Settlement OKd in Class-Action Housing Bias Suit : Discrimination: Firm that managed apartment building agrees to pay $1.1 million over allegations that it rejected blacks and Latinos as tenants.

When blacks tried to rent apartments at a large complex in Palmdale, former assistant manager Annette Caracciolo says, she was instructed to draw a “happy face” on the application as a signal of the applicant’s race.

Caracciolo refused, and she lost her job. But then she blew the whistle.

On Thursday, Caracciolo’s former employer, Investment Concepts Inc., agreed to a $1.1-million settlement of a class-action housing discrimination lawsuit brought on behalf of Caracciolo and an unknown number of blacks and Latinos who may have been unfairly denied housing.

Attorneys for the plaintiffs claim that the settlement sets a record for money paid to home-seekers who have suffered discrimination. In an unusual addition, 25% of the award will be set aside for housing advocacy organizations to test whether fair-housing laws are being violated.

Bert Voorhees, an attorney who represented Caracciolo and the other plaintiffs, said he hoped that the large settlement will show management companies that they will be held liable for the discriminatory practices of their employees.

“This case sends the message that racism will not be tolerated in the housing market, and if you tolerate it, it’s going to cost you,” he said.

Despite the settlement, which was approved by Los Angeles County Superior Court Judge Jack Tenner, ICI denied wrongdoing and said it was acting to avoid the more costly avenue of going to trial.

ICI, which is based in the city of Orange, owns or manages 40 apartment complexes, with a total of 5,000 units, throughout Southern California.

Michelle Saadeh, an attorney representing ICI, said she found no evidence of systematic discrimination and only a handful of applications with “happy face” coding. Because insurance will pay for most of the award, ICI will only spend about $200,000, she said.

Saadeh spoke at a joint news conference with Voorhees, Caracciolo and other plaintiffs and plaintiffs’ attorneys. The conference had been called to announce the settlement, and her comments plainly angered the others. Soon, tensions began to rise and barbs were traded back and forth.

“You are calling me a liar,” Caracciolo, who worked for ICI’s Palmdale complex during a four-week period in 1988, said to the firm’s attorney. “I feel like I’m being put on trial.”

Voorhees and Barry Litt, another attorney for the plaintiffs, said there were at least a dozen ICI employees prepared to testify that they were ordered to discriminate.

In addition, they presented the case of Anna and Johnnie Reese, also plaintiffs in the case.

Anna Reese, who is white, applied for an apartment at the Palmdale complex, and her application was accepted. But when she returned the next day with her husband, who is black, the same woman who promised her the apartment said nothing was available.

“I knew automatically what was going on,” Johnnie Reese said.

They rented across the street in a complex not managed by ICI.

“I was so angry I was crying,” Anna Reese said. “It brought up a lot of hurt.”

Litt said 100 families have contacted attorneys and may share in the settlement, with scores more standing to collect.