State prosecutors launched a criminal investigation and a grand jury into bankrupt American Title Services just days after its CEO killed himself with a nail gun, according to federal court records.

Meanwhile, the title insurance company for which American Title was writing policies said more than $2 million is missing from escrow accounts the Greenwood Village company maintained on real estate closings.

American Title has filed for bankruptcy protection, largely because all of its records have been seized and it’s unable to do business. Investigators from the Colorado Attorney General’s office and Title Resources Guaranty Company, the company for which American Title wrote policies, seized the documents shortly after CEO Richard Talley killed himself at his Aurora home on Feb. 4.

Records from two separate cases in U.S. District Court — a lawsuit and a bankruptcy — suggest the seemingly successful title business with several branches around the state had financial problems.

A spokeswoman for Attorney General John Suthers’ office would not say how broadly investigators are looking into American Title’s affairs or whether the inquiry centers solely on Talley.

Talley, 56, owned 40 percent of the company he founded with his wife, Cheryl, who owns the other 60 percent, according to bankruptcy records.

Cheryl Talley did not respond to efforts by The Denver Post to reach her.

American Title is seeking access to its confiscated files, saying they are necessary to complete the bankruptcy case. A federal bankruptcy judge has approved that request.

But in its own motion for the judge to reverse the order, the attorney general said a state grand jury is taking evidence about the company. As part of that inquiry, investigators have seized about 100 boxes of documents and about 60 computers from American Title’s offices in Greenwood Village.

Allowing American Title access to its records could compromise that investigation, the attorney general said in the court filing.

The Arapahoe County coroner’s office said Talley shot himself in the chest seven times with 2½ -inch finish nails from a nail gun before firing a fatal nail into his head. Police found him dressed for work, sitting in his car in the garage and with the motor running.

Records show Title Resources was to confront Talley about the missing escrow funds the morning he died.

In its lawsuit, Title Resources said it first uncovered discrepancies in ledgers kept by American Title and America’s Home Title, a related company, in late January. The ledgers “appeared to be altered to create the facade of balanced trust accounts.”

Title companies handle large amounts of money in closing real estate transactions, keeping funds in trust or escrow and then paying them to the appropriate party.

Dallas-based Title Resources said in its lawsuit that American Title’s controller, Bill Krieg, has admitted that money was misappropriated from the escrow accounts, but the extent of the alleged embezzlement is unclear.

Title Resources said it was forced to pay about $2 million in missing escrow funds — money set aside in real estate transactions to cover costs such as utilities, taxes and property liens such as mortgages — and that affected consumers will not be impacted.

Krieg has not responded to efforts to reach him.

American Title’s bankruptcy showed it owed about $40,000 in back rent to the owners of the Greenwood Village office tower that housed its headquarters, and about $36,000 in rent to other landlords of its branch offices.

A lawyer was hired to liquidate the company.

David Migoya: 303-954-1506, dmigoya@denverpost.com or twitter.com/davidmigoya