Mortgage lender seeks to block release of settlement records; Household International sues to keep talks secret

First published June 19, 2004:

Household International went to court Friday to block release of records from the state Attorney General's Office that would document the negotiations that led to 2002's $484 million nationwide settlement for thousands of consumers who said they were misled about the terms of mortgage loans they got from the company.

The Bellingham Herald had requested the records March 19, in the wake of the settlement of a Whatcom County Superior Court case that gave more than 200 local borrowers financial relief that went well beyond the 2002 deal that the company negotiated with attorneys general in all 50 states.

Among other things, the local borrowers got significant reductions in their interest rates and refunds of excessive loan fees as the result of their private lawsuit argued by attorney Bob Parlette of Wenatchee. Borrowers who accepted money under the state attorney general's settlement got one-time cash payments that state officials admitted were far less than the borrowers' financial damage in most cases.

Household spokesman Mark Friedlander did not immediately respond to a request for a comment on the restraining order that was granted Friday.

Because state Attorney General Christine Gregoire played a lead role in hammering out the 2002 deal, The Herald sought her office's records relating to the negotiations, partly to clarify the reasons why Washington and other states agreed to terms that only partly compensated borrowers.

At the time, Gregoire said $484 million was close to the maximum amount that could be obtained for the borrowers without threatening the solvency of the company.

Under the terms of the settlement, the attorneys general also agreed to give Household notice if anyone asked that the records relating to it be disclosed.

Assistant Attorney General David Huey said that when Household was notified, the company's attorneys raised objections, saying that some of the documents were exempt from disclosure under state law.

The matters sat there for almost three months, until The Herald pressed its request for the records last week. At that time, Huey said he gave Household 10 days to take legal action to block the disclosure. That prompted Daniel Dunne, Household's Seattle attorney, to go to court Friday seeking a restraining order.

Huey said the Attorney General's Office has taken the position that the records are disclosable to the public, and state attorneys will argue that case before the court. But he said he was not prepared with legal arguments on Friday, and so he raised no legal objection when company attorneys applied for a temporary restraining order.

Judges routinely grant such orders on short notice in many legal matters, Huey said, and the parties involved are then summoned back to court within 14 days to argue the matter, before the judge decides if the restraining order should remain in place.

The hearing on the Household records is set for July 2, Huey said.

Mike Killeen, a Seattle attorney who has represented Allied Daily Newspapers of Washington, was critical of the state's handling of the records request. He said the Attorney General's Office should have given Household a deadline much sooner.

"It shouldn't have drifted on like this," Killeen said.

Roland Thompson, executive director of Allied Daily Newspapers, agreed.

"They (the Attorney General's Office) are in the business of enforcing the Public Disclosure Act," Thompson said. "They are supposed to give those people notice at the beginning. ¼ Why did it take them that long to get to that point?"

Huey acknowledged that he should have given the company a deadline when the records were requested.

"I probably should have said, 'You have five days or 10 days, but I didn't," Huey said.

Matthew Lee, executive director of Inner City Press/Fair Finance Watch in New York City, has been waiting even longer for the records. He filed his request with the attorney general in January, 2003.

"It's an outrage," Lee said.

Lee made a similar records request in Texas at the same time. After the Texas Attorney General's Office ruled in March, 2003, that the records Lee sought were disclosable, Household went to court to block their release. That case is still pending, and Lee still doesn't have the records. This is not the first time Household has used Washington courts to block the release of records. In May, 2002, a Thurston County Superior Court judge agreed to seal an investigative report from the state Department of Financial Institutions detailing widespread predatory lending practices in Household's offices in Bellingham and elsewhere in the state.

That report was eventually provided to The Bellingham Herald and other news media.