WASHINGTON - The prospect of being sued under the disparate impact theory of discrimination is giving lenders and banking attorneys nightmares.

The bad fair-lending dream goes something like this: the government could nail financial institutions for having racially neutral policies that inadvertently place minorities at a disadvantage; prosecutors wouldn't even have to show intent; and mere statistical deviations could lead to millions of dollars in damages.

Now two lawyers at the Washington office of Fried, Frank, Harris, Shriver & Jacobson said they have found the government's Achilles' heel, and in the most unlikely of places.

Thomas Vartanian and Robert Ledig said the Justice Department - in an appeal filed at the Supreme Court in a crack cocaine case - trashed a disparate impact standard analogous to the one it wants to apply to banks.

The drug case centers on federal sentencing guidelines, which prescribe harsh sentences for crack cocaine and lighter ones for powder cocaine. Minority defendants across the country have challenged the different standards, arguing that they lead to discrimination against blacks and Hispanics because these groups are arrested more often than whites for crack offenses.

In essence, they charge the government is using a policy that is neutral on its face to discriminate.

That should sound familiar to bankers because it is the same charge the government is threatening to lodge in disparate impact cases.

The government, in its appeal, argued that evidence that whites receive lighter sentences than minorities doesn't prove discrimination.

"Rather, it recognizes the empirical possibility, that, for socio- economic and historical reasons, members of particular racial and ethnic groups may predominate in the commission of certain crimes," the government wrote in its petition.

Mr. Vartanian and Mr. Ledig said this statement proves the government believes numbers alone are not sufficient. They said the government's position is no different than the banking industry's argument that many minorities for historical reasons have lower net worths than whites, which results in higher loan-rejection rates.

The government is arguing that it is not enough to note all the defendants are minorities, Mr. Ledig explained. "You have to go beyond that to show actual differential treatment."

This contradiction in policy may return to haunt the government, the lawyers advised.

"If a financial institution is defending against a disparate impact case, it is fair game to use the Department of Justice's own theories and own words in other settings against them," Mr. Vartanian said.

Not everyone is as enthusiastic about this theory as Mr. Vartanian and Mr. Ledig.

"I don't see it as carrying the day in defending a fair-lending claim," said Warren Traiger, a New York lawyer.

"It is interesting on a logical level. There seems to be an inconsistency. But in one case you are talking about locking people up and in the other case you are looking at civil penalties. So the theories are different."

John P. Relman, the director of the housing project at the Washington Lawyers Committee for Civil Rights and Urban Affairs, agreed that lawyers shouldn't compare the two situations.

"These are very specific laws that were passed for very specific purposes," Mr. Relman said. "You can't just take the theory and apply it to criminal law."

Justice Department officials declined to comment.

But Andrew Sandler, a partner at Skadden, Arps, Slate, Meagher & Flom, said he agrees with Mr. Vartanian and Mr. Ledig.

"The Department of Justice acknowledgement is clearly reflected in the case law of the Fair Housing Act, and indeed there is a real question as to whether the disparate impact theory should be applied at all in the fair- lending context," he said.

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