In December 2004, Minnesota Attorney General Mike Hatch sued Capital One for failing to state in its advertisements that it could increase interest rates on credit cards. As part of a 2006 settlement, Capital One paid $749,999, of which $249,999 went to ACORN, $250,000 went to the nonprofit Legal Aid, and $250,000 to the State of Minnesota.
ACORN’s political action committee had endorsed Mike Hatch for attorney general in 1998 and 2002, and in 2006 for governor.
In 2008, Minnesota’s Legislative Auditor, James Nobles, conducted a review of the Capital One settlement and payment to ACORN. By letter, he asked Hatch’s successor, current state Attorney General Lori Swanson (who was given a grade of A+ from ACORN in 2008) for information about the settlement. Specifically, Nobles asked:
[Minnesota statute 16A-151] says: ‘A state official may not commence, pursue, or settle litigation, or settle a matter that could have resulted in litigation, in a manner that would result in money being distributed to a person or entity other than the state.’ An exception is… if the settlement amount is less than $750,000. It is alleged that the Attorney General’s office sought a judgment of $749,999 to avoid the prohibition [on diverting settlement money from the state]. Is that true? If not, please explain why the Attorney General’s office sought a $749,999 judgment.
Hatch’s letter begged more questions than it answered. In response to Nobles’ question about why Hatch sought and accepted a $749,999 settlement, exactly one dollar below the statutory threshold requiring all of the settlement money to be paid to the state, Hatch replied, “[t]he answer is because that is what the statute permitted.” That answer, of course, evades Nobles’ question. The settlement could have been for any amount or no amount whatsoever, rather than exactly one dollar below the threshold that would have required the settlement proceeds be paid to the state. That exactly one-dollar difference would have barred ACORN from receiving any portion of the settlement proceeds.
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