New Portland Trail Blazers owner played key role at company Oregon accused of predatory lending

This article was produced in partnership with ProPublica’s Local Reporting Network. Sign up for OPB’s First Look to get our stories in your inbox six days a week.

Oregon Gov. Tina Kotek is on the verge of giving the Portland Trail Blazers a major gift: hundreds of millions in taxpayer dollars to overhaul the team’s arena in an effort to keep the Blazers’ incoming owner, billionaire Tom Dundon, from moving the NBA franchise to a new city.

The deal came together with little public discussion of how Oregon and other states in 2020 landed a $550 million settlement with the car loan company where Dundon built his wealth. The settlement followed an investigation into lending practices that Oregon’s then-attorney general, in a news release, described as “predatory and harmful.”

Now, Oregon Public Broadcasting and ProPublica have obtained documents that reveal the role Dundon played in pushing some of the key company practices that regulators later presented as problematic.

Specifically, the documents show that Dundon, as the company’s CEO, was behind what regulators called an “aggressive push” at Santander Consumer USA in 2013 to waive requirements that car dealers prove borrowers had enough income to afford loans. The company would then charge more for those loans to ensure profit even in cases where borrowers ultimately failed to keep up with payments, according to internal emails and a slide deck that described findings in the multistate investigation.

Oregon officials wrote in their 2020 court complaint against Santander Consumer that many customers took out loans under the “false pretense” that they were acquiring a car they’d eventually own, when in fact the terms of the loans were so onerous that they would “almost certainly” result in the loan defaulting and the car getting repossessed.

Oregon Attorney General Dan Rayfield, when asked about Dundon’s call for waiving proof of income on car loans when he was at Santander Consumer, said in a statement: “Proof of income requirements exist for a reason — they protect borrowers from being sold loans they cannot afford. When those guardrails get waived, dealerships win in the short term, and consumers lose.”

Rayfield, who was elected in 2024, is working with other state attorneys general in a continuing investigation into another auto loan company, Exeter Finance, where Dundon’s website lists him as an investor and where he has served as chairman of its board. Dundon left Santander Consumer in 2015.

“Working families put a lot on the line when they take out a loan,” Rayfield said, “and they deserve lenders who treat them fairly and follow the law.”

Dundon, whose deal to buy the Trail Blazers is expected to close on March 31, did not answer emails sent to his investment firm from OPB and ProPublica that included a copy of the newly obtained records and a list of questions. When provided separately with an overview of the story via text to his phone, he responded simply: “Can talk after 3/31.”

Exeter has said in regulatory filings that it is cooperating with the current multistate investigation. A spokesperson for Exeter declined to comment.

Asked for comment by OPB and ProPublica, Santander Consumer referred back to the statement it gave the newsrooms for an October story: “Operating in a highly regulated industry, we have robust processes in place that are designed to protect customers and adhere to all regulatory requirements and industry best practices.”

Lawmakers recently approved $365 million in public funding to renovate Portland’s 30-year-old Moda Center, home to the Blazers, one of Oregon’s most prominent businesses. The bill awaits Kotek’s signature. Combined with city and county money, the total proposed public backing has reached $870 million, far exceeding what the team originally asked for.

Kotek’s office did not respond when asked when she became aware of the investigations into businesses connected to Dundon and whether it affected her position on giving public money to the team. Instead, a spokesperson pointed to public remarks Kotek made in support of public funding for the Blazers arena as the Legislature adjourned.

“This is a great first step,” Kotek told reporters at the time. “We’re going to get the best deal possible for Oregon, and the economic impact of keeping not only the Blazers but all the activity at Moda is really important for the state.”

The chief sponsor of the bill, Senate President Rob Wagner, a Democrat representing the Portland suburb of Lake Oswego, also declined to answer when asked if he was aware of Oregon’s investigations into Dundon’s businesses.

“The Oregon Legislature does not have a role in who owns the Trail Blazers,” Wagner said in a statement. “Our goal all along has been to support the renovation of Oregon’s Arena so it can remain an economic and entertainment hub for the region.”

But a prominent critic of the deal with the Blazers said Dundon’s history with regulators is troubling.

State Sen. Khanh Pham, a Portland Democrat who cast one of just six no votes in the 30-person chamber, wrote at the time that she supported a public investment in the arena but worried the Legislature wasn’t including enough protections for taxpayers. She tried unsuccessfully to win amendments that would require the state to negotiate a private investment and revenue sharing with the Blazers.

Pham said she wasn’t aware of Dundon’s history in Oregon until OPB and ProPublica asked her about the newly obtained emails.

