Barnett Avoids Suit Over Fair-Lending As Justice Dept. Ends

WASHINGTON - After a two-year investigation, the Justice Department has dropped plans to sue Barnett Banks Inc. on fair-lending grounds.

Officials at the Jacksonville, Fla.-based institution said Monday that the Justice Department sent them a letter Dec. 15 formally ending the probe, which had focused on the bank's mortgage underwriting standards in 1991 and 1992.

"We are obviously pleased that this issue has been resolved in this manner," Barnett spokesman David Palombi said. He declined to comment further.

Barnett has consistently defended its lending practices.

Paul Hancock, chief of Justice's housing division, said the department was impressed that Barnett had tried to fix the problems before the investigation began. Also, he said, the bank has continued to improve its fair-lending performance, even creating a community development corporation.

"This is a success story for both sides," Mr. Hancock said. "This is a bank that did the right thing."

Mr. Hancock added that the Justice Department still believes Barnett violated the law. But he said the department concluded that its resources could be better spent going after other lenders.

Fair-lending experts had mixed reactions to the announcement.

"This should be modestly encouraging for the banking industry," said D. Jean Veta, a partner at Covington & Burling. "It shows that at least under some circumstances the Justice Department is prepared to walk away from an investigation even when it has been highly publicized.

"On the other hand, I suspect the department's handling of the Barnett case will represent the exception rather than the rule," she said.

Kenneth Thomas, a Miami-based author on lending bias, said the case is another indication that the department has lost its appetite for underwriting cases.

He said he didn't believe Mr. Hancock's explanation. "Those are all just ways out," he said. "Justice has been searching for months for a way to save face."

But Warren Traiger, a New York lawyer, said the case shows the Justice Department is willing to listen to a bank's defense.

"This doesn't mean Justice is willing to accept discrimination," he said. "It means they are more attuned to bank practices and lending practices. They are willing now to do more than scratch the surface."

The Justice Department urged the Federal Reserve Board in September 1994 to reject Barnett's bid to buy several Florida thrifts. The department said it planned to charge the bank within 30 days with violating the Fair Housing Act.

The Fed, however, approved the deal.

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