SEATTLE -- When the cold call came from Ameriquest Mortgage Co., a top lender, Jeff and Cheryl Busby were intrigued.
They had been wanting to renovate the garage of their small bungalow near picturesque Green Lake. The agent, they said, promised that refinancing would give them $20,000 in cash, yet lower the monthly payments.
The agent was a smooth talker, and the Busbys were not concerned that he didn't offer them a chance to study the documents.
They later found that their interest rate was 11 percent - far too high. Assuming an honest mistake, the couple returned to Ameriquest. The agent said he would get them a better loan. Things moved so fast, they said, that they had no opportunity to read the dozens of pages of fine print.
The new terms were worse. The payments nearly equaled their entire income.
Ultimately, they sued, saying that Ameriquest had invented a car sales business for Cheryl Busby to improve her financial status, complete with a phony business card. She was 63 and had never sold a car in her life. Their lawsuit said the agent had fabricated a higher income to "flip" the Busbys into a bigger loan, larded with illegal charges.
The Busbys couldn't make the payments and were forced to sell. The bungalow had been in Cheryl Busby's family since 1935. It was where she had grown up and where her parents had died. It was 100 percent of the Busbys' retirement nest egg.
Now it was gone.
"It was a traumatic experience," said Jeff Busby, 65, sitting with his wife in the small rented house where they ended up, awaiting the outcome of their lawsuit.
The Busbys found a lawyer through Cheryl's employer, Solid Ground, a Seattle nonprofit group that counsels victims of predatory lenders. Since 1998, the Bill & Melinda Gates Foundation has awarded the nonprofit grants totaling $1.2 million. Yet at the end of last year, the Gates Foundation had more than $2 million invested in securities from Ameriquest.
The conflict is one of many that a Times investigation has found between the foundation's investments and its good works. The Gates Foundation reaps vast profits every year from companies whose actions contradict its mission of improving society in the United States and around the world, particularly the lot of people afflicted by poverty and disease.
The Times has found that the Gates Foundation had major investments in:
Mortgage companies that were accused in lawsuits or by government officials of making it easier for thousands of people to lose their homes.
A health care firm that has agreed to pay more than $1.5 billion to settle lawsuits accusing it of medical lapses and fraud going back a decade.
Chocolate companies said by the U.S. government to be profiting from the slave labor of children.
Critics fault the Gates Foundation most for failing to use the power of its immense wealth to improve the behavior of the companies in which it invests. At the end of 2005, the foundation's endowment stood at $35 billion. In June 2006, Warren E. Buffett, the world's second-richest man after Bill Gates, pledged to add about $31 billion.
That $66 billion will give the Gates Foundation more than 10 percent of the assets of all of the charitable foundations in the United States and provide it with unmatched muscle and potential moral authority.
The Gates Foundation did not respond to written questions about specific investments and whether it plans to change its investment policies. It maintains a strict firewall between those who invest its endowment and those who make its grants.
Long before the Gates Foundation's investment in Ameriquest, the mortgage lender had become known for high-pressure sales tactics, forged documents, hidden costs, stiff prepayment rules and rushed closings, such as the ones that Jeff and Cheryl Busby said cost them their home.
In January 2006, ACC Capital Holdings Corp., which owns Ameriquest, settled a class action suit with 49 states and the District of Colombia. Without admitting wrongdoing, the firm agreed to pay $295 million to customers who had borrowed money between 1999 and 2005.
Ameriquest declined to comment on the Busby lawsuit.
Cheryl Busby's employer, Solid Ground, is one of many groups that have gotten money from the Gates Foundation to fight housing instability and homelessness. Since its inception, the foundation has awarded at least $48 million in such grants.
Similarly, Ameriquest is only one of many lenders in which the Gates Foundation has invested that have contributed to housing instability. Like Ameriquest, these lenders offer so-called sub-prime loans, designed for borrowers who have credit problems that disqualify them from conventional prime loans.
As of December 2005, the Gates Foundation had at least $367 million invested in the stocks, bonds or securities of 20 of the top 25 sub-prime lenders and other large sub-prime companies. These included companies involved in the four largest class-action settlements for sub-prime abuses.