Judicial Watch Sues Obama Justice Department for Records on Slush Funds for “Favored Groups”

Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it has filed a Freedom of Information Act (FOIA) lawsuit against the Obama Department of Justice (DOJ) to obtain information about a DOJ policy that directs large sums of cash settlements from DOJ Civil Rights Division discrimination lawsuits to organizations that are not officially connected to these lawsuits (Judicial Watch v. U.S. Department of Justice (No. 10-1783)). According to Judicial Watch’s lawsuit, filed on October 25, 2010:

In August 2010, Judicial Watch commenced an investigation into [the DOJ’s] practices regarding the distribution of leftover settlement funds to ‘qualified organizations’ not otherwise connected with the settled litigation. [Judicial Watch] sought this information in furtherance of its educational mission after learning of an apparently novel settlement arrangement used in two recently settled cases brought by the Civil Rights Division of the Justice Department, United States v. AIG Federal Savings Bank and Wilmington Finance, and United States v. Sterling. Byron York, “Justice Department steers money to favored groups,” The Washington Examiner, August 5, 2010.

According to Mr. York’s report, in the past, when the Civil Rights Division filed discrimination lawsuits against banks or landlords, such cases often resulted in a settlement whereby the defendant put aside a sum of money to compensate the particular victims of the alleged discrimination. In these two recently settled cases, however, [the DOJ] agreed not only to put aside money for the victims of the alleged discrimination, but also to provide money to “qualified organizations” approved by the Justice Department which are not connected to these lawsuits nor alleged to be victims of discrimination by the defendants.

Judicial Watch filed separate FOIA requests with the DOJ on August 6 and August 31 seeking information about the controversial use of the funds as well as the general policies regarding the selection of “qualified organizations.” DOJ acknowledged receipt of both requests and was required to respond by September 14 and October 5 respectively. But to date, Judicial Watch has received no documents and no indication when documents will be forthcoming.

In the lawsuit United States v. AIG Federal Savings Bank and Wilmington Finance, AIG was accused of allowing third-party mortgage brokers to charge a higher fee to black borrowers than for white borrowers. AIG disputed the claims and there was no factual finding of any wrongdoing, according to York. Nonetheless, by consent decree, AIG (in which the Obama administration has a controlling interest) agreed to pay $6.1 million to aggrieved victims of the alleged crime and guaranteed that $1 million of these funds would be distributed to “qualified organization(s) to provide credit counseling, financial literacy, and other related educational programs targeted at African-American borrowers.”

In the Sterling lawsuit (filed in 2006) the DOJ accused a California landlord of discriminating against prospective Korean tenants. Again, the defendants denied the charges and there was never any fact finding of wrongdoing according to York. Nonetheless, by consent decree, the defendants agreed to pay $2.65 million to alleged victims. If enough victims could not be located, the remaining funds would be distributed to “qualified organizations.” The DOJ selected the California Housing Rights Center to receive a portion of the funds.

“This policy effectively allows the Justice Department to use its vast resources to initiate baseless lawsuits and funnel huge financial rewards for its leftist allies, including potentially groups such as ACORN. And, as our lawsuit shows, the Obama-Holder team wants to funnel this money in secret. Let’s hope our federal lawsuit stops the cover up,” stated Judicial Watch President Tom Fitton.