Ideas have consequences. In 2013, during the preliminary investigation for the
book, Extortion GAI researchers detected a pattern of federal lawsuits and settlements
brought by a newly created office within the Civil Rights Division of the DOJ. Assistant
Attorney General Tom Perez made the DOJ’s intentions clear in his January 14, 2010 speech to the Rainbow PUSH Coalition – Annual Wall Street Conference.
Mr. Perez stated: “Fair lending is a top priority for the Civil Rights Division, and I have taken a number of critical steps to ensure that we put our best forward. I have hired a Special Counsel for Fair Lending to spearhead our efforts. We are also establishing a
dedicated Fair Lending unit within the Division’s Housing Section. The unit will root
out lending discrimination in all forms.”
In remarks at the Brookings Institution Perez stated:
The establishment of the Fair Lending Unit, with dedicated attorneys, economists,
investigators, support staff and a Special Counsel for Fair Lending, ensure that fair
lending issues receive immediate attention and high priority.
The unit already has 50 matters open, including 18 investigations. We have
identified large, mid-size and small lenders as targets of enforcement efforts and
those targets include national, regional and local actors.
What Mr. Perez did not say in these comments was that millions of dollars would
eventually be handed over, no strings attached, to activist nonprofits.
The DOJ began to file lawsuits against financial institutions based on evidence of
unfair lending practices. With the threat of protracted litigation and bad press looming, the DOJ extracted settlements before trial. These technically voluntary settlement agreements, referred to as “consent orders,” usually established a settlement fund to service claims made by victims of the defendant’s alleged illegal behavior. More often than not, the consent order specified that unclaimed funds were to be distributed to a qualified organization as approved by the Department of Justice. Moreover, many of the settlements called for large sums of money to be paid toward educational efforts, often provided by these same qualified organizations.
The DOJ filed pleadings in each case that used essentially identical language for each
complaint and settlement. This assembly line approach uses what is sometimes referred to in the legal profession as “cookbook pleadings” – those not designed for actual litigation, but intended merely to provide a basis for the settlement and payment of money. Seldom was the actual complaint filed more than a month prior to filing the consent order and occasionally within days.
A consent order, sometimes referred to as a “consent judgment” or a “consent decree,” is an order or judgment by the court where the parties have previously agreed to the settlement terms and provisions. Another feature of the consent decree is that the court
will maintain jurisdiction of the matter to supervise the implementation of the decree. The filing of the complaint serves to invoke the jurisdiction of the court.
These institutions spend a vast sum of money advertising each year. A case of this
nature could have a devastating impact for any bank deemed racist. As the Wall Street
Journal reported, “The lenders quickly settled these cases rather than run the reputational risk of being called racist in court.”63 When contacted by the DOJ, often a target financial institution would want to reach a number and shut the process down as soon as possible, as one bank put it, “to avoid contested litigation.” Because the entire negotiation process occurs in the context of litigation, the internal communications of a party remain confidential protected by attorney client privilege. Thus, the public and Congress are provided very little information regarding the nature and process of the negotiations between the parties. In other words, the DOJ effectively silences the target institution without any form of congressional oversight or public scrutiny. Courts were either unaware of this mechanism of disbursement or did not comment in their review of the proposed consent orders.
The agreements were reached prior to filing the proposed order and the parties both had legal representation. A settlement in court is technically reached by the parties freely and voluntarily unless there is evidence to suggest otherwise. The congressional
testimony of Paul Larkin, Senior Research Fellow at the Heritage Foundation in 2015
denounced the court’s limited participation in the process:
What aggravates this problem even more is that you have these sorts of settlements
gradually coming into wider and wider…Why is that a problem? Because oftentimes
there is no judicial involvement whatsoever. These agreements often are a means of
disposing not of charges or a lawsuit that has already filed. They are a means often of disposing of charges or a lawsuit before any are filed. So there is no judicial
involvement whatsoever. You have an agreement entirely between the lawyers for
the United States and the lawyers for other parties. And in this agreement they are
trying to engage in what is for all intents and purposes a sham transaction to avoid
depositing all of the money that is due to the taxpayers of the United States into the
account that the Treasury maintains, that Congress thereafter can decide how it will
In all of the cases we reviewed in the course of our research, the court simply
accepted the proposed order, with one noted exception. In United States of America v.
