CHICAGO — Wells Fargo and Cook County have each accused the other of misdeeds in their long-running legal battle over the county's claims the bank discriminated against minority borrowers, fueling the foreclosure crisis, with Wells Fargo saying the county has "cherry-picked" which data it would turn over, to obscure how much money the county gained from processing foreclosures.
For its part, Cook County has accused Wells Fargo of improperly limiting and intentionally misinterpreting the county's information requests, to limit its liability under just one federal law.
On Oct. 28, Wells Fargo filed a motion in U.S. District Court Northern District of Illinois to compel the county to disclose documents concerning fees and costs incurred in connection with foreclosure processing. The bank accused the county of withholding information showing it collected fees that exceeded the cost of its services, meaning it turned a profit on things like recording documents, serving summonses and conducting judicial sales of foreclosed properties.
Those records, the bank said, are “squarely relevant to the claims and defenses remaining in this case — namely, the county’s theory that it was injured by the supposedly increased costs of administering and processing Wells Fargo’s challenged foreclosures.” The bank said the documents could essentially work to undermine the county's basis for its lawsuit.
In its allegations against Wells Fargo, which are similar to those the county leveled against other lenders, including Bank of America and HSBC, the county questioned predatory lending practices, including such tactics as so-called reverse redlining. Under that alleged practice, lenders agree to give loans to minority borrowers, such as African-Americans or Hispanic-Americans, but do so under rates and terms more onerous than those given to white borrowers with similar financial standing.The county filed its lawsuits against Wells Fargo and other lenders in 2014.
In the years since, the county and lenders have gone back and forth in court, as the courts have refused to dismiss the cases, but has limited the scope of the county's actions. In the case against Wells Fargo, the court largely limited the county's claims to costs the county may have suffered in handling foreclosures.
In its Oct. 28 motion, Wells Fargo said the county is attempting to obscure that actual financial impact, by only agreeing to share information on services in which expenses exceeded the fees collected. Wells Fargo argued all information must be known to determine if the county deserves to be compensated. It said the county’s initial information included items like a sheriff’s office budget listing the explicit goal of the Court Services Department to “further explore the opportunity to bring more judicial sales to the county and thus dramatically increasing revenues.”
The bank also quoted a 2010 New York Times article in which a sheriff’s spokesman said the sheriff “would prefer to handle all process serving in the county, particularly since it is one of the few ways we are able to actually bring revenues to the county,” up to as much as $5 million annually.
According to Wells Fargo, the county attributed its decision to protect some information to a motion to compel in its legal battle with Bank of America. U.S. District Judge Gary Feinerman denied the county’s request to coordinate discovery across various cases, but “the County nevertheless now refuses to produce any documents related to costs and fees” showing some services turn a profit, the bank alleged.
“Although the county may hope to base its damages calculation only on services it has specifically cherry-picked and believes to be revenue-negative,” Wells Fargo said, “defendants are entitled to discover the full financial impact to the county of all of the services it provided in administering and processing foreclosures.”
The county filed its own motion to compel Oct. 28, saying Wells Fargo “unilaterally decided to ignore” the county’s search terms, which has the effect of keeping the county from learning about anything outside its allegations relative to the Federal Housing Act. Although the county acknowledged it has not formally alleged violations of other laws — such as the Equal Credit Opportunity Act, the Community Reinvestment Act and the Real Estate Settlement Procedures Act — it said Wells Fargo’s compliance with those other laws that concern credit and housing discrimination “is clearly relevant to whether they violated the FHA.”
On Nov. 1, Judge Feinerman partially unravelled the dispute, ruling any new discovery requests from the city, which may have been issued after a court-ordered June 10, 2019 deadline, are too late. However, the judge allowed the county to persist in discovery if the written requests submited after the June 10 deadline are "follow-up" discovery requests. The order did not address the county's contentions regarding whether Wells Fargo was required to respond to the county's discovery requests regarding the other three federal laws, in addition to the FHA.
Wells Fargo is represented by K&L Gates LLP, of Miami and Chicago, and Katten Muchin Rosenman LLP, of Chicago.
The county is represented by lawyers from the firm of Evangelista Worley LLC, of Atlanta.
Jonathan Bilyk contributed to this report.