Proposal to spend $3 million to help company build garage in city decried

CitiFinancial is accused of predatory lending

September 14, 2001|By Caitlin Francke | Caitlin Francke,SUN STAFF

Advocates for the poor and a city businessman joined forces yesterday in opposing the city's proposed use of $3 million to help a company accused of predatory lending build a garage downtown.

At a City Council budget committee hearing, members of the Association of Community Organizations for Reform Now protested the construction of the garage in the 200 block of St. Paul Place so that CitiFinancial would retain its headquarters in the city.

The lawyer for businessman David Kornblatt also argued against the garage, saying it would be environmentally unsound and an "economic disaster." Kornblatt owns nearby St. Paul Plaza, an office building and garage, but his lawyer said Kornblatt is not concerned about the threat of competition.

"His garage is full," said the lawyer, Benjamin Rosenberg.

The budget committee decided not to vote on whether to approve the expenditure at the request of City Council President Sheila Dixon, said the committee chair, Councilman Nicholas C. D'Adamo Jr. He said Dixon wants to meet with CitiFinancial representatives to learn whether they will invest in city communities.

The 13-story garage, to be financed by state funds, is part of an incentive package the company negotiated in February with M.J. "Jay" Brodie, president of Baltimore Development Corp., to keep its operations downtown. Some 275 of the 519 parking spaces would be dedicated to the company.

Last month, the city approved a $1 million low-interest loan to the company for renovation of its office space at 300 St. Paul St. if it keeps some 900 employees downtown.

ACORN members protested the move yesterday, saying that the company preys on low-income, minority communities with high-interest loans.

William Scott, a victim of the high-profile mortgage fraud known as flipping, said he does not want the city to help any company that profits from poor communities.

"I don't want my tax dollars going toward predatory lending," he said.

Much of the controversy centers on CitiFinancial's purchase last year of a company called Associates First Capital Corp., which consumer groups have accused of abusive lending practices.

The Federal Trade Commission sued CitiFinancial's parent company, Citigroup Inc., in March over Associates' actions. The probe expanded in May to include CitiFinancial after a former employee alleged she was pressured to sell unnecessary insurance policies to the elderly and minorities, according to company officials and published reports.

This month, Citigroup agreed to repay as much as $20 million to borrowers in North Carolina to settle an investigation by that state into alleged deceptive practices by Associates.

CitiFinancial has attempted to answer criticism by discontinuing the sale of controversial life insurance and by severing ties with thousands of brokers, company officials have said.

Kornblatt offered additional opposition to the plan. His lawyer, Rosenberg, argued that the site is too small for a garage and exhaust fumes would create environmental hazards.

Brodie responded that the garage design has been approved by several city boards.

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