The state is investigating one of Hawai'i's largest real estate companies after a federal agency alleged that the company offered illegal kickbacks.

The company, Prudential Locations LLC, paid $48,000 in September to settle an investigation by the U.S. Department of Housing and Urban Development. Prudential did not admit to any wrongdoing in agreeing to the settlement and said it settled to avoid a costly and time-consuming legal battle.

HUD alleged that Prudential held a party in 2003 for real estate agents who had referred at least $1 million of business to an affiliated company, Wells Fargo Home Mortgage LLC. Prizes given away at the party included use of a Mercedes-Benz for three years and trips to Thailand, Las Vegas and San Francisco.

Under federal and state law, it's illegal for a real estate agent to accept payment from a lender in exchange for steering clients to that lender. The laws were enacted to prevent agents from directing consumers to a particular lender, who may not be the best choice for the consumer.

Jo Ann Uchida, complaints and enforcement officer with the state Regulated Industries Complaints Office, said her staff began its investigation shortly after Prudential settled with HUD. Uchida declined to discuss specifics of the state probe, saying it was a pending matter.

Prudential CEO William Chee said yesterday that the state investigation was a routine matter that arose as a result of the HUD investigation. Chee said the state will find no wrongdoing just as the HUD investigation had found no wrongdoing.

In September, Chee denied HUD's kickback allegations. He said the trips and the use of the Mercedes-Benz had nothing to do with business referrals but were awarded to agents who took part in a drawing at a 2003 "First Annual Wells Fargo Friends Party."

Chee said the trips and the car were like door prizes. He said that Prudential held just one party and stopped the practice after HUD began its investigation in 2004.

The 2003 party was attended by up to 200 real estate agents from Prudential and other firms.

Chee said the gifts were randomly selected from a koa bowl. He said the prizes weren't used to induce new business because they were a last-minute addition to the event.

Brokers were not aware in advance that the prizes would be given out when they did business with Wells Fargo, he said.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.