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Patrick tied to company under fire

Subsidiary's lending practices questioned

Deval Patrick, who is vowing to fight for the underdog as he begins his run for the Democratic nomination for governor, last fall joined the board of directors of a large national mortgage company that has been criticized by state regulators and advocates for the poor for what they say are unfair lending practices aimed at low-income people and members of minority groups.

The company, Ameriquest Capital Corp. of Orange County, Calif., acknowledged last month that authorities in 25 states were questioning the company about lending practices by its subsidiary, Ameriquest Mortgage. Attorney General Thomas F. Reilly's office said Massachusetts is one of those 25 states.

The company also said it had settled a $50 million class action suit that charged it defrauded thousands of borrowers in four states.

Ameriquest is a privately held holding company whose co-owner donated $5 million to a conservative political group that last fall produced ads that ridiculed Democratic presidential candidate John F. Kerry for switching positions. One ad showed him sailing back and forth on a windsurfer.

Dawn Arnall and her husband, Roland E. Arnall, are the principal shareholders in Ameriquest. They also cochaired President Bush's inaugural committee. Dawn Arnall donated $5 million last August to the Progress for America Voter Fund, an independent political group known as a 527 committee that spent $35 million in a media blitz last fall to attack Kerry. She and her husband have been major donors to Bush over the last several years.

Patrick joined the Ameriquest board Aug. 6.

In a statement to the Globe, Patrick said he joined the company's board to help Ameriquest deal with the allegations of predatory lending and to put in place policies that will protect low-income consumers. He denounced the anti-Kerry ads that Dawn Arnall helped finance as ''pure trash."

''I don't ask the executives of this company what their political leanings are, and they don't ask me," Patrick said.

A spokesman for Ameriquest said the Arnalls do not comment on their political donations or activities. The spokesman also said the firm does not comment on specific regulatory inquiries, but denied that the firm has unfair lending practices.

''We hold ourselves to the highest standards and ethical practice and do not tolerate unethical or improper behavior by our employees or our vendors," Ameriquest spokesman Charles Sipkins said.

Patrick, who grew up in a poor neighborhood in Chicago and attended Milton Academy and Harvard University, announced his candidacy for governor last week. He is the state's first significant African-American candidate to seek the governorship and has touted his work for civil rights causes and as the head of the US Justice Department's civil rights division under former president Bill Clinton.

In that job in 1996, Patrick persuaded Ameriquest to enter into a $4 million settlement with the Justice Department after the company faced charges that it and its affiliates engaged in discriminatory pricing practices. It denied the allegations.

Patrick's role on the Ameriquest board and his other high-level corporate experiences highlight his potential political problems as he seeks the 2006 Democratic nomination. He has come under criticism from some labor leaders for his role as general counsel to Coca-Cola Co., which union officials say is culpable in human rights abuses and environmental pollution in several overseas operations. The company denies the allegations.

Four years after the Justice Department settlement, ACORN, a national advocacy group representing low-income borrowers, accused Ameriquest of preying on minorities and other vulnerable borrowers. Ameriquest denied the allegations, and the two settled their differences in July 2000, when Ameriquest agreed to a list of new principles in its lending practices.

But in the last year, Ameriquest has faced more allegations. A legal aid group in Pennsylvania is calling on state regulators to investigate its lending practices, saying the company is taking advantage of low-income and elderly homeowners. Connecticut regulators are deciding whether to bar Ameriquest from selling mortgages after receiving dozens of complaints.

''These are serious charges that I believe the company is taking seriously," Patrick said. ''In fact, the company is using the situation as an opportunity to raise the bar for the entire industry."

''The measure of a good company is not whether it always gets it right, but how it responds when things go wrong," Patrick said. ''I see my role in every company I have been associated with as trying to make it better. Sometimes problem solvers, if they're serious, get their hands dirty. That is exactly the kind of leadership we need in Massachusetts today."

Sipkins, the spokesman for Ameriquest, said Patrick's role on the board will be to ''assist and lead us in the ongoing process of improving both our own companies and working to set the highest standards for the entire lending industry."

Frank Phillips can be reached at phillips@globe.com.

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