The head of one of the state's largest real estate agencies said yesterday his company agreed to settle a federal investigation for $48,000 to avoid a costly and time-consuming legal battle.

William Chee, Prudential Locations LLC's chief executive officer, denied allegations by the U.S. Department of Housing and Urban Development that a Prudential affiliate paid kickbacks to real estate agents in exchange for the agents referring business to the affiliate.

Chee signed a settlement with HUD under which Prudential agreed to pay $48,000. The settlement brought to a close HUD's investigation, which alleged that Prudential provided "kickbacks" in the form of trips to Las Vegas, San Francisco and Thailand, use of a Mercedes-Benz for three years and other prizes to sales agents who referred more than $1 million in business to Wells Fargo Home Mortgage Hawaii LLC, which is affiliated with Prudential. In agreeing to the settlement, Prudential did not admit any wrongdoing.

It's illegal for a real estate agent to accept payment from a lender in exchange for steering clients to that lender.

Chee said the prizes 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."

"It was like going to a party and there were door prizes," said Chee, who noted that the company gave away about six prizes at the party.

Chee said Wells Fargo only held one party and stopped the practice after HUD began its investigation last year.

Chee said the party was meant as a customer appreciation event and was attended by up to 200 real estate agents from Prudential and other firms.

He said the gifts, randomly selected from a koa bowl, didn't induce new business because they were a last-minute addition to the event and that brokers didn't know in advance that they would be eligible for such prizes when they did business with Well Fargo.

HUD said in a news release that only sales agents who referred more than $1 million in business were invited, and "it's obvious that when you award prizes based on the amount of business any sales agent refers, you're going to violate the spirit and the letter of" the law.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.