Zillow is back in hot water: A class-action suit against the online real estate giant is moving forward after insider whistleblowers alleged that the company designed its controversial “co-marketing” program to violate federal anti-kickback laws.

Zillow termed the charges “without merit” and says it intends to “vigorously defend” itself.

Best known to the general public for its Zestimates property-valuation feature, Zillow is a multibillion dollar, publicly traded behemoth whose principal revenues come from advertising placed by real estate agents. “Premier” agents and brokers, who receive prominent placement on Zillow-listed home sites, pay hundreds or thousands of dollars a month in advertising fees to the company. Premier agents need not be the highest volume or most successful agents in their area; they simply need to pay for the label. According to the company’s latest Securities and Exchange Commission filing, it earned nearly $900 million — two-thirds of its corporate revenue — in fees from agents paying for ads last year.

In 2013, Zillow rolled out a program whereby real estate agents could have large portions of their advertising fees paid for by lenders who share advertising costs with them. Buyers interested in a particular property could then contact not only an agent but a lender to shepherd them through the financing process. The idea proved wildly popular among agents and lenders. For paying part of an agent’s Zillow advertising fees — initially up to a maximum of 90 percent, later revised to 50 percent — a lender could get hot leads directly to active buyers. For agents, the attraction was obvious. Hey, why not? Lenders will subsidize my costs.

But a federal law known as RESPA — the Real Estate Settlement Procedures Act — prohibits payment of fees for business referrals among realty, mortgage and title industry providers that are not for services actually rendered. In April 2017, the Consumer Financial Protection Bureau informed Zillow that it was investigating whether its co-marketing program violated the law’s prohibition against kickbacks. Zillow negotiated with the CFPB, but last year, after the Trump administration appointed a new CFPB director, the agency abruptly dropped the case.

Meanwhile, investors who said they bought Zillow stock at inflated prices relying on company executives’ statements that its co-marketing concept did not violate federal law filed a class-action suit alleging securities fraud. A district court judge later dismissed portions of the suit but allowed the plaintiffs to file an amended complaint if they presented conclusive evidence that the co-marketing scheme violated RESPA.

They appear to have done so successfully — at least enough to convince a federal district court judge to put the case back on track. Last November, the plaintiffs filed their amended complaint, bolstered by testimony from two unnamed Zillow insiders. The first: a regional sales manager for the company who alleged that lenders participated in the program because they “expected real estate agents to refer business.” The second: a sales and operations trainer who alleged that “every agent and lender knew that the co-marketing program was for the lender to get leads and referrals. . . . It was understood that lenders were paying for referrals.” Whenever the second insider “spoke to Zillow about potential concerns with the co-marketing program,” she was told “not to ask questions,” according to the court. She also alleged that she knew of a lender who had been paying 100 percent of a realty agent’s fees for 2½ years. Both whistleblowers provided “consistent testimony regarding how agents and lenders used the [program] to provide mortgage referrals in exchange for advertising payments,” according to the court.

In his decision, which was handed down April 19, Judge John C. Coughenour of the U.S. District Court in Seattle said “the court can draw a reasonable inference that Zillow designed the co-marketing program to allow agents to provide referrals to lenders in violation of RESPA.”

Asked for his take on the case, Marx Sterbcow, a nationally known RESPA lawyer based in New Orleans, told me “the court certainly seems to suggest there is a lot of smoke involving the legality of Zillow’s” program. If the whistleblowers’ allegations are correct, he said, “it could cause [mortgage companies] and banks to pull completely out” of the program, for fear of violating RESPA themselves, and being exposed to major legal jeopardy.

The significance for buyers, sellers and owners? The case is still out on the alleged federal law violations, but when you see “premier” agents linked up in marketing efforts with lenders, you have a better idea about what’s really going on.