The Justice Department has found a new way to pursue civil rights lawsuits, using the powers of the Civil Rights Division not just to win compensation for victims of alleged discrimination but also to direct large sums of money to activist groups that are not discrimination victims and not connected to a particular suit.

In the past, when the Civil Rights Division filed suit against, say, a bank or a landlord, alleging discrimination in lending or rentals, the cases were often settled by the defendant paying a fine to the U.S. Treasury and agreeing to put aside a sum of money to compensate the alleged discrimination victims. There was then a search for those victims -- people who were actually denied a loan or an apartment -- who stood to be compensated. After everyone who could be found was paid, there was often money left over. That money was returned to the defendant.

Now, Attorney General Eric Holder and Civil Rights Division chief Thomas Perez have a new plan. Any unspent money will not go back to the defendant but will instead go to a "qualified organization" approved by the Justice Department. And if there is not enough unspent money -- that will be determined by the Department -- then the defendant might be required to come up with more money to give to the "qualified organization."

The arrangement was used in a recently-settled case, United States v. AIG Federal Savings Bank and Wilmington Finance. The Justice Department alleged that AIG violated the Fair Housing Act and the Equal Credit Opportunity Act by allowing third-party wholesale mortgage brokers to "charge African-American borrowers higher direct broker fees for residential real estate-related loans than white borrowers." The financial institution denied any wrongdoing, and there was no factual finding of wrongdoing. Nevertheless, under the terms of a March 19, 2010 consent decree, AIG agreed to pay $6.1 million to "aggrieved persons who may have suffered as a result of the alleged violations."

That is standard procedure in such cases. But then AIG also agreed, in the words of the consent decree, to "provide a minimum of $1,000,000 to qualified organization(s) to provide credit counseling, financial literacy, and other related educational programs targeted at African-American borrowers." The money would come from unspent funds in the victim-compensation fund. But if it turned out that, after paying off the victims, there was less than $1 million left in the victim-compensation fund, AIG agreed to "replenish the settlement fund so that it contains $1,000,000 for distribution for those educational purposes."

The consent decree directs AIG to consult with the Justice Department on which "qualified organizations" could receive money, and it gives the Department the right to approve where the money will go. In any event, the money will go to groups who have no direct connection to the lawsuit and its allegations of discrimination.

Xochitl Hinojosa, a Justice Department spokeswoman, says no money has yet been given to organizations under the AIG agreement. But she adds that the funds, and those from other cases, will "go to 'qualified organizations' that have a mission that addresses whatever the harm is that was the subject of the litigation."

The Department followed a similar procedure in another case, United States v. Sterling. In that suit, which was first filed in 2006, the Department accused a large California landlord of violating the Fair Housing Act and other laws by "refusing to rent to non-Korean prospective tenants, misrepresenting the availability of apartment units to non-Korean prospective tenants, and providing inferior treatment to non-Korean tenants in the Koreatown section of Los Angeles."

The defendants did not admit any wrongdoing, and there was no factual finding of wrongdoing. Nevertheless, in a November 3, 2009 consent decree, the defendants agreed to pay $2.625 million to compensate alleged victims. On top of that, the consent decree stipulated that if there weren't enough alleged victims on which to spend the $2.625 million, then what's left "shall be distributed...to a qualified organization(s) mutually agreed upon by the United States and defendants...for the purpose of conducting fair housing enforcement or educational activities in Los Angeles County."

Hinojosa says that in the Sterling case, $40,000 will be split between the victim fund administrator and a group called the Southern California Housing Rights Center. According to the Center's website, its goal is to promote "freedom of residence" through the use of "education, advocacy and litigation." Thus, money used to settle a lawsuit over alleged discrimination might well go to fund yet another lawsuit over alleged discrimination.

Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, recently learned about the new Justice Department practice and on July 8 sent a letter to Holder asking for an explanation. "While these settlements may appear reasonable on their face, I am concerned that this change in policy has the potential to divert compensation intended for victims to third party interest groups that were not wronged by the defendant," Grassley wrote. "Absent proper safeguards and internal controls, this policy change could drastically alter the way victims are compensated and could set the Department down a path where third party interest groups are compensated to a greater level than victims. Moreover, as a staunch supporter of victims' rights, I want to know what this change in policy means for individual victims and for advocacy groups that are both selected and not selected to serve as 'qualified organizations.'"

Grassley asked Holder which suits have been settled or are being settled in this fashion, how much money is involved, and what guidelines apply to the settlements. "What, if any, qualifications are taken into consideration when determining whether an organization should be designated a 'qualifying organization'?" Grassley asked. "What protections and safeguards are in place to oversee the use of funds by the 'qualified organization' to ensure that monies that could otherwise be used for victim compensation are used in a manner free of fraud, waste, and abuse?"

Grassley has not yet received an answer from Holder.

Republicans are particularly concerned that the "qualified organizations" money might end up with groups that are associated with the community organizing group formerly known as ACORN. Republican lawmakers want to avoid sending federal money to groups that Congress has deemed unsuitable to receive it.

But the concerns of Republicans, and perhaps some Democrats, go beyond ACORN and other activist groups. The new Civil Rights Division tactic represents a departure from a fundamental principle of such cases, which is the pursuit of justice on behalf of actual victims. "If the Department of Justice recovers funds for alleged civil rights violations, the money should go to compensate victims or to the Treasury," says Bob Driscoll, who was a top official in the Civil Rights Division during the first two years of the George W. Bush administration. "The practice of the Civil Rights Division steering settlement funds to favored advocacy groups is at odds with both civil rights laws and common sense. If Congress wants to fund certain advocacy groups or set up grants for agencies to award in order to promote non-discrimination, it can. But allowing the Civil Rights Division to steer a defendant's money to its ideological allies is offensive."

Byron York, The Examiner's chief political correspondent, can be contacted at byork@washingtonexaminer.com. His column appears on Tuesday and Friday, and his stories and blog posts appears on ExaminerPolitics.com