Goodman Group Conveyancing Bribe Payments

Published 04 April 09 08:03 AM | Peter Mericka 

OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

 

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...

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Filed under: goodman group, licensed conveyancer, corruption, scott goodman, bribe, client trafficking, rosier real estate

Comments

# Tim O'Dwyer said on April 4, 2009 8:44 AM:

Me again.

For a Queensland perspective on the same problem Blog-readers are referred to this earlier post:

Conveyancing Corruption - Lawyers Too!

# interested observer said on April 4, 2009 9:37 AM:

This blog will get a lot of comment. A Real Estate agent is obliged under the law particularly when they act for a vendor to disclose the referral payment/commission in the Listing Authority?  The Authorities were changed specifically for this, to declare gifts or money etc from mortgage brokers and advertising kickbacks.

All a regulator has to do is obtain Goodmans list of commmisions paid to agents who have referred Vendors to them and then look at each listing authority. I will bet not one authority has disclosed the commission.   Why ???  because the agent wants to keep it a secret...

# Peter Mericka said on April 4, 2009 10:34 AM:

Hi Interested Observer,

I have previously discussed the paradox associated with the disclosure of bribe payments - they don't work unless they're secret.  (See "Disclosure reduces the value of the referral" in Richard Wood Solicitors Letter – What If The Right Way Doesn’t Pay!)

I would also like to know about the tax records.  I would expect that Goodman would receive a tax invoice from each real estate agent, and that GST would be paid and claimed on each bribe.

I must admit that I don't know that much about tax law - is GST payable on bribes?

Also, I would expect that each real estate agent would declare the bribe payments as income, and that Goodman would claim them as a work-related expense.

# interested observer said on April 4, 2009 10:47 AM:

Peter you would expect an agent to declare the tax?

I dont think so but i am sure goodman claims it as a deduction.   Around 1999 a firm down frankston way that also did finance paid commissions and paid them in cash and the agents never declared it.  so when there was a tax audit carried out some agents had a fair amount of tax and penalties to pay, imagine the cosy relationship then.

# Peter Mericka said on April 4, 2009 11:16 AM:

H interested Observer,

If Goodman claims the deduction, wouldn't his accountant tell him to claim the GST as well?  This means he would want tax invoices.

If the estate agent issues Goodman with tax invoices, wouldn't the estate agent's accountant tell the agent that he must declare the bribe income?

# Agent said on April 4, 2009 2:07 PM:

My understanding is that the payments are sent directly to the agents themselves and has nothing to do with the office as a business (from a taxation point of view). The individual agents are then obliged to make allowences for the additional income at tax time. They certainly do not receive a tax invoice from the office itself. The goodman group are everywhere, they would have a presence in many, many real estate offices.

# Peter Mericka said on April 4, 2009 2:58 PM:

Hi Agent,

From my conversations with David Priest and Kurt Gunther of Rosier Real Estate in Croydon Victoria, it seems that it is the agency itself taking the bribes from Goodman, with the individual agents being told where to direct their referrals.

In any case, when a vendor signs up with the agent they are actually signing up to the agency.  Thus, the transaction in which the referral is made is an agency transaction, and the principal of the agency would have ultimate responsibility for what the agent does.

Surely, the principal of a real estate agency can't rely on "wilful blindness" and say that it's a matter between the individual agent and the client/purchaser/conveyancer.

As for Goodman Group's GST obligations, don't they have to withhold the GST component and remit it to the ATO if they don't get a tax invoice?

# Agent said on April 4, 2009 3:19 PM:

We do a lot of business with the Goodman group and our direction is to send the $150 back to the consumer as a reduction in their fees. Despite what others may or may not do with their $150 it is my experience that the Goodman group are very good to deal with, sec 32's in a day, phones calls responded to within an hour and a high degree of accountability to their clients all the way through the transaction. $150 or not we would still use them.

# Peter Mericka said on April 4, 2009 4:03 PM:

Hi Agent,

I accept that real estate agents would find Goodman Group excellent in all respects.  Do they get their purchaser clients to release the deposit quickly so you can get your commission?  Do they talk their clients out of making complaints against you etc.?

It must be very comforting as a real estate agent to have someone who is well and truly on your side, and I can understand why you say, "WE would still use them".

Now, where does the client fit in?