Citizens Republic Bancorp, Inc. and Citizens Bank, the defendant bank gave the court reason to believe that something was amiss and the court took quite a different approach. The defendant objected to the claims made by the DOJ in the pleadings which the defendant had not seen until after the terms of settlement had been established. This anomaly opened up the process and demonstrated the pressure placed on a target institution by the federal government and its incentive to settle.
The DOJ had alleged that the defendants, Citizens Republic Bancorp, Inc. and
Citizens Bank, had engaged in a pattern of conduct violating the Fair Housing Act and the
Equal Credit Opportunity Act (ECOA). The proposed Agreed Order imposed a much smaller contribution amount to the settlement fund, but incorporated several of the same elements in its terms as have been seen in other consent orders for other cases.
This proposed order required that the Defendant “enter a partnership” with the City of Detroit to set up a fund in the amount of $1.625 million and provide grants to homeowners to enhance neighborhood stability and revitalization. The program was to be administered by the city or its “designated partner.” The proposed order also required the Defendant to ensure that the Defendant’s lending products and services in the Detroit area were marketed in majority-black census tracts. It also required that the bank hire two Community Development Leaders to focus primarily on generating residential mortgage loans in the “majority-black census tracts of Wayne County” as well as to facilitate the bank’s grant program.
It instated a separate fund in the amount of $400,000 with one half of that fund devoted to advertising and marketing in these same neighborhoods. The consent order required that the other half be spent on consumer education in order to sponsor programs offered by community or governmental organizations engaged in fair lending work.
Furthermore, the proposed order required that the Defendant make $1.5 million available for loan subsidies via a “special financing program” for residents in Wayne County. If the funds were not fully expended, the remaining amount was to be donated to a nonprofit housing organization in the City of Detroit or to such other organization involved with community reinvestment in the City of Detroit.
In its response to the DOJ’s Motion For Entry of Proposed Agreed Order, the Defendant described the process by which the DOJ pursued the settlement.69 It became apparent that the motivation for these banks was to settle rather than resist the claims of the DOJ.
The Defendant bank explained that it was not aware of the precise nature of the
charges until the complaint was filed. The Defendant stated:
The precise articulation of the Department’s claim was not made available to
Citizens until the Department provided Citizens with a copy of the Complaint
after it was filed with the Court on May 5, 2011. Citizens disputes the factual
and legal basis for the claim presented, and, to the extent permitted, has
included in the proposed “Agreed Order” as Part III, the “Position of Citizens
Bank” that describes its actual conduct and performance.
It went on to illuminate some of Bancorp’s considerations in reaching a settlement:
Nonetheless, threatened litigation by the Department imposes a substantial
financial burden on Citizens, particularly in the context of current economic
conditions. Thus, Citizens entered into negotiations with the Department in
an effort to avoid contested litigation. The only option afforded by the Department to avoid contested litigation was the filing of a complaint and the simultaneous presentation of an “Agreed Order.”
The Defendant further stated: Citizens pursued the negotiations to avoid the cost and burden of litigation…. The important point for Citizens is that the voluntary resolution will put the matter to rest, through entry of the Agreed Order. Then the Defendant bank reiterated their reasons for entering into settlements over litigation, which had little to do with culpability:
Perhaps there are some inconsistencies here because Citizens continues to
deny a factual or legal basis for the claim, but agrees to take certain action to
resolve the claim of the Department. But it is not uncommon for businesses
facing the prospect of very expensive litigation against the government to
seek a way to avoid the cost. If reasonable business objectives can be met,
Citizens prefers settlement to the alternative of expensive litigation, and
indeed would prefer to use the bank’s resources to assist the City of Detroit
in its continued efforts to stabilize housing conditions in the City. The bank
currently faces economic challenges that further favor settlement over
When faced with the prospect of extended litigation, expense, and bad publicity,
many targeted institutions choose to settle rather than resist the questionable and
disputable claims brought by the DOJ.
