Congressional panel probes St. Paul, DOJ housing discrimination cases

The Republican-controlled House Judiciary Committee as launched a probe into a pair of federal lawsuits in St. Paul after four House members accused the Obama administration's Department of Justice of obstructing justice in two discrimination cases, with the city's help.

The action grows out of three cases. The first is a federal lawsuit against the city, dating back 10 years to when Randy Kelly was mayor. Landlords said his get-tough housing inspection policy reduced the number of affordable rental homes in the city and indirectly discriminated against minorities who needed cheap housing.

The lawsuit went all the way to the U.S. Supreme Court, with the City of St. Paul arguing that it was doing the right thing by fighting squalor and threats to public health. Officials said their actions shouldn't be judged by the effect on minorities.

Then, along comes the financial crisis and a second a case. The Department of Justice goes after mortgage lenders using a similar legal theory -- that bad loans disproportionately hit minorities. Federal authorities use that theory to win hundreds of millions of dollars in legal settlements.

The first two cases put the city and federal governments on two sides of the same coin -- asking the courts to ignore and enforce these so-called "disparate impacts" on minorities at the same time. That sets the stage for the third case

In 2008, a St. Paul contractor filed a lawsuit, saying the city was violating requirements of a federal grant intended to encourage low-income employment, and alleging that required documentation wasn't being completed. The Department of Justice agrees there is a problem in St. Paul, and suddenly, nearly $200 million in federal aid to the city could be at risk.

St. Paul officials say the cost of fighting the case could bankrupt the city if the feds get tough. So in February, St. Paul decided it wouldn't ask the Supreme Court to strike down the "disparate impact" theory from the landlord case -- seemingly against the city's own legal interests, but keeping the theory intact for the federal mortgage cases.

Some background on this case is included in the letter from members of Congress. In the letter they say that fair housing advocates - including former Vice President Walter Mondale -- asked St. Paul to back down on the landlord case.

At about the same time, according to Congress, the Department of Justice decided it wouldn't get involved in the lawsuit brought by the contractor that threatened the federal grants to St. Paul. The House Judiciary Committee then launched an investigation on Monday, saying the bargain cost federal taxpayers more than $180 million in grant money.

A letter from the members of Congress says the "disparate impact" theory the DOJ used to take on the mortgage banks was legally "questionable," and wouldn't have survived on its own merits. The letter suggests the only reason it did survive was the side deal with St. Paul. That was the contractor lawsuit challenging how the city managed a big federal grant. So they're accusing the Obama administration of gaming the system with St. Paul in these court cases.

Officials in both St. Paul and the Justice Department admit they talked about the landlord and mortgage cases. But the city said it won the third, contractor case, on its merits -- not with help from Washington. There were some paperwork oversights, but that lawsuit was dismissed this summer and is under appeal.

Justice Department officials defended their actions, although they admitted they usually don't get involved in cases such as the grant matter. However, the four members of Congress say the DOJ should have tried harder to get the money back from St. Paul.

Now the House Judiciary Committee is demanding that Minnesota's U.S. Attorney General, B. Todd Jones, provide a formal explanation for the DOJ's actions.