Judge Questions DOJ Settlement Lacking Victim Compensation Amid Law Enforcement Funding

The Justice Department announced it will proceed with a proposed $68 million settlement with Colony Ridge, a Texas land developer accused of exploiting Hispanic residents. U.S. District Judge Alfred H. Bennett expressed concerns during a hearing, questioning why the settlement does not provide compensation for victims and instead allocates over $20 million for police and immigration enforcement.

Judge Bennett stated, "I thought I was dealing with … folks who had been defrauded, with allegations of above-market interest rates, improper foreclosures. Now, all of the sudden, I’m being asked to OK increased law enforcement?" He further interrogated the rationale behind the law enforcement funding, asking, "Who in the settlement room said it would be a good idea to give $20 million to law enforcement? Where did that come from?"

Justice Department senior prosecutor Varda Hussain indicated that the provision originated from the Texas Attorney General's office, which filed a similar lawsuit. Despite the original lawsuit not addressing public safety or immigration, Hussain defended the funding by citing concerns from Colony Ridge residents regarding crime.

The settlement aims to resolve a three-year legal battle where the DOJ and Consumer Financial Protection Bureau accused Colony Ridge of misleading Hispanic consumers into high-interest loans, leading to foreclosures. Former DOJ officials expressed disbelief that the settlement did not seek victim compensation, noting that only 6% of similar settlements since 2018 lacked victim funds, and none included law enforcement funding.

Judge Bennett sought a compromise but was met with resistance from the DOJ, which decided to pursue the settlement without judicial approval, meaning there will be no court supervision over Colony Ridge's compliance. Former deputy assistant attorney general Johnathan Smith criticized this move, stating it effectively grants Colony Ridge a "get out of jail free card," leaving victims without recourse.

Hussain assured the court that the DOJ would ensure compliance with the settlement, but skepticism remains regarding enforcement capabilities.

What to watch: The response from Colony Ridge regarding potential amendments to the settlement and the implications for future enforcement of similar cases.