The Justice Department announced Friday it will move forward with a $68 million settlement with a Texas land development company it accused of preying on Hispanic residents, despite a judge’s concerns that the deal doesn’t go far enough to help victims.
At the hearing, U.S. District Judge Alfred H. Bennett questioned why the settlement did not compensate those who were harmed and who spent more than $20 million on federal prosecutors on police and immigration enforcement. He said he was uncomfortable with the provision because the Justice Department’s lawsuit against Colony Ridge, a large subdivision north of Houston, made no mention of public safety or immigration.
“I thought I was dealing with people who had been defrauded by above-market interest rates and alleged unfair foreclosures,” Bennett said, holding up the plaintiff in his right hand and the settlement offer in his left. “Now all of a sudden we’re being asked to authorize increased law enforcement?”
“Who said in the Settlement Room that giving $20 million to law enforcement is a good idea?” Bennett asked at the beginning of the hearing. “Where did that come from?”
Justice Department senior prosecutor Varda Hussein said the original idea came from the state, referring to Texas Attorney General Ken Paxton’s office. Paxton’s office has filed a similar lawsuit, which will also be resolved by the settlement. He did not respond to requests for comment. Hussein, principal deputy attorney general at the Justice Department’s Washington headquarters, said the federal government supports the provision even though neither the lawsuit nor the states have expressed concern about the crime.
Colony Ridge residents told federal investigators after filing the lawsuit that they were concerned about crime at the development, Hussein said.
“I understand what that looks like for you, but I’m saying this is a concern that friends of the court and residents have for you,” Hussain said.
The settlement ends a three-year legal dispute in which the Justice Department and Consumer Financial Protection Bureau accused Colony Ridge of defrauding tens of thousands of Hispanic consumers into loans with high interest rates that many could not afford. The developer then profited when the property was foreclosed on, prosecutors said.
Former Justice Department and CPFB lawyers and investigators, including some who were involved in filing the original lawsuit in 2023, told ProPublica and the Texas Tribune that they were stunned that the Trump administration reached a settlement that did not seek to compensate victims.
Of the 183 housing and civil enforcement settlements announced by the Justice Department since 2018, only 6% lacked funding for victims and did not include funding for police or immigration enforcement, a news outlet analysis found.
Bennett said such a clause had never been included in a predatory lending case before and tried to find a compromise.
An hour into the hearing, Bennett asked the Justice Department and attorneys for Colony Ridge, which denies wrongdoing, whether they would consider his proposal to amend the settlement for approval.
Colony Ridge attorney Jason Ray said his client would consider that. Hussein said the Justice Department is not interested.
Instead, the Justice Department said it would move forward with the settlement without seeking judicial approval, based on federal law that requires judicial approval. That means there will be no court oversight of Colony Ridge to ensure developers comply with the terms of the settlement, said Jonathan Smith, who served as assistant attorney general for civil rights during the Biden administration.
Smith, who helped organize the Colony Ridge case three years ago, said the case simply evaporates because there is no one to enforce it now. He added that the Department of Justice cannot sue Colony Ridge based on the same allegations in the future.
“Having the settlement made public and enforced in court sends a clear message to other potential bad actors that their actions can have real consequences,” Smith said in an email.
He said the Justice Department’s decision amounted to a “get-out-of-jail-free card.”
“The Department of Justice has turned its back on victims, leaving them with no recourse and no guarantee that steps will be taken to redress the harms identified in the Department’s original complaint,” Smith said.
The Justice Department did not immediately respond to a request for comment on Smith’s criticism. But at the hearing, Hussein said the department would ensure Colony Ridge complied with the terms of the settlement. The developer said in a court filing that it has already begun implementing provisions, including adopting stricter lending standards.
Kayla Sanchez, a former Colony Ridge landowner who along with her sister had fielded complaints from residents who said they were mistreated by the developer, said it was painful to see the settlement come to fruition without helping past victims.
“It’s hard to believe, but I don’t have high expectations for these agencies at this point,” she said.