“This new information affirms that guardrails on public-private partnerships are important in all instances and especially this one,” Pham said in a statement.

“Ignoring this internal concern”

Dundon was known as a key player in the rise of subprime lending to car buyers, a niche that supporters say makes car ownership possible for people with poor credit. He sold the subprime company he founded to a Spanish firm in 2006, retaining a 10% stake and becoming CEO of the newly formed company.

In January 2013, he took a step that would keep the company’s lending from being slowed down by people having to prove they could afford the cars they were buying. He set a plan in motion that would let the company advertise to car dealers that Santander Consumer wasn’t going to ask anymore for proof of income, or “POI,” in order to issue a loan.

“Lets do a test,” Dundon wrote to two of his senior employees, Karthik Chandrasekhar and Steve Zemaitis. “I want to waive poi more often.”

As the plan moved forward, Santander Consumer’s chief risk and compliance officer, Michele Rodgers, sent an email on Jan. 21, 2013, to Zemaitis and various senior executives expressing worry the company’s plan could violate federal law.

Rodgers identified potential concerns surrounding anti-money laundering and identity theft laws. She also noted that federal regulators were less than a year from implementing a new rule for another type of loan — home mortgages — requiring those lenders to “determine the consumer’s ability to repay both the principal and the interest over the long term.”

But the records collected by the attorneys general indicate the plan proceeded.

Two weeks after Dundon’s email, Santander’s marketing and sales teams got involved, records show.

Matt Fitzgerald, Santander Consumer’s executive vice president of sales and marketing, described a conversation with Dundon about “stips,” or statements stipulating the borrower’s income, address and phone number have been verified.

“I just rode up the elevator with TD and he wants us to market (fax, e-mails, sale handout) the waiving of stips to all dealers,” Fitzgerald wrote on Jan. 30, 2013. “And he wants to see these communications by the end of the day.”

He added: “We can serve it up to dealers that due to their good performance of the loans, we have decided to waive these certain stips to make it easier for you to close deals.”

Mark Williams, a former Federal Reserve regulator who teaches finance at Boston University’s Questrom School of Business, reviewed the state’s summary of the company’s correspondence and said it was troubling that internal concerns seemed to go unheeded.

Williams described proof of income as one of the pillars of bank lending.

“To say, ‘Sure, I’ll give you a loan and we don’t even care whether you make income or not,’ or, ‘You don’t even have to state your income,’ that’s counter to just sound banking practices,” he said.

By early February of that year, the company was days away from announcing its new plan to car dealers, including a fax-based marketing plan and promotional flyer, ready for final approval.

“Flyer looks good,” Robert O’Brien, senior vice president at Santander, wrote on Tuesday, Feb. 5, “however the POI change will not be in the system until Thursday.”

He suggested holding off a couple of days. Then Rodgers, the company’s chief risk and compliance officer, chimed in again with a question.

“What is the POI Change?” she asked.

“Tom wants to waive POI as much as possible and build in pricing to cover the incremental risk,” O’Brien wrote back. O’Brien said that their tests showed the stated income was correct on most loans, and that they would continue to require proof of income for dealers with a history of problems. He said they found that requiring proof of income “reduces capture especially in the nearprime segment.”

In other words, the company felt it was limiting its business opportunities by forcing potential customers to prove they could afford to pay back a car loan. Any increase in risk created by the new approach would be made up through fees and interest rates.

“I am just trying to ensure we aren’t disparately treating any of our customer base,” Rodgers wrote to O’Brien on Feb. 5, 2013. Under fair lending laws, companies are not allowed to enact policies that would have disparate impacts on certain groups of customers, such as people of a particular race or gender.

Dundon is not listed as a recipient on the emails that Rodgers sent, and the degree to which her concerns may have been shared with him is unclear from the company emails obtained by OPB and ProPublica.

However, in the slide presentation regulators gave to Santander Consumer, they said the remarks O’Brien and Fitzgerald described Dundon making showed he continued to push for waiving proof of income even after Rodgers raised red flags on Jan. 21. The slides characterized Dundon as “ignoring this internal concern” from his company’s risk and compliance officer.

Oregon’s subsequent 2020 legal complaint against the company alleged Santander Consumer did not, as O’Brien’s email suggested it would, continue requiring proof of income from dealers with a history of fudging borrowers’ incomes as it launched its new approach.

“When Santander rolled out this change to its funding requirements, Santander did not bar those dealers identified as ‘problematic’ by Santander from using stated income on loan applications,” Oregon’s attorney general wrote in the 2020 complaint. “Santander’s decision to broadly market its new stated-income policy, even to dealers with a history of misstating income, led to a significant spike in the number of early payment defaults.”

