand cathedrals and more Catholic high schools," parishioner Bruce Bergondy of Hayward said. There are too few Catholic high schools in the suburbs, yet that's where most Catholics live, he said.

But proponents point out that the cathedral was financed through donations solicited specifically for the project. None of the financing has come from the $350 million the Oakland Diocese spends annually on social services, schools or church administration, according to the church's finance committee.

Arguments over construction costs also wracked the Los Angeles Diocese when it spent $180 million to replace its quake-damaged Cathedral of Saint Vibiana. Critics dubbed its replacement the "Taj Mahony," believing it to represent the oversized dreams of Cardinal Roger Mahony.

Now, motor coaches line up outside the boxy, auburn Our Lady of the Angels to see the cathedral where actor Gregory Peck's remains are interred.

In Los Angeles, members of the Catholic Workers movement protested the investment in bricks and mortar when services for the poor were so desperately needed.

The director of Catholic Workers of Oakland, on the other hand, was persuaded by Pulitzer Prize winning architectural critic Allen Temko to support the cathedral, despite its cost.

The pair was among 143 people involved in early planning meetings.

"I had my opportunity to voice my hesitation back in the pre-planning process," said Margaret Roncolli. "Allen Temko kind of changed my mind on the thing. Even (Catholic Workers founder) Dorothy Day said even the poor need beautiful places to worship."

In 1821, the Baltimore Cathedral became the first major religious building constructed in America after the adoption of the Constitution. Its first major renovation was just completed.

In the past decade, dioceses in Seattle, San Jose, Rochester, N.Y.; Kalamazoo, Mich.; and other cities have undertaken extensive cathedral renovations.

But the building of a new cathedral is rare -- so rare that two art historians teamed up to teach a class in cathedral architecture at the Graduate Theological Union focusing on Christ the Light.

"I think it's wonderful," said Mia Mochizuki, one of the teachers. "The design combines the ethereal and the grounded."

Rebecca Rosen Lum covers religion. Reach her at 925-977-8506 or rrosenlum@cctimes.com.

The numbers

--224,000 square feet: size of entire complex

--53,000 cubic yards: amount of soil removed during excavation

--60,750 tons: amount of concrete poured

--15 feet: height of surrounding concrete base walls supporting the wooden structure

--110 feet: height of 26 curved Douglas fir ribs

--101 feet: height of 26 straight vertical fir mullions

--768: number of Douglas fir horizontal louvers

--1,028: number of 4.5-foot-by-10-foot glass panes that will envelope the wood structure

--94,000: number of pixels in the Omega Wall, through which light will pass, illuminating the Christ in Majesty, an image from Chartres Cathedral in France

--36: number of friction pendulum double-concave base isolators, each of which weighs 4,200 pounds, protecting the cathedral against earthquake

--1,300: number of crypts the cathedral will hold

--1,450: number of niches it will contain

--200: parking spaces

Source: Christ the Light Cathedral communications office

Monday profile: Sister embraces solitary life of faith

Oct. 8--By Rebecca Rosen Lum

STAFF WRITER

Sister Laurel O'Neal frequently trades her nun’s habit for blue jeans. She rims her blog entries with brilliantly colored artwork, teaches adult education classes and plays first violin with the Oakland Civic Orchestra.

But for much of her life, she is alone with God.

O'Neal is a hermit. A Benedictine nun who sought greater solitude than convent life allowed, O'Neal earlier this month placed her hands across the palms of Bishop Allen Vigneron of the Oakland Diocese in a ceremony that formalized her status as one of fewer than 100 people in the country who share her vocation.

She’s used to the double takes. "Everybody looks at you and says, 'Huh?’” – even fellow parishioners at Lafayette's St. Perpetua Catholic Community.

A Baptist neighbor asked what she should do when the two met. Should she genuflect?

“I said, 'Hello' works."

O'Neal lives a life of study and contemplative prayer in a ground floor Lafayette apartment she calls "Stillsong Hermitage."

She rises at 5 a.m., drinks a cup of cider or coffee and begins a series of prayers to sanctify the day. She attends daily Mass at St. Perpetua, studies, recites the Morning Praise. She writes. She performs chores in silence. More prayer fills the afternoon and evening -- the Vespers, then finally the Complin. Some evenings she may play the violin or meet with clients seeking spiritual direction.

"If I'm successful, it means I've lived a day with integrity," she said.

O'Neal quotes one of her favorite Catholic thinkers, Thomas Merton, the late writer, poet, peace activist and Trappist monk, who said a hermitage should allow its resident to "fulfill (her) special needs for growth ... and confront the triple specters of boredom, futility and unfulfillment, which so terrify the modern American."

