Wednesday, July 30, 2008
C.A. Justice Demands Retraction From Magazine
By KENNETH OFGANG, Staff Writer
A justice of this district’s Court of Appeal has demanded that a national magazine retract an article asserting that he “turned to” the then-chief executive of Countrywide Financial Corp. for refinancing of his home and suggesting a relationship between the refinancing and a case before the court.
In an interview with the MetNews yesterday, Justice Richard Aldrich of this district’s Div. Three said the reference to him in an article in the August 2008 issue of Conde Nast Portfolio is “absolutely wrong and false.” The jurist provided a copy of a retraction demand dated July 26.
A spokesperson for the magazine said the demand was received yesterday and was under consideration. California law allows a newspaper or magazine 20 days to reply to a retraction demand, if it publishes a retraction, the subject of a defamatory article may not sue for general or punitive damages.
Aldrich declined to comment on whether he intends to pursue litigation if he does not receive the retraction, but said he has retained well-known trial lawyer Edith Matthai, a former County Bar president.
The article by reporter Dan Golden is entitled “Angelo’s Many Friends,” referring to Angelo Mozilo, who founded Countrywide in 1969 and built into the largest home lender in the United States before financial problems forced it into a recent merger with Bank of America.
The thrust of the article is the contention that Countrywide had a “V.I.P. program” that gave loans at favorable rates to prominent individuals, including members of Congress, cabinet members, and congressional staff members involved in housing issues.
Aldrich was also mentioned prominently last week in a Los Angeles Times story about an upcoming federal investigation of alleged preferential lending. That investigation has nothing to do with him, the justice said yesterday, charging that the Times merely picked up on the false magazine story.
Golden’s piece begins by referring to the 2004 transaction in which Aldrich refinanced his house next to the golf course at the Sherwood Country Club in Westlake Village Aldrich, Golden wrote, “turned to a prominent Sherwood member,” Mozilo.
The magazine reported:
“Aldrich’s application was assigned to a loan officer named Robert Feinberg; the judge was seeking a $1 million loan and a $900,000 line of credit. By email, Feinberg alerted Mozilo that the credit line was ‘above what guidelines allow.’ Mozilo responded, ‘Go ahead and approve the loan, and close it as soon as possible. Don’t worry about this deal, it’s golden.’ Countrywide further waived half a point, or $5,000 on the million-dollar loan....
“That wasn’t Aldrich’s only contact with Countrywide. At the time he refinanced, a class action lawsuit against Countrywide was pending before the appellate court, brought by borrowers contending that the company offered an inadequate payment to settle allegations that it charged excessive fees for credit reports. That August, Aldrich was part of a three-judge panel that unanimously rejected the borrowers’ appeal.”
In seeking a retraction, Aldrich declared that he “never discussed” the loan with Mozilo and “never had a discussion about any topic with Mr. Mozilo or any other executive at Countrywide.”
He dealt with Countrywide, he explained, because they had been his home lender since the 1970s. He received a call from a loan officer, and after explaining what he was planning to do, was told that he was eligible for a mortgage at 4.625 percent fixed for seven years and adjustable thereafter, and for a line of credit, which he paid in full within 60 days.
In speaking to the MetNews, Aldrich acknowledged that he was told he was receiving a “V.I.P loan.” But contrary to the tenor of the Portfolio article, he said, he was never told, and never thought, that the rate had anything to do with his being a judicial officer, and certainly not with his involvement in a particular case.
He added that he has only met Mozilo on about three occasions, although he had occasionally “bumped into him” around Westlake Village.”
“I thought ‘V.I.P.’ was a marketing tool” used to attract good customers, he explained. Aldrich says he figured he was receiving a good rate because he was putting down 70 percent of the total cost, had done business with the lender for over three decades without missing or delaying a payment, and was otherwise creditworthy.
The case alluded to by Portfolio, Gonzalez v. Countrywide Home Loans, Inc., B163706, B166302, involved an appeal from an order by Los Angeles Superior Court Judge Carolyn B. Kuhl overruling objections to a class action settlement between the lender and borrowers who claimed they were overcharged for credit reports and similar services.
The settlement was negotiated in mediation. Two of the class members, represented by Howard Strong of Tarzana, argued that the settlement, which entitled each of more than 250,000 class members to a $35 discount if they closed a loan within two years after final judgment, was improperly noticed and inadequate.
Strong declined to discuss the case with the MetNews.
The opinion, filed Aug. 26, 2004, was authored by Justice Patti Kitching and joined by Aldrich and Justice Walter Croskey. Under the court’s internal procedure, Aldrich noted yesterday, the draft opinion had been written by Kitching and approved by Croskey before he ever saw it.
He joined his colleagues, he said, in concluding that there was no abuse of discretion. He noted that it is quite rare for an appellate court to overturn a settlement that was negotiated by the parties and approved by a trial judge.
He did, the justice said, advise his colleagues at a conference just before oral argument that he was a Countrywide borrower, of which there were about 12 million at the time, he figures. They assured him, he said, that there was nothing wrong with his sitting on the case and no need for disclosure to counsel.
Croskey and Kitching both said yesterday that while they could not recall the details of the conference, they trust Aldrich’s recollection. In reviewing the matter after the magazine article appeared, both said, they do not believe that disclosure or recusal was required.
