Ameriquest’s Ties to Watchdog Group Are Tested

Special to The Times

Ameriquest Capital Corp. and the Greenlining Institute have had a rewarding friendship -- an odd coupling of an Orange County-based mortgage giant and a Berkeley-based activist network known for criticizing big corporations.

Ameriquest donated $350,000 to the institute in little more than two years and kept up a steady dialogue about the advocacy group’s concerns about the mortgage industry. The Greenlining Institute, in turn, endorsed Ameriquest’s pledges to treat borrowers fairly.

But lately, the relationship has been strained.

In March, the institute returned a $100,000 donation from Ameriquest after a Times story detailing ex-employees’ allegations of improper sales tactics and the disclosure that authorities in 25 states have raised questions about the lender’s conduct. Lawsuits in California and at least 20 other states accuse the company of misbehavior, including fraud, falsifying documents and bait-and-switch tactics.


John Gamboa, the Greenlining Institute’s executive director, said his organization had no choice but to stop taking the money because Ameriquest had failed to adequately answer Greenlining’s repeated requests for a response to the allegations.

On Friday afternoon, Gamboa said the company called him and agreed to work with the institute on an independent review of Ameriquest’s lending practices.

An Ameriquest spokesman said the company’s consent to a review showed that if someone had concerns, it was willing to “work to resolve them.”

“We take any allegation of flawed business practices seriously,” the company said in a statement. “If we find problems to fix, we will fix them.”

Ameriquest’s contributions to the Greenlining Institute and donations it makes to other fair-lending groups are not unusual: Citigroup Inc., Bank of America Corp. and others have funneled millions of dollars in grants and billions of dollars in special loan programs through groups that in some cases had previously accused them of discriminating against minorities and financially strapped consumers.

Some observers worry that such financial connections compromise the independence of nonprofits that monitor corporate behavior.


“It creates an issue when you’re taking money from a company that you’re supposedly a watchdog over,” said W. Michael Hoffman, executive director of the Center for Business Ethics at Bentley College in Waltham, Mass. “It creates a clear conflict of interest that I’m not sure you can overcome.”

Ira Rheingold, general counsel of the National Assn. of Consumer Advocates, an attorneys group, says activists who see themselves as partners with corporate executives can lose touch with their constituencies.

“The attitude becomes: ‘We have friends who are bank presidents and vice presidents.... Let’s cut a deal with them because we always cut deals with them,’ ” he said.

Defenders of financial ties between lenders and activists say the relationships give advocacy groups the economic punch they need to fight for change in the marketplace -- and cultivate partnerships that give activists a voice in the nation’s boardrooms.

The Greenlining Institute is one of at least seven nonprofit watchdog groups that have shared in millions of dollars in donations from Ameriquest over the last decade. The seven received about $800,000 among them last year, according to the organizations.

None of the other groups said they planned to return the money, and most expressed continuing respect for the company.

“I don’t expect any company to be perfect,” said Shanna Smith, chief executive of the National Fair Housing Alliance, which has received $100,000 from Ameriquest in the last two years. “But I do expect that when the flaws are identified, they correct them. And Ameriquest has that attitude.”

Smith noted that she had rebuffed overtures from other lenders that had failed to gain her trust, going so far as to turn down a $600,000 settlement offer a decade ago from Countrywide Financial Corp. in connection with alleged lending discrimination. Countrywide did not respond to a request for comment.

The Leadership Conference on Civil Rights received $250,000 from Ameriquest for training and other organizational needs last year. Other contributions from Ameriquest over the years have helped the group lobby for stricter lending laws and more customer-friendly policies, said Executive Director Wade Henderson.

“In no way does it come with strings attached,” Henderson said of the money from Ameriquest. “In no way does it inhibit our ability to engage in advocacy around our core principles.”

Smith and Henderson said their organizations’ fair-lending efforts had been bolstered by a consumer education initiative that began in the 1990s with $1 million in seed money from Ameriquest’s corporate forebear, Long Beach Mortgage Co. The money was set aside as part of a settlement of a Justice Department lawsuit that accused the company of gouging elderly, female and minority borrowers.

Headquartered in Orange, Ameriquest is the nation’s largest “sub-prime” mortgage lender. Sub-prime customers typically have credit problems or other issues that prevent them from obtaining lower-cost “prime” loans.