They don't appear to terrify Laurel O'Neal.

The name Stillsong Hermitage "reflects the essential joy and wholeness that comes from a Christ-centered life of silence and solitude," she writes in her blog. "At the heart of the Church, in the stillness and joy of God's dynamic peace, resonates the song which IS the hermit."

Quiet feels natural in these rooms. A chapel in her room holds a tabernacle, and within it the Eucharist, which she performs here and for other residents in the complex: "Bishops allow hermits to do that," she said.

Shelves full of books bank the living room. A print of Rembrandt's "The Return of the Prodigal Son" hangs beneath a crucifix. "Bach Works for the Violin" waits on a music stand. A shelf holds DVDs -- "The Hobbit" series, "The Green Mile" -- a television and other gadgets. And she loves "Harry Potter."

She embraces solitude, not isolation, she says: A hermit's life is not for those trying to hide from society.

"Probably one of the biggest misconceptions is that (hermits) live in silence," said the Rev. Mark Weisner, spokesman for the Oakland Diocese. "We have the image of hermits being unhappy and unable to fit into society. Sister O'Neal is a very normal person. Can you imagine having constant contact with the Lord and not being joyful?"

Canon law describes a hermit's life as one of solitude and penance, "but there is nothing in church law about how much silence to keep," said Sister Marlene Wiesenbeck, who wrote a guidebook for aspiring hermits and the vicars and bishops who assess their applications.

Too much silence not only "interferes with the need for normal social interaction any person has," she said. It leads to "a spirituality that is so inward that the world no longer matters."

For O'Neal, vocation completes the whole of religious life.

Today, much of religious life focuses on activity -- social justice, feeding the poor. "And that's good," she said, "but the other part, contemplative life, has been ignored."

O'Neal began attending services as a teen and fell deeply in love with the faith. She found the liturgy "mysterious, in the best meaning of that word," she said.

"I was pretty much amazed, maybe even awed, by the richness of the experience," she said. "As I have explained it to others, I was an adolescent searching in the inchoate, sometimes (in) desperate ways adolescents do, but without even knowing for what myself. I was tremendously moved by the liturgy and found that it satisfied me emotionally, aesthetically and intellectually."

She was not raised a Catholic, and her ebullience for all the faith offered shocked her family.

"My mother was particularly unhappy about the whole thing. She said, 'You can't be baptized and live in this house.'"

Her pastor offered her an apartment over his garage, and she moved in without a second thought.

"I knew what I wanted," she said.

A seizure disorder interfered with her early call to become a Franciscan nun and later, her doctoral studies at the Dominican School of Philosophy and Theology in Berkeley. She holds a master's degree in theology from St. Mary's College in Moraga.

She was a neuroscience research assistant at Mt. Zion Hospital in San Francisco and a hospital chaplain. But monastic life pulled hard, and she joined the Sisters for Christian Community.

In 1983, the church passed a canon law that revived the life of the hermit (sometimes called an anchorite). She asked immediately to be "professed" in a life plan that spoke to her motivation, described how she perceives God's call for solitude, laid a groundwork in theology and discussed how she intended to live her vows of poverty, chastity and obedience.

After accepting an early candidate in 1985, the diocese backed away from professing hermits. With a new bishop came a renewed interest, and 23 years after she tendered her bid, the diocese gave her its blessing.

She donned a gold betrothal ring in a special ceremony Sept. 2 and was given a white prayer cowl. She wears it to her daily Mass.

"One day, this older guy walks in, and he looks over at me and he goes, 'Awesome.' I was afraid there would be a lot of snickering."

It surprises her not one bit that more people are expressing an interest in eremetic life.

"I walk along today," she mused. "People have things sticking out of their ears all the time. People are always talking on the cell phone. People are always being talked to. People have to be hungry. How many people even stop to listen to their hearts?"

If the number of hermits is an indication, more do in France than in the United States. France has around 500 hermits.

New Zealand has one, too -- "She's a friend of mine, so I know that.”

The hermit's life can be traced back to Exodus and the Israelites' 40-year sojourn through the desert.

St. Paul of Thebes of the third century is the first known hermit, Weisner said. To escape persecution by the Roman emperor, Paul found refuge in a cave. In later centuries, hermits would cloister themselves on church grounds.

"In Europe, you see these little rooms connected to the church with slots so the person could see into the church, but the door would be bricked up. There would be a window so people could come by and feed them.

Merton pressed the church to open the doors of the diocese to hermits.

It has done so, but it could go further. O'Neal would like to see the church embrace those with chronic illnesses and steer them to eremetic life as a source of spiritual richness.

"Our church does very well ministering to the chronically ill, but not at having a ministry of the chronically ill," she said. "This is one way for that to happen."

