Last year Scott Goodman, a licensed conveyancer and owner of Goodman Group Conveyancing, launched what he called the Goodman Group Conveyancing Referral Program – a scheme whereby a bribe of $150 is paid to a real estate agent each time a client is referred by that real estate agent to Goodman Group Conveyancing for conveyancing services. Anecdotal evidence suggests that Goodman’s scheme has been a runaway success, but questions arise over the ethics and legality of the scheme. I wrote to a prominent real estate agency to find out how they deal with the bribe payments.
In a previous posting titled “Conveyancing Bribes – A New Growth Industry” I exposed the blatant use of bribery in the conveyancing industry. The issue was also raised in The Australian newspaper (see “Paid referrals distort market in conveyancing“).
I have since been told by licensed conveyancers in different parts of Melbourne that their businesses have suffered because the real estate agents on whom they rely for client referrals are now channelling their referrals to Goodman Group Conveyancing in return for bribes payments. I also became aware that the General Sales Manager of Rosier Real Estate, Mr. David Priest (also a part-time lecturer in real estate practice and ethics), had been sending clients to Goodman Group in return for bribe payments.
In December, 2008 I wrote to the Principal of Rosier Real Estate, Mr. Kurt Gunther:
“Dear Mr. Gunther,
It has been reported to me that Rosier Real Estate accepts bribes from conveyancing business”Goodman Group”, operated by Mr. Scott Goodman.
I understand that these bribes, also known as “referral payments”, are paid to Rosier Real Estate each time Rosier Real Estate refers a client to Goodman Group for conveyancing services. According to the information I have received, your General Sales Manager Mr. David Priest is your office’s contact person for Goodman Group and that he is responsible for channelling the bribes from Goodman Group to Rosier Real Estate.
This morning I sought to substantiate the information I had received on this scam, and so I telephoned Mr. Priest and put it to him that Rosier Real Estate has been receiving secret commissions from Mr. Scott Goodman of Goodman Group at the rate of $150 per referral. Mr. Priest confirmed to me that Rosier Real Estate has been receiving some “referral fees”, but denied that these could be described as secret commissions, as your clients are made aware that the payments are being made to Goodman Group.
When I asked Mr. Priest as to whether the referred clients are told in writing that Rosier Real Estate receives payments in return for referrals, Mr. Priest indicated that the clients are not given any information in writing, but are told verbally.
I asked Mr. Priest if the clients receive any part of the $150, but Mr. Priest became reluctant to discuss the matter further.
When Mr. Priest asked me as to why I was inquiring about the bribes, I put it to him that such behaviour is corrupt. When I asked Mr. Priest as to whether he felt that Rosier Real Estate, by accepting bribes from Scott Goodman for referrals, was contributing to the corruption of the real estate industry, Mr. Priest stated that he did not want to comment further.
I told Mr. Priest that it is my belief that, as an estate agent, he has a fiduciary duty to the client, and that such a duty rendered any payment received by him as an estate agent as the property of the client. I put it to him that keeping the payment instead of giving it to the client was tantamount to an act of theft. Mr. Priest did not want to comment on this.
Mr. Gunther, I am keen to explore the way in which the payment of bribes by conveyancers to estate agents contributes to the corruption of both the real estate industry and the conveyancing industry. I describe the referring of clients in return for payment as “client trafficking”. I use the term “bribe” to describe money offered or received in order to procure an action or decision in favour of the giver of the money, and I use the term “corrupt” to describe the use of bribes to
control or influence the behaviour of consumers.
I seek your assistance in my investigations, and at the same time I offer you the opportunity to put your views on the matter. Please let me have your response to the following questions:
1. How long has Rosier Real Estate been accepting payment in return for “referring” consumers to, or otherwise influencing consumers’ selection of, conveyancers?
2. How many referrals @ $150 per referral would Rosier Real Estate make per month?
3. Are full written records kept of the $150 payments?
4. Is each payment of $1 50 declared for GST and other tax purposes?
5. How is the payment explained to the client?
6. Assuming that the payment is fully and frankly explained (e.g. “We refer our clients to Goodman Group because they pay us $150 for each client we send to them.”) do consumers ever question your ethics or bona fides as professional real estate agents?
7. In many cases a consumer will have already selected a lawyer or conveyancer to represent them. What internal procedures have you adopted to deal with the possibility that your estate agents may be tempted to advise consumers against using the lawyer or conveyancer a consumer has selected, in order to refer that consumer to Goodman Group in return for a $150 payment?
8. Does Rosier Real Estate expect any form of “loyalty” from Scott Goodman or Goodman Group Conveyancing, based on the business relationship that has developed through the payment and acceptance of bribes?
9. Do you believe that there is any conflict of interests in the relationship between Rosier Real Estate and Goodman Group Conveyancing?
10. Do you genuinely believe that influencing a consumers’ choices in terms of legal representation is good and ethical business practice?
11. Would you advise all real estate agencies to follow the example of Rosier Real Estate in accepting bribes from Scott Goodman and Goodman Group Conveyancing?
12. Would you advise all conveyancing businesses to follow the example of Scott Goodman and Goodman Group, and encourage them to offer higher bribes in order to win more referrals?
13. 1 put it to you that by accepting bribes in return for client referrals, Rosier Real Estate contributes to the corruption of the Victorian real estate industry -what to you say that?
14. Will Rosier Real Estate continue to engage in “client trafficking” with Scott Goodman and Goodman Group Conveyancing?”
On 3 April, 2009, having received no response from Mr. Gunther, I telephoned Mr. Gunther and he informed me that upon receiving my letter he immediately suspended his dealings with Goodman Group. Mr. Gunther told me that he had requested Scott Goodman to provide him with written confirmation, by way of a legal opinion from a senior barrister, that no criminal offences were involved in the operation of the bribe scheme.
Mr. Gunther added that he had not received any assurances from Scott Goodman to date.
I wrote to Scott Goodman the same day:
As you know I have been quite critical of your paying of cash bribes to real estate agents in return for which the real estate agent “refer” conveyancing clients to your conveyancing business.
As a result of my concerns I wrote to a local real estate agent, Mr. Kurt Gunther of Rosier Real Estate, Croydon late last year. I was aware that your conveyancing business had been actively recruiting real estate agents in this area, and that Rosier’s General Sales Manager, Mr. David Priest was taking advantage of your bribe offers.
I made a follow-up telephone call to Mr. Gunther today, and he informed me that, as a result of my writing to him, he immediately directed you to halt all bribe payments to his office until such time as you had received “a barrister’s advice” on the legality of the bribe program.
As you are aware, I take a keen interest in matters associated with client trafficking, sweet-heart arrangements, and bribery in the real estate industry, and so I request that you provide me with a copy of the barrister’s advice when it becomes available.
Of course, if you are able to direct me to any other material you feel supports your use of bribe payments I would be keen to peruse same.”
I will publish the details of the Goodman Group legal opinion as soon as they become available.
In the meantime, my own professional legal opinion is that Goodman Group Conveyancing may not fall foul of the provisions of the Conveyancers Act 2006 by paying bribes, (the Conveyancers Act 2006 anticipates and condones the use of bribery so long as the licensed conveyancer who pays the bribe discloses the payment – see Section 49(4)(c)), but a criminal offence is committed if Goodman Group acts in concert with a real estate agent who accepts a bribe payment and the real estate agent fails to disclose the payment.
In such circumstances the real estate agent would be guilty of receiving a secret commission, and Goodman Group would be a party to the commission of that crime.