EAST PALO ALTO: City files red-lining lawsuit

Action filed against Washington Mutual Bank

by Don Kazak

The city of East Palo Alto filed a lawsuit Wednesday against Washington Mutual Bank, alleging that the bank's predecessor, American Savings Bank, illegally discriminated against East Palo Alto residents on the basis of race. Palo Alto-based Midpeninsula Citizens for Fair Housing, an anti-discrimination advocacy group, co-filed the suit. It was the housing group's "checkers," posing as people requesting real estate loans, who documented the alleged discriminatory practices between 1993 and 1995.

The lawsuit claims that American Savings Bank loan officers discouraged people from applying for loans to purchase apartment buildings in the city. In one case, a loan officer allegedly said, "We don't loan in East Palo Alto." In another case, a different loan officer allegedly said the bank didn't make loans "in that area."

American Savings Bank had been the country's fifth-largest thrift, with 165 branches in California, when it was purchased by Washington Mutual Bank in 1998.

All the alleged discriminatory practices occurred before Washington Mutual Bank purchased American Savings Bank. Washington Mutual Bank is named in the lawsuit "solely in its capacity as the successor in interest" to American Savings Bank.

"When we found out about this situation, we were outraged because it was so blatant," said East Palo Alto Mayor Sharifa Wilson. "It's another example of institutional racism, and it's one of the historic conditions we've had to deal with."

James Mulkeen, an attorney representing Washington Mutual Bank, declined to comment on the lawsuit.

While the lawsuit concerns incidents that allegedly occurred years ago, it is still significant because of the fear that some of these practices may continue today, said Rufus Cole, attorney for Midpeninsula Citizens for Fair Housing.

"There is a fear that this type of lending practice continues to occur," Cole said, noting that some of the individual loan officers named in the lawsuit still work at Washington Mutual Bank.

One of the defendants in the lawsuit is Edward Gresnick, who worked as a loan officer in the Santa Clara branch of American Savings Bank. The lawsuit alleges that Gresnick told a loan applicant on April 19, 1995 that "the bank had a number of foreclosures in East Palo Alto" and "the bank would not make any more loans in East Palo Alto until it got its problems straightened out."

The lawsuit alleges that American Savings Bank:

Discriminated on the basis of race, color or national origin in making loans available.

Failed to provide information regarding the availability of loans, or provided "information which is inaccurate or different from that provided to others" on the basis of race, color or national origin.

Imposed different conditions for availability of loans, based on race, color or national origin.

Used different policies to determine the credit worthiness of applicants, based on race, color or national origin.

Discouraged people from buying a home because of the race, color or national origin of people in the community.

The lawsuit asks for unspecified monetary damages, and to enjoin Washington Mutual Bank and its employees "to take affirmative action to provide equal lending opportunities to all areas/districts regardless of race or color."

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