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Attorney prepares lawsuit to challenge sweep of mortgage assistance money

An attorney representing a housing organization took its first step in suing the state over a sweep of $50 million meant to assist distressed homeowners.

Tim Hogan, of the Arizona Center for Law in the Public Interest, sent a letter to Attorney General Tom Horne today asking Horne to refuse to transfer the money to the state’s general fund, as he was directed to do by a budget bill signed Monday by Gov. Jan Brewer.

The letter is a precursor to a lawsuit, which Hogan said he plans to file on behalf of the Arizona Housing Alliance.

It cites a state statute under which an official is liable for any payment he makes if it is “not authorized by law.” The letter also cites another statute authorizing the attorney general to bring suit to stop the “illegal payment” of public money, and allows a plaintiff to recover legal costs if the attorney general declines to sue.

Hogan argued that the payment to the general fund because it would violate the consent judgment reached in a settlement between 48 states, including Arizona, and five mortgage lenders. Arizona’s share of the settlement is $97.7 million, which the consent judgment said must be used to ameliorate the effects of the foreclosure, repay the state for money lost due to the actions of the banks, or several other housing-related purposes.

He also said Horne would violate his duties as a trustee of the money if he transferred the $50 million to the general fund. Hogan asked him to affirm that he would not transfer the money.

“If you decline to provide that affirmative representation, we will take appropriate legal action to enjoin you from making the transfer and in the event that you do transfer the funds, we will take appropriate action to impose liability on you for the amount transferred,” read Hogan’s letter, which was written on behalf of an Arizona taxpayer.

Horne said he would make the transfer and would even defend the state in Hogan’s pending lawsuit, despite his opposition to Brewer and the Legislature’s decision to sweep the money.

“I’m going to abide by the wishes for the governor and the Legislature, who are the bodies elected by the people to deal with budget matters,” Horne told the Arizona Capitol Times. “As a matter of policy, I expressed my views that it would have been better policy to not take the 50 million. But once they made a decision, it’s my job as the attorney general, as their lawyer, to defend the state.”

Horne said he did not believe it’s illegal for the governor and Legislature to sweep the money. He would not disclose the contents of a memo he sent to both branches about the sweep, citing attorney-client privilege.

Hogan said he will sue in time to block the transfer on July 1, when the 2013 fiscal year begins.

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