Fidelity National Financial refutes claims that it violated disclosure laws [The Florida Times-Union, Jacksonville]

Jan. 7--Fidelity National Financial Inc. (NYSE: FNF) Thursday denied assertions in a New York Times story that the Jacksonville-based title insurance company violated disclosure regulations for public companies.

The Times story published Thursday said Fidelity has been dealing with numerous lawsuits from a mortgage fraud scheme in San Diego. The lawsuits allege that employees of Fidelity subsidiaries assisted Southern California financial planner Rollo Norton II in fraudulently obtaining loans for a condominium project.

The newspaper story's main contention is that Fidelity did not properly disclose potential losses from those lawsuits in its Securities and Exchange Commission filings after Norton pleaded guilty to charges related to the fraud scheme in August 2007. That would mean the company's shareholders were left in the dark about losses that could impact Fidelity's finances.

Fidelity said in a press release Thursday that the company "emphatically refutes the significant inaccuracies" in the story and said its "SEC disclosure complied with all applicable laws and regulations."

The article said Fidelity did not disclose losses from those lawsuits until its third quarter financial report issued in October 2009. But Fidelity, which said it is "not required under any law" to disclose specific information about the claims, said it did give some information on potential losses from them in early 2008.

Fidelity's first quarter 2008 report filed with the SEC did not specify the case involved, but it did say that Fidelity's cash flow was affected by $51.8 million in payments "to settle a group of related claims for third party losses." It also said "we believe that these payments and certain previous payments on these related claims are recoverable under various insurance policies."

According to its third quarter 2009 report, Fidelity had been expecting to recover $83.2 million "under certain insurance policies on a fraud claim." But the report said Fidelity lost a court ruling in its attempt to collect on those insurance policies. So while it continues to pursue collection, it can now only say confidently that it will recover $20 million.

Again, the third quarter SEC filing did not specify the case involved. But during the company's quarterly conference call in October, an analyst asked for more details, and Fidelity Chairman William Foley said it involved "the Norton claim." He described it as "a massive fraud situation in San Diego."

Some of the lawsuits in the case are still pending, and attorneys for plaintiffs who claim they were victims of the fraud scheme are arguing that Fidelity's lack of disclosure "is further evidence that it was covering up for its employees," according to the Times story. Fidelity says the disclosure issue is irrelevant to the fraud cases.

Fidelity's press release said the company "is actively fighting mortgage fraud" and it "has fully cooperated with the federal investigation" of the Norton case.

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