# Agent said on April 4, 2009 4:12 PM:

The answer to all the above is no. We also refer Aughtersons and Van Leirop Lawyers who don't pay us anything. Our clients have the final choice and we value companies that do their job well. There is no hidden agenda here.

# Peter Mericka said on April 4, 2009 4:33 PM:

Hi Agent,

OK, so let's accept that Goodman Group offer excellent service, always act in their clients' best interests, and are so well regarded by real estate agents that they don't need to offer bribes for referrals.

If Goodman is already getting penty of referrals from estate agents on the basis of good service etc., why would he suddenly start throwing away $150 for each one.

And why would Goodman not simply cut his fee for the client and the credit for doing so, rather than letting the estate agent get the credit for it?

One final question Agent:  Aughtersons and Van Lierop are law firms in Ringwood, and they are within a hundred metres of each other, so I assume that your office is near theirs.  Why would you get involved with Scott Goodman, who is all the way over in Seaford?

# Agent said on April 4, 2009 4:43 PM:

I can't answer those first few questions as they would need to be asked of the Goodman group.

As for the last question section 32's within an hour of request was the initial reason we started referring them. They are also more than happy to instruct us in the adding clauses in contracts and dealing with legal issues where as a lot of solicitors and conveyancers refer the clients back to the agents for answers.

# Peter Mericka said on April 4, 2009 5:00 PM:

Hi Agent,

I don't think anyone can answer those first few questions.

Although it does distract from the current debate, I must agree with you that the fact that so many (perhaps most) solicitors and conveyancers refer their clients to real estate agents for answers to their legal questions is an utter disgrace.  It is a major contibuting factor in the corruption that now bedevils this industry.

The twin problems of legal representatives referring clients to real estate agents for legal advice, and offering bribes to real estate agents for client referrals (Goodman is certainly not the only one - it's just that he's the first to be so open and public about it) account for the amazing power real estate agents wield over consumers and other industry participants.

# Agent said on April 4, 2009 5:16 PM:

Peter,

Have you ever had any issues with the conduct of the Goodman Group with any of the files you have encountered?

Would you agree that they are extremely professional in their dealings with clients?

Is it then fair to say that Scott Goodman is just a very clever man given that his business model seems to be very successful?

# Peter Mericka said on April 4, 2009 5:57 PM:

Hi Agent,

Let's assume that Goodman Group are as professional as everyone else in the industry - it's really not the issue.

I have no doubt that Scott Goodman is a very clever fellow and I am sure that his business model is extremely successful.

My concern is that the Goodman Group's use of bribes has the effect of corrupting the industry, increasing the cost of conveyancing for consumers, and reducing the general quality of conveyancing services.

Agent, do you believe that the Goodman Group strategy of offering $150 per client referral is good for the industry?  Should it be taken up by all conveyancers and lawyers?

# Agent said on April 4, 2009 6:07 PM:

Peter,

To be fair conveyancing is not my industry. Much as I have to compete on a daily basis with other agents this is a competive issue between all those who are fighting for conveyancing business.

I don't seek to dodge the issue, I only point out that it is not my issue to confront.

I post on this blog because I want the opinions of ethical agents to also have a voice but I don't pretend to have all the answers.

# Peter Mericka said on April 4, 2009 6:18 PM:

Hi Agent,

I'm not asking for an objective answer.

I'm interested in your personal and subjective opinion.

Would you encourage all conveyancers and lawyers to compete with each other by offering bribes (whether in cash, movie tickets or whatever) to real estate agents as per the Goodman Group model?

# Mortgage Broker said on April 4, 2009 6:23 PM:

Hi,

I think this problem does not only exist with Real Estate Agents getting paid a kick back from conveyancers but also being paid kick bakcs  from Mortgage Brokers. I have been a broker for the past 10 years and have never paid a kick back to a real estate agents, as i refuse to. I can get plenty of business on my own without paying them, we never ask for payment if a house sells. But from experiance I know when ever we speak to an agent they bluntly ask how much are you going to pay me. Most real estate agents are disgusting money hungry people. They don't care about the client, its all about how much extra money can i make. I think the real estate industry should have more regulations, so that all they do is sell property. They shouldn't be allowed to refer to any conveyancer, broker or lawyer. It should be a conflict of interest and penalites should apply, if they  break the law. It is often said that Real Estate Agents are worse than used car sales man.

