Sumitomo Accused of Bias in Lending, Hiring in State
Japan’s giant Sumitomo Bank was accused Thursday of exporting discriminatory hiring and lending practices to its California subsidiary that have favored people of Japanese descent and hurt African Americans and Latinos.
The Greenlining Institute, a San Francisco-based public advocacy group, said the world’s second-largest bank has the worst record of any major California bank in its treatment of racial minorities within and outside the bank.
Of the 153 housing loans made by Sumitomo’s California subsidiary in 1995, only one went to an African American, 13 to Latinos and more than half--94--to Asians, according to Greenlining, which filed its complaint Thursday with the San Francisco office of the Federal Deposit Insurance Corp.
By comparison, Sanwa Bank, another Japanese-owned bank, made 783 housing loans in 1995, of which 22 went to African Americans--about four times the rate of Sumitomo--and 155 to Latinos, or proportionately twice the Sumitomo rate. Sanwa made less than one-third of its housing loans, or 204, to Asian Americans.
Yukio Kitagawa, a Sumitomo Bank corporate secretary in San Francisco, said the complaint was a “complete surprise” and that the bank had not had time to review the allegations. But he said the bank “take[s] pride in our service to all the communities throughout California.”
Sumitomo, which is still reeling from the recent disclosure of a multibillion-dollar copper-trading scandal, is also accused of favoring Japanese nationals and Japanese Americans in its hiring practices, lending and philanthropic donations.
The complaint alleges that one-third of all Sumitomo’s California management positions were held by Japanese nationals or Japanese Americans and that there was no representation at that level of Latinos, African Americans or Southeast Asians.
Japanese and Japanese American organizations received almost 100 times more in charitable contributions and business contracts than did Latinos, after adjustments for differences in population, according to Greenlining. Greenlining was joined in the complaint by 33 Asian American, African American and Latino groups.
Greenlining also quoted a letter to Sumitomo from Warren Brazas, a former business development officer at the bank who claims that he was fired after he helped make two loans to businesses owned by African Americans.
In Brazas’ letter, a top Sumitomo bank official is quoted as saying that “black people were very bad risks and should be avoided.”
Brazas could not be reached Thursday for comment.
Other Japanese companies have also faced accusations that they promoted or tolerated racial and sexual discrimination at their U.S. subsidiaries. Over the summer, Mitsubishi Motors came under attack after allegations surfaced of widespread sexual harassment at its U.S. manufacturing plant.
Robert Gnaizda, general counsel for Greenlining, said Japanese-owned banks have historically had a poor record of serving low-income, minority communities. But he said other such banks operating in California, such as Sanwa Bank and Union Bank and the Bank of California (the last two are now merged) improved their performances significantly in recent years.
That is apparently not true for Sumitomo Bank of California, which has close to $5 billion in assets, 47 branches and nearly 1,600 employees.
Just three years ago, under pressure from community groups, Sumitomo made a widely publicized commitment to improve its outreach to ethnic minorities in the United States. That included a promise to provide more than $500 million in home and community development loans for neglected areas of California.
But while there have been at least 10 meetings between Greenlining and Sumitomo executives since then, the bank’s performance in this area has grown worse, the complaint alleges.
Gnaizda said his group doesn’t oppose small community banks targeting a specific group--such as Chinese or Japanese Americans--if that group has been traditionally underserved. But he said banks controlling $1 billion in assets or more have the resources and responsibility to serve all ethnic minorities, particularly when such groups make up almost half of California’s 33 million residents.
Gnaizda attributes Sumitomo’s problems to the parent bank’s unwillingness to relinquish control of its U.S. subsidiary. He said other Japanese banks operating here have adopted Western management practices, hired locals in key positions and reached out to underserved communities.
The FDIC is currently conducting an examination of Sumitomo Bank as required by the Community Reinvestment Act, which was designed to increase bank lending to minorities and low-income families.
Greenlining has asked the FDIC to give Sumitomo its lowest CRA rating. It is also requesting that the Japanese bank give its California subsidiary total management autonomy, develop a five-year plan for ethnic minority community outreach and establish a $500-million “underserved community” fund.
If a bank receives a low CRA rating, it can be prevented from expanding, selling or merging its operations.