Hermits across the country have a loose online partnership. They discuss the work that is part of a hermit's life. Most have some sort of cottage industry. Some run spiritual retreats. One plans to keep bees.

Those who aspire to a formal relationship with a diocese can wait a long time for it to come to pass. Her friend in New Zealand waited 17 years.

For at least three years, the church tests a candidate for mental and physical fitness. A canonical team studies the applicant's life plan.

"You're being watched to see if you are authentic, if God is watching you," said Sister Mary Dawiczyk, a hermit in Genoa, Wis., who said, "You are either being called by God or you are crazy."

That statement drew a chuckle from O'Neal.

"They want to make sure you're not a nut case," she said. "We've all run into them. You can't use hermitting to run away from things."

"I think of a life of silence and solitude as a natural way of life," she said, relaxing into an easy chair in Stillsong Hermitage, salt-and-pepper bangs escaping from under her nun's habit.

"My ancestors, coming across the plains, worked in silence, did humble, hard work."

Rebecca Rosen Lum covers religion. Reach her at 925-977-8506 or rrosenlum@bayareanewsgroup.com.

Biography

Name: Sister Laurel O'Neal

Occupation: Hermit

Age: 58

Residence: Lafayette

Accomplishments: Benedictine nun has been accepted as a hermit by the Oakland Diocese.

Quotable: "We don't live in caves, we bathe regularly, and most of us (I can only speak for myself and the other hermits I know) LOVE people and are integrally connected to the rest of the church and world in some real way."

Stillsong Hermitage

Sister Laurel O'Neal's blog is online at http://notesfromstillsong.blogspot.com.

Coffee roaster pushes beyond its 'Peetnik' roots

Published in the Oakland Tribune, June 2006

by Janis Mara

SHADOW, an Australian cattle dog, crouches at the feet of youngsters Teresa Dayrit and Isabella Brown as they sip tea with Isabella’s mom, Sarah Brown, outside Peet’s Coffee and Tea. They are surrounded by a crowd including a 15-year-old golden retriever and other Peet’s customers.

Less than half a block away on Berkeley’s Solano Avenue, in full sight, is a Starbucks. Though there is a bench outside, not a soul is in evidence.

“Peet’s was here first," says Sarah Brown when asked why she comes here. "They're a Berkeley original. The Solano Avenue store has vegan cookies." Somewhat wistfully, Brown adds, “Peet’s wasn't always so much of a corporate company -- but it’s changing. They have many more stores now. It’s getting more and more like Starbucks."

And that, industry insiders say, concisely frames the 40-year- old, $175 million company’s challenge: to retain the unique quality that inspired generations of devotees like Brown -- "Peetniks," as they are affectionately dubbed -- while continuing the rapid expansion it began at the end of the 20th century.

By now, the story of Peet’s is as much a part of local lore as that of Chez Panisse. Just as Alice Waters' North Berkeley restaurant changed the character of American cooking, the neighboring Peet’s, founded in 1966 by Dutch immigrant Alfred Peet, transformed the coffee trade with its hand-roasted, premium-quality dark roast coffee.

Indeed, Seattle-based Starbucks, the $6.4 billion, 20-ton gorilla of the $11 billion annual specialty coffee market, was nurtured by Peet’s. Gerald "Jerry" Baldwin, one of Starbucks' three founders, learned about coffee selection, blending and roasting from Alfred Peet. In 1984, Baldwin bought Peet’s and in 1987 sold his interests in Starbucks.

Now, Peet’s, currently based in Emeryville, is -- like certain types of shade-grown coffee -- flourishing in the shadow of 35-year- old Starbucks. Other smaller players in the specialty coffee industry include $58.2 million, Seattle-based Tully’s, with more than 110 stores and an expanding wholesale business.

At first, Peet’s was known for its slow and methodical growth in comparison to Starbucks, which currently has nearly 12,000 stores.

"They wanted to expand and they wanted to keep their unique brand identity, so they were very cautious at first," said Kenneth Davids, author of “Coffee: A Guide to Buying, Brewing and Enjoying" and editor of Berkeley-based Coffee Review.

But as the 21st century dawned, a new era of accelerated growth began for Peet’s -- growth that insiders like Davids say poses a dilemma. The company went public in January 2001 at $8 a share. The stock has more than tripled since then to about $25.

When Chief Executive Patrick O'Dea took over in May 2002, the company had 60 stores. The tally has now doubled to 120 -- including 65 in the Bay Area -- and Peet’s coffee and tea is sold in more than 4,000 grocery stores nationally. Peet’s is building a $17 million, 135,000-square-foot roastery in Alameda, which is scheduled to open in 2007. Of course, compared with the rapid expansion rate of Starbucks, which plans to add 2,000 stores this year and 2,400 stores next year, Peet’s approximately 25-store-a-year growth rate - - mostly in California -- is minuscule.