# Agent said on April 4, 2009 6:25 PM:

No, but I would encourage the vast majority to be better at their job! Conveyancing in Victoria (including some solicitors) is rife with rude, aggresive and lazy practioners. I don't care about the money, I just want someone who knows how to do their job well. Goodman Group certainly does their job well.

# Peter Mericka said on April 4, 2009 6:30 PM:

Hi Mortgage Broker,

What I find amazing about real estate agents referring purchasers for finance is that the real estate agent has an interest in ensuring that the sale proceeds, and it would be in the interests of the agent to send the purchaser to a lender of last resort, or even a loan shark, in order to win the sale and the commission.

So of course there is a conflict of interests when a real estate agent refers a purchaser for finance.  And that's before we even get to the bribery issue.

I note that some real estate agencies are even badging mortgage brokers with their own brands - LJ Hooker Finance, Ray White Finance etc.

# Peter Mericka said on April 4, 2009 6:34 PM:

Hi Agent,

One more simple question:

Why would you not encourage other conveyancers and lawyers to compete with Goodman Group by offering bribes to real estate agents?

# agent said on April 4, 2009 6:36 PM:

Hi Mortagage Broker,

All agents are disgusting money hungry people? Get a grip, we work hard, pay our taxes and offer a service that is freely taken up by members of the public. Brokers are nothing more than finance agents, be careful about throwing stones, you know what they say about glass houses!

# Agent said on April 4, 2009 6:37 PM:

Peter,

I would niether advocate nor discourage. The money is not the issue, we just want someone who does the job well.

# interested observer said on April 4, 2009 6:39 PM:

Dear Mortgage broker  a real estate agent by law must disclose any kickback when he/she refers a vendor it must be in the listing agents authority that the agent and the vendor sign. in my 20 years as a lawyer i am yet to see such a disclosure.  however when an agent deals with a buyer there is no such requirement to disclose although it may be a secret commission under the crimes act.   As Peter rightly points out goodman group must be claiming gst on the expense and should be receiving a tax invoice from the agent who in turn should be sending one eleventh of the $150 to the tax man.   PIGS MIGHT FLY.   If GST isnt involved goodman group has a big tax problem as the commission per month would be over $10,000 on just 15 referalls a week. you cant handle that expense outside gst..

# Peter Mericka said on April 4, 2009 6:46 PM:

Hi Agent,

Let me frame the question differently then:

Do you personally believe that the use of bribes is good for consumers and for the real estate and conveyancing industries?

Just your own personal opinion will do.

# Agent said on April 4, 2009 6:49 PM:

By the way does the broker declare his trailer commissions from the financial institutions? Is he any better given that trailers often last the life of the loan? See what I mean about glass houses?

# Agent said on April 4, 2009 6:51 PM:

Peter,

As long as the consumer is getting value for money and adequate protection then payments have no effect on the health of the industry.

# Peter Mericka said on April 4, 2009 7:01 PM:

Hi Agent,

Sorry, but I really do want you to get off the fence.

A close friend or relative of yours values your opinion, and she is thinking of offering bribes in order to compete with Goodman Group; but she won't if you're not that keen on the idea.

She asks, "In your view, is there any reason why I shouldn't adopt the Goodman Group strategy?"

What do you tell her?

# Agent said on April 4, 2009 7:42 PM:

Peter,

Why do you want me off the fence? This is not my issue to deal with. I have made my points, insofar as they relate to my day to day activities. You’re the lawyer, this is your minefield.

# Peter Mericka said on April 4, 2009 8:01 PM:

Hi Agent,

OK, OK, I've been here before.  When I criticise something as being improper or unethical I always find plenty of people who will start off oposing me.  But when they're pressed they really don't want to commit to the opposing view.

Agent, you're on the fence because you know that if you jump down on either side you'll be waist deep in something yucky.

If you say "No" you will then have to answer the question, "Why not?" and then you'll have to admit that there's something smelly about bribes.

If you say "Yes" you know that you'll be condoning a bribe bidding war that will inevitably end in tears for all concerned.

We've peeled the onion Agent.  This has been a very useful exercise in demonstrating that it is extremely difficult (impossible) to support the use of bribes while keeping your ethics and integrity intact.