The company said in a statement that its charitable efforts were “integral to Ameriquest’s corporate philosophy of social justice and a fair housing market.” Ameriquest credits advocacy groups with helping it develop a series of “best practices,” such as its pledge to provide customers “clear and timely” disclosure of their loan terms.

Ameriquest Chairman Roland E. Arnall and other company executives have been remarkably willing to listen to activists’ ideas, Henderson and Smith said. Even in instances when the company’s lawyers were nervous about making a change, Smith recalls, Arnall has said: “ ‘This makes sense. We don’t have anything to hide. Let’s open this up.’ ”

And whenever she brings individual borrowers’ complaints about inflated appraisals or other problems to the company’s attention, Smith said, Ameriquest addresses the problem -- sometimes rewriting the loan to the customer’s benefit, investigating the sales branch in question or, in cases when consumers are simply having problems keeping up, forgiving late fees and halting foreclosures.

Matthew Lee, executive director of a Bronx, N.Y.-based advocacy group, Fair Finance Watch, remains skeptical of the relationships.

Lee said it made sense for Ameriquest to respond promptly to watchdog groups that can stage demonstrations or focus the attention of the news media. But that says nothing, Lee contends, about whether average customers are being treated fairly.

Ameriquest and other lenders realize “they only look bad if certain prominent players criticize them,” Lee said. “So the energy that could and should have gone into making sure you’re not screwing your own customers goes into making friends with possible critics.”

One nonprofit organization, the Assn. of Community Organizations for Reform Now, was a staunch critic of Ameriquest until 2000, when Ameriquest pledged to improve its practices and route $360 million in low-cost mortgages through ACORN’s housing programs.

Ultimately, few loans were made through the agreement, ACORN says, because it was able to secure better mortgage products through Bank of America. Nevertheless, ACORN and Ameriquest continued to work together, with the lender donating about $100,000 a year to ACORN, said Mike Shea, director of the group’s housing programs.

Shea said his organization failed to adequately monitor whether Ameriquest was keeping the “best practices” pledges it made in 2000 and revised in 2003. But he said the advocacy group’s attention was piqued last year when it began fielding a “steady stream” of consumer complaints about Ameriquest, chief among them claims that its employees were falsifying borrowers’ incomes to qualify them for loans they couldn’t afford.

ACORN became “so fed up with the company’s unresponsiveness” to ACORN’s concerns that it came close to filing complaints with regulators, Shea said, but decided to give the company another chance.

“Some say we might have waited too long,” Shea said. “But you try to give people the benefit of the doubt once they pledge to work with you.”

Now, Shea said, media and government scrutiny have “focused Ameriquest’s attention,” and the company has proposed procedures aimed at preventing employees from faking loan applicants’ incomes.

Ameriquest said that it was responsive to ACORN’s concerns and that it was moving ahead with policies that came out of their discussions.

Public disclosure of allegations against the company has had a different effect on the relationship between Ameriquest and the Greenlining Institute.

Greenlining’s general counsel, Robert Gnaizda, said he pressed Ameriquest repeatedly for responses as its practices came under a spotlight this year. The company’s ultimate reply was “more of a lawyer’s response, which was unconvincing to me. Platitudes are always unconvincing to me,” he said.

Gamboa, the institute’s executive director, said Ameriquest had pledged $200,000 this year for his group. Greenlining returned $100,000 that was already in hand, he said Tuesday, and his group wouldn’t consider accepting money from Ameriquest again until the company opened itself to an independent audit of its lending operations.

On Friday, Gamboa said Ameriquest’s vice chairman and senior executive vice president, Adam J. Bass, called him to say the company would agree to such a review so long as it wasn’t called an audit. “They’re convinced they’ve done nothing wrong,” Gamboa said, “and they’re asking for a chance to prove it.”

Gamboa said the agreement didn’t change the institute’s stance on taking money from Ameriquest, but he considered it a hopeful sign.

In a statement, Ameriquest said that it looked forward to continuing to work with the institute and that it remained “willing to work with people who are passionate advocates of their causes even when we sometimes have to agree to disagree.”



Funding activists

Here’s a sampling of advocacy groups that say they received major donations from Ameriquest in 2004.

* Leadership Conference on Civil Rights: $250,000

* Consumer Mortgage Education Consortium: $150,000

* Greenlining Institute: $100,000

* National Community Reinvestment Coalition: $100,000

* Assn. of Community Organizations for Reform Now: $100,000*

* National Fair Housing Alliance: $50,000

* Iowa Citizens for Community Improvement: $50,000


Source: Times research