- Associated Press - Monday, December 7, 2015

DOVER, Del. (AP) - A nonprofit group sued Delaware officials Monday over the use of bank settlement money to help balance the state budget.

The Delaware Community Reinvestment Action Council filed the suit in chancery court against Gov. Jack Markell, state treasurer Ken Simpler, and the legislature’s controller general, Michael Morton.

Markell’s office did not immediately respond to an email seeking comment.

The lawsuit comes several weeks after the council warned that it was considering litigation, and several months after the group asked the U.S. Justice Department to oversee distribution of settlement funds.

“We did not get a response. None,” said Rashmi Rangan, executive director of the council, which advocates for equitable treatment and equal access to credit and capital.

The lawsuit involves the state’s use of $45 million from a multistate settlement involving Bank of America.

Lawmakers used about $31 million in various financial crisis settlement funds to balance this year’s budget and are considering using another $30 million in settlement funds to help balance next year’s budget.

“The wrong committed by the General Assembly was compounded when Governor Markell, despite his previous statements endorsing the use of the settlement funds to address the mortgage crisis, signed the budget legislation which, in essence, appropriated the settlement funds as part of the state of Delaware’s general fund,” the complaint reads. “While the hardest hit communities continue to suffer, the defendants have unconscionably seized these funds and withheld relief.”

The BOA settlement money was intended primarily to provide housing-related restitution or remediation related to bank misconduct leading up to the 2008 financial crisis.

Rangan said Monday that the attorney general’s office, which negotiated the rights of Delawareans in the settlement agreement, should decide, with community input, how best to use the money.

Last week, legislative budget writers agreed to appropriate $2 million in financial settlement funds for crime-prevention efforts in Wilmington and Dover, as Attorney General Matt Denn, with the council’s support, has proposed. But lawmakers have balked at Denn’s other suggestions for use of settlement funds. Those suggestions include funding for mortgage assistance and housing programs, a neighborhood building blocks fund, high-poverty schools, and substance abuse and after-school programs.

“No part of the settlement agreement provided that the funds received from Bank of America were to be deposited into the general fund of the State of Delaware or to be made available for budgetary purposes other than to address the effects and to assist the victims of the unlawful conduct of Bank of America,” the lawsuit states. “Accordingly, the state of Delaware had no right, nor did it have the power, to arrogate to itself the right to spend the settlement funds as part of its general fund.”

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