Croskey noted that he had refinanced his own home around that time, using a different lender. He pointed out that this occurred at a time of declining interest rates and intense competition in the industry, and said that if anybody was offering special rates to judges, “I sure...never heard about it.”
Aldrich said his general practice is to recuse himself if there is even a hint of a conflict. Here there was no conflict, he said, anymore than a conflict would exist if a judge bought some goods at a department store and the department store chain later had a case in the court that had nothing to do with the products the judge purchased.
Besides, the justice noted, Countrywide had only a secondary interest in the appeal, which primarily involved a dispute between the objectors and the class representatives.
In the wake of the magazine article, and the Los Angeles Times story, Aldrich said he contacted the Commission on Judicial Performance out of concern for “not only my reputation but he reputation of the judiciary.”
He said he has not heard back from the CJP, nor has he been contacted by any other governmental entity in connection with the matter. He also asked Loyola Law School professor and former federal prosecutor Laurie Levenson to review the circumstances and advise him on the matter.
Levenson yesterday called the story “a drive-by smear on the justice.” Given the facts as laid out in the retraction demand, she explained, there was no need to disclose, and no ethical violation.
She agreed with the jurist that any special treatment he received was because of his financial circumstances, not his employment. This falls into the category of private information that a judge is not required to disclose under the Code of Judicial Ethics, Levenson said.
“Any lender would love to have a client like this, no matter what he did for a living,” she commented.
Justice Richard Aldrich’s Demand for Retraction of Portfolio Story
July 26, 2008
Ms. Joanne Lipman
Conde Nast Portfolio Magazine
4 Times Square
New York, New York 10036
Re: Demand for correction and retraction
Dear Ms. Lipman:
In an article that discusses Countrywideís business practices, reporter Dan Golden incorrectly states that I turned to Countrywide Financial chief executive Angelo Mozilo when I decided to refinance my home. This is not true. I never discussed my loan with Mr. Mozilo. I have never had a discussion about any topic with Mr. Mozilo or any other executive at Countrywide. All of my communications regarding this loan were with a loan officer, Robert Feinberg, or others in Mr. Feinbergís department. I have no knowledge of any e-mails or internal discussions that Mr. Feinberg had with other employees or executives at Countrywide.
Mr. Goldenís description of the circumstances of the loan and the case involving Countrywide put my actions in a false light. The true circumstances are as follows: My wife and I applied for a loan with Countrywide as the company had been our home lender since the 1970s. I was contacted by loan officer Robert Feinberg and I detailed my borrowing needs and my repayment plan. During a later telephone conversation with a Countrywide representative I was told that based upon the information I had provided we were eligible for a mortgage of 4.625% fixed for seven years and thereafter adjustable according to the LIBOR index. There was also a home equity line of credit (HELOC) that I paid in full within 60 days. At no time during the negotiations for this loan transaction was it stated or intimated that this transaction was anything other than an arms-length loan transaction. Nor was there any suggestion that I was being singled out for any type of special treatment. I was always led to believe that the loan was made on the terms stated because of its very low risk to the lender, the large amount of equity I was paying toward the purchase price (more than 70 percent), and my overall credit worthiness. It was also common knowledge at the time that the Federal Home Loan Bank Board had been lowering prime lending rates among banks resulting in home loan mortgage interest rates being reduced to record lows. I therefore had no reason to believe that this transaction was anything other than a loan made by a lender at no financial risk of loss whatsoever.
In the Courts of Appeal in California, each appeal is heard by a panel of three judges. It takes at least two votes in order to decide the appeal. In May 2004, one of my colleagues in Division 3 of the Second Appellate District was assigned to author a case in which Countrywide was a named party. I was assigned as one of the three judges on the case. I had no knowledge of the existence of this appeal until, at the earliest, late June or early July of 2004, when I received the file with a copy of a draft opinion authored by my colleague. I informed the author and the other judge assigned to the case that I had a home loan with Countrywide and we all agreed that there was no need for disclosure or disqualification because of the nature of the case and the fact that I was simply one of hundred of thousands, if not millions, of Countrywide borrowers. A judge or justice who is simply a customer of a party in litigation is not required to disclose that fact and is not disqualified from the matter. Otherwise there would be an impossible situation created since a question would be raised any time an uneventful transaction had occurred between the bench officer and a party.
The case involved a class action lawsuit against Countrywide; I was not a member of the class as defined in that case. The plaintiffs alleged that Countrywide overcharged borrowers for credit reports. The case settled in mediation. Two of the plaintiffs and their attorney objected to the settlement and the attorney asked for attorney fees of $76,741.26 for filing the objections. The trial court overruled the objections, denied the attorney fees and approved the settlement. The objecting attorney appealed. In these kinds of cases, great deference is given to the trial court. Only two votes were required. In this case the opinion was unanimous, affirming the settlement approved by the trial judge. The California Supreme Court denied review.
It is libelous to suggest, as your article does, that an appellate justice received a benefit that influenced a decision of the court. I hereby demand that you publish a correction of the false statements contained in the article.
RICHARD D. ALDRICH
Copyright 2008, Metropolitan News Company