House Judiciary letter warns Holder not to redistribute $335M Countrywide settlement to ACORN affiliates

Matthew Boyle Investigative Reporter
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In a letter obtained by The Daily Caller, House Judiciary Committee chairman Rep. Lamar Smith warned Attorney General Eric Holder not to permit the transfer of funds from a recent $335 million Department of Justice settlement to organizations associated with the Association of Community Organizations for Reform Now, more commonly known as ACORN, or other advocacy groups allied with President Obama.

Smith is concerned that flimsy language in the settlement agreement with Countrywide Financial — the mortgage arm of Bank of America — could be politically motivated.

“I am concerned that the terms of the Justice Department’s recent settlement with Countrywide Financial Corporation and certain affiliates (collectively, ‘Countrywide’) will allow the Department to give large sums of money to individuals and organizations with questionable backgrounds or close political ties to the White House without any guidelines or oversight,” Smith wrote.

“If that is to be the case, this sort of backdoor funding of the president’s political allies would be an abuse of the Department’s law enforcement authority.”

In December, Countrywide settled with the DOJ for $335 million over allegations that it had discriminated against approximately 200,000 African-Americans and Hispanics by charging them higher interest rates or by placing them in subprime loans.

In his letter to Holder, Smith said the settlement documents allow the DOJ to disburse parts of the $335 million settlement to “each allegedly aggrieved person.” But there are no specific criteria for what qualifies someone as an “aggrieved person.” “The only criterion for status as an ‘aggrieved person’ is that the Department says so,” Smith wrote.

According to the settlement documents, whatever funds from that $335 million settlement that are “not distributed to allegedly aggrieved persons,” as Smith points out, “shall be distributed to qualified organization(s) that provide services including credit and housing counseling … financial literacy, and other related programs targeted at African-American and Hispanic potential and former homeowners in communities where the Complaint alleges significant discrimination occurred against [those homeowners].”

Funding recipients “may include non-profit community organizations that provide education, counseling and other assistance to low-income and minority borrowers,” the document continues.

Smith added that there are no specific criteria laid out for what organizations qualify for that money. “Again, the only apparent criterion for a non-profit community organization’s receipt of a potentially substantial amount of money is that the Department says so,” Smith wrote.

“Without any criteria by which ‘aggrieved person’ or ‘qualified organization’ status is to be determined, I am concerned that the Settlement may provide a means by which money is doled out to heavily political organizations or to groups with close political ties to the White House,” Smith added.

The administration has continued funding organizations closely affiliated with ACORN, despite a 2010 law stipulating that no taxpayer funds could be awarded to ACORN “or any of its affiliates, subsidiaries, or allied organizations.”

One such organization that received about $700,000 in taxpayer cash over the course of 2011 is the Affordable Housing Centers of America, or AHCOA. AHCOA formerly called itself ACORN Housing, but changed its name after the 2009 ACORN meltdown.

The Government Accountability Office and Obama’s Department of Housing and Urban Development both crafted a defense for legally funding AHCOA. But, a subsequently released internal audit report from NeighborWorks America — a nonprofit group that doles out taxpayer funds — shows AHCOA was far too closely affiliated with ACORN to legally grant the organization funding. NeighborWorks America decided against sending cash to AHCOA because of that audit report, but HUD continued to fund AHCOA on questionable legal grounds.

During their announcement of the Countrywide settlement, neither Holder nor DOJ Civil Rights Division head Thomas Perez mentioned the possibility that related funds could benefit the president’s political allies.

Justice spokesperson Xochitl Hinojosa would not specify exactly which organizations will qualify for funds and which will not. Hinojosa did tell TheDC that the DOJ plans to give funds to victims first, and that no funding has been distributed yet.

“If any money remains in the settlement fund at the conclusion of exhaustive efforts to compensate the borrowers who were the victims of discrimination, the consent order requires the Defendants to distribute the money to qualified organizations that provide financial education, housing and credit counseling and similar services to areas hardest hit by Countrywide’s discrimination,” Hinojosa said in an email.

“The Court must approve the proposed distribution after Defendants have consulted with the United States. The United States has no unilateral ability to distribute funds to organizations under the consent order.”

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