"Revenue for Peet’s is up 19 percent this year compared to last year," said Rob Black, a financial analyst for KRON Channel 4. Not only that, Peet’s stock is up 220 percent over the last five years, he said. Though the company reported a rough second quarter this year, with profit dipping nearly 30 percent, Black dismissed the development as a hiccup caused by higher costs that quarter.

Black is bullish on Peet’s, saying he believes that coffee sales will remain strong for years to come. About 15 percent of the U.S. adult population drank specialty coffee daily in 2005, according to the Specialty Coffee Association of America.

"Their dilemma is, are they going to stick to the methods that made them distinctive?" Davids said, citing the company’s unique roasting approach.

Colin Newell, editor of Vancouver, British Columbia-basedcoffeecrew.com, agreed with Davids.

“Peet’s roasts one 120-pound bag of coffee beans -- about the size of a sack of flour -- at a time," Newell said. "Starbucks uses machinery that can roast 10,000 pounds at a time."

There's a downside to that. The quality of the coffee suffers or you have more fractured coffee beans. There are always compromises when you increase the scale of an operation," Newell said.

Peet’s dark roast and "the incredibly strong drip coffee they make in their stores" are two of its unique aspects, Davids said. "Another part of their identity is selling only bulk coffee that is freshly roasted."

The company will stick to its values, CEO O'Dea vowed in a telephone interview in August.

"The most important thing to us as we grow is to make sure that we stay true to the 40-year deeply seated culture of quality that emanates from this place," O'Dea said, speaking from the Emeryville roastery.

"Our religion around coffee is: First, we are selective about the beans we buy and we pay whatever it takes to get the quality. Second, we only artisan roast by hand in small batches by trained masters. Our average roaster has been roasting over 10 years, our master roaster over 25. It’s as much an art, like winemaking, as it is a science."

Third, the CEO cited "our commitment to get our coffee from roaster to cup as fast as possible." He said the company built a direct store grocery delivery system in 2002 "to meet our freshness standards."

Asked if Peet’s will continue its hand-roasting process at its new 135,000-square-foot roastery in Alameda, O'Dea said, "You bet. Absolutely. We can use a little extra space, but it doesn't change the process.

"Though we are moving into a new home, we are bringing along a lot of our existing furniture. By that, I mean the roasters will be the same."

O'Dea described his company's marketing approach as "inside-out, as opposed to what large consumer packaged goods companies do. They go out and figure out what people want and build a product based on that. Peet’s is built inside-out, from the passion people have about the quality of the coffee, and, hopefully, over time it attracts a customer base that is equally passionate."

Though the question is by no means resolved, Davids notes that Peet’s made a skillful transition into espresso some years ago.

"The popularity of espresso threatened them, because they didn't sell espresso," Davids said. "But they managed to make that transition very successfully. They added espresso without losing their identity.

"It's a risky and difficult thing to do. But my cursory observation is that they did this skillfully in the Bay Area," Davids said.

In the original Peet’s at Walnut and Vine in Berkeley, the air is redolent of the dark, rich coffee that has graced its confines for 40 years. A dad emerges bearing the familiar white paper cup, pushing his offspring in a stroller, while two cyclists fresh from their morning blast of coffee jump onto their bikes.

Inside, the espresso prices coexist peaceably with other offerings on the brown wooden sign setting forth the classic Peet’s menu. A small coffee of the day is $1.50, a small latte $2.65 and a bag of Kenya $13.95, compared with $1.45 for a small coffee, $2.45 for a small latte and about $9.95 for Kenya at the Starbucks on Solano Avenue. About 12 people stand in line or engage in conversation while savoring the brew. A group of three men in slacks and shirts, possibly from the nearby University of California, Berkeley, appears to be discussing programming; phrases like "only when you have a gray line boundary" and "diagnostics" are uttered.

"With any branded company, the brand is a reflection of the person who is consuming the brand. The Peet’s core customer has a much different perspective as a coffee connoisseur than a Starbucks customer," says Bill Cody, managing director of the Jay H. Baker Retailing Initiative at the Wharton School of the University of Pennsylvania.

Cody compared Peet’s to successful microbrewery Samuel Adams, which started small and expanded nationally.

"Rather than growing for growth's sake, the goal is to find the customer who is the most successful customer," Cody said. "You're trying to get your product to the customers who will appreciate it."

Business Writer Janis Mara can be reached at (510) 208-6468 or jmara@angnewspapers.com.