DoJ redirecting damage awards to favored groups?
posted at 10:55 am on August 5, 2010 by Ed Morrissey
Remember when asking for the resignations of political appointees equated to somehow-intolerable “politicization” at the Department of Justice? Those days seem quaint and courtly compared to the successor DoJ in the Obama administration. Byron York reports that Justice has begun redirecting jury and court awards to “qualified organizations” that weren’t party to the claims at all — but may have ties to the administration:
In the past, when the Civil Rights Division filed suit against, say, a bank or a landlord, alleging discrimination in lending or rentals, the cases were often settled by the defendant paying a fine to the U.S. Treasury and agreeing to put aside a sum of money to compensate the alleged discrimination victims. There was then a search for those victims — people who were actually denied a loan or an apartment — who stood to be compensated. After everyone who could be found was paid, there was often money left over. That money was returned to the defendant.
Now, Attorney General Eric Holder and Civil Rights Division chief Thomas Perez have a new plan. Any unspent money will not go back to the defendant but will instead go to a “qualified organization” approved by the Justice Department. And if there is not enough unspent money — that will be determined by the Department — then the defendant might be required to come up with more money to give to the “qualified organization.”
The arrangement was used in a recently-settled case, United States v. AIG Federal Savings Bank and Wilmington Finance. The Justice Department alleged that AIG violated the Fair Housing Act and the Equal Credit Opportunity Act by allowing third-party wholesale mortgage brokers to “charge African-American borrowers higher direct broker fees for residential real estate-related loans than white borrowers.” The financial institution denied any wrongdoing, and there was no factual finding of wrongdoing. Nevertheless, under the terms of a March 19, 2010 consent decree, AIG agreed to pay $6.1 million to “aggrieved persons who may have suffered as a result of the alleged violations.”
That is standard procedure in such cases. But then AIG also agreed, in the words of the consent decree, to “provide a minimum of $1,000,000 to qualified organization(s) to provide credit counseling, financial literacy, and other related educational programs targeted at African-American borrowers.” The money would come from unspent funds in the victim-compensation fund. But if it turned out that, after paying off the victims, there was less than $1 million left in the victim-compensation fund, AIG agreed to “replenish the settlement fund so that it contains $1,000,000 for distribution for those educational purposes.”
This should sound familiar, at least to Minnesotans. Former Attorney General and erstwhile gubernatorial candidate Mike Hatch concocted a similar scheme in 2006. As AG, Hatch negotiated odd settlement amounts that happened to just barely leave the funds within his discretion for disbursements — and then favored a familiar organization:
A Minnesota government investigator has questioned whether former Attorney General Mike Hatch was out to aid a political ally in a 2006 settlement with a credit card company that steered nearly $500,000 away from the state treasury and toward nonprofit groups.
According to an inquiry by the legislative auditor made public Monday, Hatch’s office agreed to drop its deceptive-advertising case against Capital One Bank that February in exchange for $749,999 — a dollar short of a statutory threshold for automatic deposit of settlement funds into state coffers.
Instead, Hatch’s office and the defendant were able to pick other recipients for two-thirds of the proceeds: the Minnesota chapters of the Legal Aid Society and the Association of Community Organizations for Reform Now, known as ACORN. The state got $250,000 to cover its investigative costs.
Less than a month later, Hatch appeared as a gubernatorial candidate at a news conference to accept the endorsement of ACORN’s Minnesota-based political action committee, which is legally distinct from the nonprofit group’s official work.
Presumably, ACORN’s successor organizations would qualify as one of the DoJ’s select list of recipients of these funds. After all, the description is practically written to fit the original ACORN, from a case in LA: “qualified organization(s) mutually agreed upon by the United States and defendants…for the purpose of conducting fair housing enforcement or educational activities in Los Angeles County.” It’s a dodge designed to provide federal funds for community organizers.
Senator Charles Grassley has demanded an explanation from AG Eric Holder, but has yet to receive a response. As York notes, the issue goes far beyond the potential recipients of the funds:
The new Civil Rights Division tactic represents a departure from a fundamental principle of such cases, which is the pursuit of justice on behalf of actual victims. “If the Department of Justice recovers funds for alleged civil rights violations, the money should go to compensate victims or to the Treasury,” says Bob Driscoll, who was a top official in the Civil Rights Division during the first two years of the George W. Bush administration. “The practice of the Civil Rights Division steering settlement funds to favored advocacy groups is at odds with both civil rights laws and common sense. If Congress wants to fund certain advocacy groups or set up grants for agencies to award in order to promote non-discrimination, it can. But allowing the Civil Rights Division to steer a defendant’s money to its ideological allies is offensive.”
The DoJ is basically conducting an end run around Congress on appropriations of federal funds. If we had a Congress interested in protecting its Constitutional authority, we would see hearings commence immediately, with subpoenas for DoJ officials and records. Perhaps we’ll have such a Congress after the midterms, because we certainly need one.