Homebuilder files lawsuit against Goddard - East Valley Tribune: News

Homebuilder files lawsuit against Goddard

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Posted: Thursday, March 11, 2010 5:36 pm | Updated: 3:40 am, Sat Oct 8, 2011.

Attorney General Terry Goddard has hired an outside law firm to investigate predatory lending practices by homebuilders and their mortgage firms.

Attorney General Terry Goddard has hired an outside law firm to investigate predatory lending practices by homebuilders and their mortgage firms.

Documents obtained by Capitol Media Services show Goddard has agreed to pay a Washington, D.C., law firm a share of whatever they help him recover in penalties against those being investigated. Under the terms of the deal, the firm could get up to one-fifth of anything collected.

But that contract has generated a lawsuit of its own, with the largest U.S. homebuilder and its lending arm accusing Goddard of violating their constitutional rights by hiring a law firm with links to a major labor union to investigate it.

Legal papers filed in U.S. District Court in Washington, D.C. by Pulte Homes and Pulte Mortgage charge that the arrangement between Goddard and attorneys at the firm of Cohen Milstein Sellers & Toll gives those lawyers access to certain government information — information it can then turn around and use to help the labor unions which the companies say “are engaged in a harassment campaign against Pulte and other homebuilders.”

The attorneys also are specifically challenging the state signing a deal which makes the law firm’s payment contingent on getting money from the homebuilders it investigates. Attorneys for Pulte say Arizona law specifically prohibits outside law firms from being hired on a fee-contingent basis, making the contract “contrary to the will” of state lawmakers.

Goddard press aide Molly Edwards said her office was aware of the lawsuit and studying the issues. She would not comment on the merits of the lawsuit.

She also would not say why Goddard, a Democratic candidate for governor, went out and hired the outside firm.

But bid documents obtained by Capitol Media Services show the state is looking into predatory lending practices. That includes whether any lender being investigated provided borrowers with false or misleading information.

And those documents show the state wants to get civil penalties against anyone breaking Arizona consumer fraud laws.

Neither the Cohen Milstein law firm or the union at issue in the dispute immediately responded to requests for comment.

In the legal papers filed in federal court, Pulte attorney Andrew Sandler does not challenge the right of the state to conduct the investigation. It is who the state hired that is at issue.

According to Sandler, the Cohen Milstein attorneys who will be involved in the inquiry against Pulte also represent the Laborers’ International Union of North America “that is waging an extensive campaign against Pulte consisting of activities, including potentially illegal activities, designed to damage Pulte’s business and harm its shareholders.” That campaign, the lawsuit charges, is designed to coerce Pulte and other homebuilders into forcing their subcontractors to sign union contracts.

Sandler said Pulte already has provided the Attorney General’s Office with more than 70,000 pages of materials the state has requested as part of its investigation. That information also is being shared with the Nevada Attorney General’s Office which is conducting its own inquiry -- and which also has hired the same outside firm.

As investigators for the state, Sandler said the lawyers for Cohen Milstein have access to confidential information which it can then turn around and use in its separate actions against Pulte on behalf of the union.

Separate is the question of the contingency fee arrangement.

According to Sandler, the deal the state signed with the lawyers last year — while they were still at another firm — gives them 3 percent of anything recovered within two months of the contract, 5 percent of anything recovered within four months, 10 percent up to nine months and 20 percent of anything recovered after that.

After the contract was signed, the lawyers moved to Cohen Milstein and the state followed them there with the contract.

The lawsuit also makes virtually identical charges against Nevada Attorney General Catherine Cortez Masto.

No hearing has been set on the matter.

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