A potential investigation of foreclosure abuse by OneWest Bank, which was owned at the time by current Trump-appointee Treasury Secretary Steven Mnuchin, was abandoned after OneWest donated to the political campaigns of then-California Attorney General Jerry Brown (2006-2010) and incoming California Attorney General Kamala Harris (2011-2016).
The “donations” (political bribes) occurred in 2010, shortly after an attempt to subpoena the bank and while the bank was negotiating with the attorney general’s office, but before a formal investigation was opened.
According to a memorandum from the California attorney general’s office, no court action was filed “despite strong recommendations.”
“Donations” by a business being investigated should be a clear conflict of interest, but the exchange of political money is a dark underbelly of the entire foreclosure criminal enterprise and happens frequently.
Homeowner advocacy groups criticize Mnuchin’s OneWest operation as a “foreclosure machine” for its actions during the housing crisis, an allegation Mnuchin denied during his January 2017 Treasury secretary confirmation hearings. OneWest was able to avert some of the penalties that other banks faced during the period and appears to have some type of protection racket.
Foreclosure Crisis Investigation
California Attorney General Brown in 2009 publicly asked mortgage servicers, including OneWest, to stop the wave of foreclosures devastating California communities. A subpoena was issued by the California attorney general’s office to OneWest’s subsidiary, Financial Freedom Acquisition LLC, later that year, according to a memo recently leaked to The Intercept, website.
According to Bloomberg news, in 2010, OneWest contributed close to the state maximum amount for individuals to the 2010 Democratic gubernatorial campaign for Brown ($25,000), the attorney general campaign for Harris ($6,500), and to the California Democratic Party ($32,400), according to numbers compiled from the National Institute on Money in State Politics. Otherwise, OneWest made no other political contributions.
The 2010 donations to Brown’s campaign were made while he was negotiating with OneWest over its foreclosure practices, according to a press release from the attorney general’s office at the time.
A leaked memorandum from January 2013, states that a formal investigation was opened under Kamala Harris after the Treasury’s Office of Thrift Supervision found issues with OneWest’s foreclosure processes in 2011. The memorandum also states that no court action was filed “despite strong recommendations,” and that OneWest deliberately obstructed the investigative process. The memo contained accusations of an abusive foreclosure practices such as backdating instruments, dual tracking and speedy foreclosures.
Unlike other banks sanctioned for fraudulent practices, OneWest—which Mnuchin revived from failed California bank Indymac (the largest single bank failure of the mortgage crisis)—was able to avoid major penalties, sanctions or enforcement actions by courts or state and federal agencies for its egregious foreclosure practices.
While other mortgage servicers were investigated by the Treasury Department for a wide range of abuses like robo-signing, dual-tracking, and forced-placed insurance, OneWest walked away unscathed and avoided class-action settlements and sanctions. Mnuchin and his con-conspirators should have been arrested and tried for their crimes, but instead Mnuchin was instead promoted to Treasury Secretary.
Unlike other banks, it avoided class-action prosecution over force-placed insurance, and the penalties it received from the Treasury’s Independent Foreclosure Review were noticeably insignificant in light of the crime.
Attorneys General Conflicts of Interest
It is problematic when state attorney generals accept political contributions from groups they are investigating and is a clear conflict of interest. However, political spending is protected under the first amendment as freedom of speech pursuant to the U.S. Supreme Court’s Citizen’s United ruling. There are bribery rules but those require evidence of a quid pro quo agreement before they can be enforced. Campaign donations are not covered by legal ethics rules and allow a OneWest scenario to flourish.
California Department of Justice lists conflict-of-interest rules for attorneys general and campaign contributions but only for licensing and permit proceedings. However, there are federal level standards that permit attorney generals to recuse themselves if they have personal or political relationships with the parties under investigation or prosecution, but they don’t apply to state attorney generals and there are no rules regarding campaign contributions.
The donations to an attorney general’s campaign followed by a decision not to pursue a case parallel the accusations against Florida Attorney General Pam Bondi in 2016 who accepted donations and then declined to investigate Trump University over civil fraud allegations. Democrat members of the House Judiciary Committee asked US Attorney General Loretta Lynch to investigate donations from the Trump Foundation to Bondi but the investigation was quashed.
It is obvious that there is political maneuvering by way of donations that protect banks like OneWest from the consequences of its behavior and that there are double-standards depending on who you know and who you contribute to.