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California governor sued over homeowner relief fund reallocation

The lawsuit demands that the state of California reinvest money for those trying to stave off foreclosure

Usually, state lawmakers are on the accusatory end of financial suits, trying to bring unruly financial institutions to heel. This time, though, California Governor Jerry Brown is the one under fire, facing allegations that he unlawfully diverted $369 million in homeowner relief in order to pay for state bills.

A lawsuit filed against Brown and other California officials on March 14 demands that the state of California reinvest money for those trying to stave off foreclosure.  The lawsuit was filed by the National Asian American Coalition, COR Community Development Corp. and National Hispanic Christian Leadership Conference.

“To this day, countless California victims of the mortgage and foreclosure crisis and their supporters are waiting to receive any benefit, much less the full benefit, of the settlement the Attorney General obtained for the State of California as compensation for the harms the victims suffered and continue to suffer,” the lawsuit said.

California Attorney General Kamala Harris helped secure the funding for homeowner relief, which was secured via a settlement reached by all 50 states with major U.S. banks. She also opposed using the funds for state budgetary expenses. According to the Sacramento Bee, Harris said at the time that “while the state is undeniably facing a difficult budget gap, these funds should be used to help Californians stay in their homes.”

Along with Brown, the suit named California Department of Finance head Michael Cohen and California state Controller John Chiang as defendants, although the suit did note that Chiang was only added because of his crucial role in any eventual settlement. According to a Department of Finance spokesperson, Brown’s reallocation of the funds broke no laws.

“While we haven’t yet seen the complaint, we’re confident that our budget actions are legally sound,” the spokesman said in an emailed statement to the Bee.

The plaintiffs in the case are represented by Neil Barofsky, who recently served as the special inspector general in charge of supervising the $700 billion Troubled Asset Relief Program.


For more on California cases, check out these IC articles:

Litigation: Budget woes slow Calif. courts, but they remain a favored forum for corporate plaintiffs

California’s legal catastrophe with the unemployed

6 of the strangest lawsuits making headlines

Microstamping law forces gun manufacturers to stop selling new guns in California

Assistant Editor

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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