# agent said on April 4, 2009 8:17 PM:

I do not agree with your posting above. I have stated my case and been fair in my responses. You are free to chase shadows if you think you see them, but nothing in this discussion validates your viewpoint.

Sometimes when you peel an onion all you find is the inside of an onion.

# Peter Mericka said on April 4, 2009 8:50 PM:

Hi Agent,

You appear to back Scott Goodman and his use of bribe payments to real estate agents, and yet you are very coy about it.

And then when the problem gets too hot to handle you say what real estate agents always say as they pass the buck to the lawyer: "You're the lawyer, this is your minefield."

Agent, you have helped to construct the minefield by getting involved with Goodman and his bribe program.

I recall a magistrate's response to a defendant who claimed that handling stolen goods is not as bad as being the thief.  The magistrate told him in no uncertain terms that fewer people would steal if handlers did not handle.

Agent, by working with someone whose business is based on bribes you condone and contribute to culture of bribery in your industry.  If you feel uncomfortable about it, then don't do it.

# Agent said on April 4, 2009 8:59 PM:

I appear to do no such thing. You make wild assumptions with broad references. You're a lawyer, I accept that is part of your training. I, however, will not be drawn into your attempts to entrap me or my industry. I have repeatedly said that I am not, in any way, accountable or responsible for the conveyancing industry. All I have said is that I think the Goodman Group do a very good job. You have constructed everything else.

# interested observer said on April 4, 2009 9:29 PM:

RE agent blog at 6.45 above; dear agent, the financier should disclose and the lender will do in their loan offer. they state how much and to whom gets a commission even if it is a trailer.  Thats what we need conveyancers to disclose under the new act.  when goodman tells your vendor that in addition to the commission that you have just signed them up for you will also get anothe $150 for referring them to goodman (and you didnt tell them) imagine your credibility then.  are you so ethical that you tell each referall that you get $150 is it in writing like the banks do....  

Let me assure you that a detailed disclosure will have to be provided by conveyancers very soon... then where will the goodmans and the others that have to pay to get work be?   time will tell...

# Mortgage Broker said on April 4, 2009 9:41 PM:

Hi Agent,

I just want to advise that we use a finance brokering  contract and this clearly outlines, what upfront commission received and the trail commission rate for the life of the loan is also stated. I belong to a large brokering organisation and we receive the same commission from every lender, so we are not biased towards any lender for the sake of the commission, we always have the clients best interest at heart.

I also want to clarify, i didn't say all i said most real estate agents, i am sure there are a few good ones out there also. It seems to me you may be one of these, thats why you are on this forum.

# Mortgage Broker said on April 4, 2009 10:00 PM:

And also, thank you 'interested observer' the loan offer does state very clearly how much commission is paid and the trail that the broker will receive.

# not happy said on April 23, 2009 5:02 PM:

Scott Goodman should be put out of buisines, he claims he can settle things like adverse posession then strings the client along for monts and months and months, only to leave the client thousands out of pocket then leaves the client in the lurch. Have nothing to do with this man

# Sass said on May 18, 2009 3:17 PM:

A company that has to bribe to get clients sounds very sad.

Just like you never trust someone that says trust me. When someone says they are a goodman....

# Conno said on June 10, 2009 9:19 PM:

The referral of clients in any industry has "kick Backs" or discounts to the client or the referree; they may not all be in the nature of dollars but the end result is still the same. Perhaps all "kick backs" should be as open as Scott Goodman, that way we may have no more secrets.

# Peter Mericka said on June 10, 2009 9:59 PM:

Hi Conno,

When you say "but the end result is still the same" are you lamenting the fact that it inevitably leads to corruption?  and that open corruption is better than secret corruption?

# Aware of the situation said on June 29, 2009 6:15 PM:

As an agent who works in the south east, I can confirm that Goodman Group do offer $150 kickbacks to the agents who refer business on to them. I am a strong advocate of employing solicitors who do the job properly and thoroughly, kickbacks or no kickbacks. As a result I am not a big fan of conveyancing groups and personally refer most of my business to the local solicitor (at arms length), although Goodman Group are a touch more professional than most other conveyancers. This isn't the only group that offers kick backs, in all of my years in real estate i can tell you that most conveyancing, interior design, general trade and gardening businesses offer kick backs to us agents.