Report: Dem. AGs may use settlement funds for campaigns

John O'Brien Feb. 21, 2012, 2:39pm


WASHINGTON (Legal Newsline) - Democratic attorneys general received $1.1 billion to possibly use to promote their re-election campaigns in the recent nationwide $25 billion settlement with mortgage servicers, a Tuesday report in the Daily Caller says.

The report says that the amount will be transferred to the AGs when a judge approves the deal and is to be distributed to housing groups and community organizers. Republican AGs will receive $1.4 billion, but many have said they will give the funds to their state legislatures, the report adds.

One Democrat attorney general running for re-election has already organized a series of workshops around the state. West Virginia's Darrell McGraw, who is running for a sixth term after winning both of his previous two elections by less than 1 percent of the vote, says the Save Our Homes workshops will help his office assist homeowners affected by the settlement.

They will be administered by his Consumer Protection Division. In the past, McGraw has been criticized for putting his name on trinkets financed through his Consumer Protection Fund. A former employee testified years ago that the office spent $142,000 on trinkets to be distributed during the 2004 election.

West Virginia received $33.8 million in the $25 billion settlement, and approximately $6 million will be used to finance mortgage-related programs like the workshops.

The executive director of West Virginia Citizens Against Lawsuit Abuse said the money belongs in the state's general fund.

"In the past, Darrell McGraw has shown that he is willing to shamelessly spend state funds on self-promotional materials and advertisements," Richie Heath said.

"Legislators should be looking at how the money is going to be used, and whether or not it is being used in a way that benefits state consumers the most. Most importantly, lawmakers need to make sure that this isn't just another taxpayer-funded election effort for Darrell McGraw."

Much of the settlement - $18 million - is earmarked for California. Federal officials and a group of state attorneys general brokered the deal over the course of months. It settled allegations that the companies undertook improper foreclosure practices like the robo-signing of foreclosure-related documents.

The banks that settled are Wells Fargo, JPMorgan Chase, Citigroup, Ally Financial and Bank of America. Iowa Attorney General Tom Miller led the probe. The multistate settlement, which would cover only those mortgages held by the five banks, is said to lower nearly one million homeowners' mortgages by about $20,000 and provide for payments of $1,800 to those harmed by the banks' lending practices.

Oklahoma Attorney General Scott Pruitt did not have his state join the settlement. He said the probe started as an effort to correct certain practices but morphed into "an attempt by President Obama to establish an overarching regulatory scheme."

Pruitt said the state reached its own settlement, worth $18.6 million.

McGraw's first workshop was held in Morgantown last week.

"With these Save Our Homes workshops, we have the opportunity to assist homeowners as we work toward a return to a stable housing and lending environment with rising homeownership," McGraw said.

Heath says the state's legislature should be questioning what the funds are being used for.

"Why is the Attorney General's office allowed to spend state settlement funds at its own discretion, with no transparency whatsoever?" Heath said.

"This money should be turned over to the state's General Revenue Fund so that it can be spent through legislative appropriations with the necessary safeguards. Hurting homeowners can't afford for this money to be misspent on more of McGraw's campaign-styled events."

From Legal Newsline: Reach John O'Brien by e-mail at

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