A Judge Worried a Proposed Settlement Doesn’t Do Enough to Help Victims. The DOJ Is Still Moving Forward.

The Justice Department said Friday that it would move forward on a proposed $68 million settlement with a Texas land developer it had accused of preying on Hispanic residents, despite a judge's concerns that the agreement did not do enough to help victims.

During a hearing, U.S. District Judge Alfred H. Bennett questioned why the settlement had no compensation for those who were harmed and grilled a federal prosecutor over $20 million devoted to police and immigration enforcement. He said he was uncomfortable with the provision because the Justice Department's lawsuit against Colony Ridge, which has massive subdivisions north of Houston, mentioned nothing about public safety or immigration.

I thought I was dealing with ... folks who had been defrauded, with allegations of above-market interest rates, improper foreclosures," Bennett said, holding up the original lawsuit in his right hand and the settlement in his left. Now, all of the sudden, I'm being asked to OK increased law enforcement?"

Who in the settlement room said it would be a good idea to give $20 million to law enforcement?" Bennett asked early in the hearing. Where did that come from?"

The original idea came from the state, said Justice Department senior prosecutor Varda Hussain, referring to the office of Texas Attorney General Ken Paxton. Paxton's office filed a similar lawsuit that would also be resolved through the settlement. He did not respond to a request for comment. Hussain, a principal deputy chief at the Justice Department's Washington headquarters, said that the federal government stood by the provision even though neither its lawsuit nor the state's raised concerns about crime.

Colony Ridge residents told federal investigators that they were worried about crime in the development after the lawsuit was filed, Hussain said.

I understand what it might look like to you, but I am telling you that this is a concern that friends of the court and residents will tell you exists," Hussain said.

The settlement ends a three-year legal dispute in which the Justice Department and Consumer Financial Protection Bureau accused Colony Ridge of deceiving tens of thousands of Hispanic consumers into taking out high-interest loans that many could not afford. The developer then benefited when it foreclosed on their properties, prosecutors said.

Former attorneys and investigators with the Justice Department and CPFB, including those involved in filing the original lawsuit in 2023, told ProPublica and The Texas Tribune they were stunned that the Trump administration had reached a settlement that did not seek to compensate victims.

Of the 183 housing and civil enforcement settlements the Justice Department has announced since 2018, only 6% lacked money for victims, and none included funding for police or immigration enforcement, an analysis by the news organizations found.

Including such a provision in a predatory lending case has never been done before, said Bennett, who sought to find a compromise.

An hour into the hearing, Bennett asked the Justice Department and the attorneys for Colony Ridge, which has denied any wrongdoing, whether they would consider his suggestions to revise the settlement to obtain his approval.

Colony Ridge attorney Jason Ray said his client would consider it. Hussain said the Justice Department wasn't interested.

Instead, the Justice Department said it would pursue the settlement without seeking judicial approval under a provision of federal law that allows it to do so. That means the court will not supervise Colony Ridge to ensure the developer follows the terms of the settlement, said Johnathan Smith, former deputy assistant attorney general for civil rights during the Biden administration.

Smith, who helped assemble the Colony Ridge lawsuit three years ago, said now the case simply goes away because there is no one to enforce it. He added that the Justice Department cannot sue Colony Ridge based on the same claims in the future.

By having settlements that are public and that are court-enforced, it sends a clear message to other potential bad actors that there could be real consequences for their actions," Smith said in an email.

He said the Justice Department's decision amounts to a get out of jail free card."

The DOJ is turning its back on the victims, and those victims are left with no recourse and no assurance that any actions will be taken to remedy the harms that were identified in DOJ's original complaint," Smith said.

The Justice Department did not immediately respond to a request for comment about Smith's criticisms. During the hearing, however, Hussain said the department would ensure Colony Ridge abides by the settlement. In a court filing, the developer said it had already started implementing the provisions, which include adopting stricter lending standards.

Keilah Sanchez, a former Colony Ridge landowner who, along with her sister, collected complaints from residents who said they had been mistreated by the developer, said it was crushing to see the settlement be implemented without helping past victims.

It's unbelievable, but at this point, I don't expect much from these agencies," she said.

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