On May 24, 2011, the Court issued a scathing order denying approval of the
proposed consent order. The Court had its own reasons for refusing to approve
the consent order.
The Court noted: In reviewing the Agreed Order, it (1) fails to define terms; (2) lacks completeness; (3) contains superfluous clauses; (4) lacks clarity; and (5) is void of provisions for the Court to effectively oversee the parties’ obligations under the Agreed Order during its anticipated term.
Others, in the banking industry, have criticized the DOJ practices that have
resulted in these settlements.…there is a troubling lack of transparency with the DOJ’s growing fair lending actions. DOJ’s unprecedented actions and the legal theory upon which they are based are shrouded in secrecy, as targeted banks are forced to enter into
confidentiality agreements. Community banks work hard to comply with laws and regulations and consistently seek information and guidance on how to implement applicable rules in this ever-changing lending and regulatory environment. By requiring banks to enter into confidentiality agreements regarding the investigations, enforcement and settlement agreements, DOJ is thwarting banks’ ability to assess and refine, if necessary, their policies or practices to ensure compliance with fair lending laws.
This approach is counter to the intent of well-functioning fair lending laws.
Mr. Perez and the newly created Fair Lending Unit in the Housing and Civil
Enforcement Section of the DOJ had a different take on the Citizens case. In his estimation this had been a cooperative effort to right wrongs recognized by all.
Both Citizens and Midwest worked collaboratively with the Department to develop
these creative solutions, and were eager to find solutions that allow them to remedy
the harm done while also reaching new customers.
Toward the end of his remarks Mr. Perez addressed concerns that he had gleaned
from “…listening sessions we have conducted with industry stakeholders.” Among those
concerns were “transparency” in the DOJ processes; promptness of decisions by the DOJ
because “the cloud of uncertainty that looms during the pendency of an investigation can take a toll” and uncertainty regarding the legal theories that the DOJ was using. Mr. Perez described an “…unprecedented level of collaboration and coordination between DOJ and its partner agencies.”
The banking industry was concerned about the “harmful and inappropriate fair lending actions” of the DOJ, as expressed in a letter addressed to Eric Holder. The Committee on Homeland Security and Governmental Affairs United States Senate made this observation: …the DOJ used the settlement process to achieve policy goals—including the
distribution of hundreds of millions of dollars from private companies to third-party
housing counseling groups—that would not have been possible in litigation. In other words, the DOJ used the threat of litigation—and the corresponding financial and reputational costs—to cause banks to take actions that a court would not have
ordered them to do. (emphasis added)
Even as early as 2010, some members of Congress had begun to take notice that all was not right in the new administration’s Justice Department.
Congress Takes Notice
See entire 115 page Government Accountability Institute report here: FOLLOW THE MONEY: HOW THE DEPARTMENT OF JUSTICE FUNDS PROGRESSIVE ACTIVISTS
HEADLINE JUNE 27, 2017: Hidden Government Forcing Taxpayers To Finance Their Own Destruction
Peter Schweizer‘s Government Accountability Institute issued a report in October 2016, “Follow the Money: How the Department of Justice Funds Progressive Activists,” that detailed the stunning amount of money the DoJ has been awarding to left-wing groups. Under Eric Holder’s DoJ, financial institutions paid an unprecedented $110 billion in fines, much of which came in through out-of-court settlements.
Many of the cases were based on tenuous grounds, such as “disparate impact” which assumes racism based solely on the proportion of loans awarded to minorities. According to the report, “The DOJ used the threat of litigation—and the corresponding financial and reputational costs—to cause banks to take actions that a court would not have ordered them to do.”
We are still trying to figure out where it all went. But we do have some ideas. As with Obama’s corrupt green energy subsidies, it seems apparent that Holder’s DoJ extorted huge sums from banks specifically to funnel money to political allies. Schweizer documents how the DoJ flagrantly misused this money:
See full article here: Hidden Government Forcing Taxpayers To Finance Their Own Destruction