Latinos Balk at Offer in Money-Wiring Suit

Support among California Latino leaders was crumbling Tuesday for an enhanced settlement to a federal class-action lawsuit alleging three money-wiring companies charged immigrants steep hidden costs to send money to Mexico.

State Sen. Richard Polanco (D-Los Angeles), who helped broker the deal with Western Union, MoneyGram and Orlandi Valuta, opted out of a scheduled news conference in the 11th hour after a coalition of Latino groups accused him of selling out and betraying his constituents.

Polanco now says he needs more time to study the offer and listen to community concerns, including those of Hermandad Mexicana Nacional. The immigrant rights group’s leaders are longtime allies of Polanco but fiercely criticized his role in the deal.

“The senator . . . is not prepared to take a position, mainly because he’s hearing from people who are friends of his in the community,” said chief aide Bill Mabie.

The deal was announced amid fanfare in Houston and Chicago on Tuesday but was disclosed in Los Angeles in a private office under threat of demonstrations by Hermandad.

The offer sweetens a national settlement announced by the companies in May and negotiated by plaintiffs lawyers in Chicago. It would double the amount of money the companies donate to Latino community causes to $4.6 million, and create a nonprofit Latino community development fund financed by a percentage of the $4 billion wired to Mexico yearly, officials announced Tuesday. The companies would set up and advertise the fund, but the money diverted to it would come from the pockets of consumers.

The companies have also agreed to support legislation to make some settlement concessions permanent in California. The core of the deal--which offers discount coupons on future transactions to customers who wired money to Mexico since 1987--remains unchanged. A federal judge in Illinois is expected to issue a final ruling on the settlement Dec. 10.

“Given what we have to work with, I think it’s . . . terrific,” said Chicago attorney Matthew J. Piers, who negotiated the deal and flew to Los Angeles before learning Polanco had pulled out.

The legal case against the companies was not a slam-dunk, he added.

While a lack of support from key California legislators could delay implementation of the settlement, Piers said this won’t derail it. Piers on Tuesday counted four California assembly members as supporters. But three congressmen from the Southland still oppose the deal. Polanco’s support was viewed as key since he brokered it.

The initial offer, which received preliminary approval from a federal judge in May, froze all similar class-action lawsuits, including three in California. However, plaintiffs are free to opt out of the settlement and form a new class to pursue litigation.

The federal and other lawsuits allege fraud and false advertising because the companies do not disclose to customers that they are being charged exchange rates that are much less favorable than prevailing rates. The companies have agreed to post signs reminding customers to inquire about the rate they are getting, but maintain that they are not required to reveal the spread.

Los Angeles attorney J. Fred Kumetz, who represents plaintiffs here and helped form the opponents’ coalition, said a coupon-based settlement is flawed because it forces victims to give repeat business to the companies and compensates community groups instead.

“The enhancement is an effort . . . to buy politicians with benefits that do not go to the victims but instead go to the politicians’ favorite causes,” he said.

Polanco was among California legislators who several months ago blasted the deal. But in recent months, he and Assemblyman Marco Firebaugh worked to broker the enhancement.