Dundon’s 2015 departure from Santander Consumer came with a separation agreement of more than $700 million, including cash for stock he owned, according to Securities and Exchange Commission filings.

Rodgers, Zemaitis and Chandrasekhar all left Santander Consumer and are currently listed as senior executives at Exeter Finance, a subprime car lender where a number of top Santander Consumer employees have landed.

They did not respond when OPB and ProPublica sent copies of the Santander Consumer correspondence in which they are named and requested comment. O’Brien and Fitzgerald are no longer alive.

Santander Consumer did not admit any wrongdoing as part of the settlement it paid to 33 states — including Oregon — and the District of Columbia.

Private business, public money

Six years after the settlement, Dundon and his associates are playing hardball in negotiations with state and city leaders to secure public money to revamp Portland’s Moda Center.

Although sports arena renovations in some cities have been 100% taxpayer-financed, at least 10 — including in Atlanta; Phoenix; Jacksonville, Florida; and Cleveland — have been funded wholly or partially with private money during the past decade. Just north of Portland, Seattle’s Climate Pledge Arena opened in 2021 after $1.15 billion in renovations that were entirely privately financed.

That same precedent exists in Portland: When the Moda Center opened in 1995 — back then it was Portland’s Rose Garden — Blazers owner Paul Allen got $34.5 million from the city of Portland but financed the rest of the $262 million construction himself.

Dundon, too, has offered private dollars as part of arena renovations in the past. In 2023, he agreed to a new arena lease in Raleigh, North Carolina, for his professional hockey team, the Carolina Hurricanes. Raleigh put $300 million toward the arena while Dundon committed to investing $800 million over 20 years toward developing an entertainment district in the surrounding area.

Portland was a different story.

According to a January chat group message from a city employee whose job is to manage sports venues, a consultant for the team and Dundon’s billionaire ownership group was asking for the public to cover 100% of the cost to renovate the Moda Center.

A phalanx of lobbyists hired by the Blazers, meanwhile, were telling state lawmakers they’d need a total of $600 million, starting this year.

“The assumption that the incoming ownership group can finance an additional $600 million for Moda Center — which is now a publicly-owned community asset is not possible,” lobbying materials from the Blazers stated.

After state and local leaders concluded that the team’s initial ask wasn’t nearly enough to cover rising construction costs, they bumped up the investment to $870 million.

Team representatives wrote in the lobbying material that the Blazers’ future in Portland was at stake — and that a departure would threaten the city’s turnaround from pandemic-era headlines about downtown retail vacancies and crime.

“If the Portland Trail Blazers leave Rip City,” team officials stated, “we are losing far more than the tax revenue the Blazers generate for the General Fund. It would have a devastating impact on the City’s national and international reputation and would feed the ‘doom loop’ narrative we have all been working to refute.”

The Blazers did not respond to emailed questions. When asked about the lobbying effort in a March 17 interview on OPB’s “Think Out Loud,” the Blazers’ President of Business Operations Dewayne Hankins said Dundon’s ownership group never explicitly told the team it would move without a public investment. But he noted that other cities are pushing hard to get an NBA team and said the Blazers had “heard rumblings” of interest.

“You have a team that has very few years left on their lease,” Hankins said of the Blazers. “You have a team that could potentially be portable.”

Portland Mayor Keith Wilson declined to say whether Dundon’s business history would affect the city’s ongoing negotiations with the Blazers after the late Paul Allen’s sister agreed to sell the team. The council plans to take up the issue of arena funding no later than this summer.

“Jody Allen chose to sell the team to the ownership group led by Tom Dundon,” Wilson said in a statement, echoing a point made by Oregon’s Senate president. “The City is not a decision maker in the process of approving franchise ownership changes; that authority lies exclusively with current team ownership and the NBA. The City will work in good faith with whoever owns the Trail Blazers.”

John Van Alst, senior attorney at the National Consumer Law Center, said state and local officials should use caution in negotiating with someone whose business the state previously accused of violating consumer protection laws.

“If they’re willing to violate those rules, I’d be concerned about doing business with them,” Van Alst said.

Van Alst said leaders in Portland, far more so than people buying a car through a subprime lender like Santander Consumer or Exeter, have options at their disposal as they negotiate for the Blazers’ future.

“They have more resources to make good choices, hopefully, than a lot of folks do who get themselves tangled up in really bad subprime auto financing,” Van Alst said.