The Justice Department said Friday it will move forward on a proposed $68 million settlement with a Texas real estate developer it had accused of preying on Hispanic residents, despite a judge’s concerns that the agreement did not do enough to help victims.
At a hearing, U.S. District Judge Alfred H. Bennett questioned why the settlement included no compensation for those who were harmed and questioned a federal prosecutor about the $20 million spent on police and immigration enforcement. He said he wasn’t comfortable with the provision because the Justice Department’s lawsuit against Colony Ridge, which has huge subdivisions north of Houston, didn’t mention anything about public safety or immigration.
“I thought I was dealing with … people who had been defrauded, with allegations of above-market interest rates, improper foreclosures,” Bennett said, holding the original lawsuit in his right hand and the settlement in his left. “Now all of a sudden I’m being asked to accept increased enforcement?”
“Who in the negotiating room said it would be a good idea to give $20 million to law enforcement? » Bennett asked at the start of the hearing. “Where did it come from?”
The original idea came from the state, said Justice Department lead prosecutor Varda Hussain, referring to Texas Attorney General Ken Paxton’s office. Paxton’s office filed a similar complaint that would also be resolved by the settlement. He did not respond to a request for comment. Hussain, a principal deputy at the Justice Department’s headquarters in Washington, said the federal government maintained that provision even though neither his nor the state’s lawsuit raised crime concerns.
Colony Ridge residents told federal investigators they were concerned about crime in the development after the lawsuit was filed, Hussain said.
“I understand what that might look like for you, but I’m telling you 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 the Consumer Financial Protection Bureau accused Colony Ridge of defrauding tens of thousands of Hispanic consumers into taking out high-interest loans that many could not afford. The developer then profited from the seizure of his properties, prosecutors said.
Former Justice Department and CPFB attorneys and investigators, including those involved in filing the original complaint in 2023, said: ProPublica and The Texas Tribune they were stunned that the Trump administration reached a settlement that did not seek to compensate victims.
Of the 183 housing and civil enforcement agreements announced by the Justice Department since 2018, only 6% lacked money for victims, and none included funding for police or immigration services, a news agency analysis revealed.
Including such a provision in a predatory lending case has never been done before, said Bennett, who was seeking a compromise.
An hour into the hearing, Bennett asked the Justice Department and lawyers for Colony Ridge, which has denied any wrongdoing, whether they would consider his suggestions to revise the settlement to gain his approval.
Colony Ridge attorney Jason Ray said his client would think about it. Hussain said the Justice Department was not 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 complies with the terms of the settlement, said Johnathan Smith, a former assistant attorney general for civil rights during the Biden administration.
Smith, who helped build the Colony Ridge lawsuit three years ago, said now the case disappears simply because there is no one to enforce it. He added that the Justice Department will not be able to prosecute Colony Ridge based on the same allegations in the future.
“By having regulations that are public and enforced by the courts, it sends a clear message to other potential bad actors that their actions could have real consequences,” Smith said in an email.
He said the Justice Department’s decision amounted to a “get out of jail free card.”
The “DOJ turns its back on the victims, and these victims have no recourse and no assurance that action will be taken to remedy the harms identified in the DOJ’s initial complaint,” Smith said.
The Justice Department did not immediately respond to a request for comment on Smith’s criticism. However, during the hearing, Hussain said the ministry would ensure Colony Ridge complied with the regulations. In a court filing, the developer said it has already begun implementing the provisions, which include adopting stricter lending standards.
Keilah Sanchez, a former Colony Ridge landowner who with her sister fielded complaints from residents who claimed they were mistreated by the developer, said it was crushing to see the settlement being implemented without helping former victims.
“It’s amazing, but at this point I don’t expect much from these agencies,” she said.
