House passes bill stopping Justice Department's settlement 'slush fund' practice

Source: Washington Examiner | October 25, 2017 | Sean Higgins

Congress passed legislation Tuesday aimed at stopping the Justice Department from sending settlement money from its prosecutions to third-party groups not involved in the cases, an Obama administration era practice critics called a “slush fund.”

“An investigation by the House Judiciary Committee last Congress revealed the Department of Justice’s abuse of power: using settlement agreements to direct money away from victims toward organizations of their choosing and away from those they disliked,” said Rep. Bob Goodlatte, R-Va., chairman of the committee.

“Regardless of which party is in the White House, subverting Congress to funnel money to outside organizations is unacceptable and unconstitutional.”

The bill passed 238-183. Seven Democrats joined Republicans in approving the legislation.

The House passed similar legislation last year by a vote of 241-174.

As a part of multi-billion dollar plea agreements DOJ made in 2014 with Bank of America and Citigroup regarding the 2008 financial crisis, the banks were directed to donate respectively, $100 million and $50 million, to housing-related charities and other nonprofit entities. These requirements were characterized by the settlements as relief for victims of fraud.

However, the recipients were not themselves victims or otherwise party to the cases.

Ordinarily, this would have made them ineligible for relief under long-standing rules for federal settlements and the funds would have instead gone directly to the Treasury Department. The funds would have become subject to congressional appropriations. The Obama administration circumvented this requirement by getting the banks to agree to make the donations prior to signing their plea agreements.

This, the administration argued, meant the banks were voluntarily making the donations. But, the banks would have violated their plea agreements if they didn’t make the donations.

Goodlatte held numerous hearings on the settlements in 2015. In one, then-Deputy Assistant Attorney General Geoffrey Graber said, “This kind of relief could not have been ordered by a court, even if the government had prevailed at trial.”


Recipients included liberal groups such as the National Council of La Raza ($1.5 million), Habitat for Humanity ($1.5 million) and the National Urban League ($850,000), prompting several Republicans to give the effort the slush fund label. Data for the Citigroup settlement was not available.


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  •  Consistent #19553

    Senators Cruz, Cornyn, Hatch, Lankford, and Lee Introduce Stop Settlements Slush Fund Act

    June 10, 2016

    WASHINGTON, D.C. – U.S. Sens. Ted Cruz (R-Texas), John Cornyn (R-Texas), Orrin Hatch (R-Utah), James Lankford (R-Okla.), and Mike Lee (R-Utah) today introduced the Stop Settlements Slush Fund Act (S.3050) to prohibit settlement agreements that require donations to third-parties. This legislation will prevent the Department of Justice’s (DOJ) practice that sometimes requires defendants who choose to settle lawsuits to contribute funds to preferred third-party groups selected by the Administration. In recent years, more than $500 million have been transferred to outside groups, which include political activist groups, in the form of donations directed by the DOJ.

    Specifically, the bill would prohibit officials or agents of the government from entering into or enforcing any settlement agreement on behalf of the US that provides payment in the form of donations to third-parties. The bill still allows payments for environmental damages and still allows losing parties to pay restitution for harm caused by the party. Last year, The Wall Street Journal reported that the DOJ keeps a list of approved non-profits that benefit from settlements. In 2011, the DOJ directed $30 million from a banking settlement to go towards left-leaning non-profit groups, like the National Community Reinvestment Coalition and NeighborWorks America.

    “Cronyism reigns supreme at President Obama’s DOJ, and its use of settlement agreements to funnel millions of dollars to left-wing political allies is perhaps the perfect example,” Cruz said. “This bill will put an end to that sordid practice and ensure that settlement money is only used for public purposes. Congress should pass it without delay.”

    “Our judicial process must be driven purely by a mission to do right by those wronged, and not be co-opted to advance ideological goals by whichever political party controls the White House,” said Cornyn. “Directing portions of financial settlements to partisan interest groups is a deceptive practice that has happened far too often with the Obama Justice Department. It is the job of Congress, not the Executive Branch, to decide how money recovered by government lawyers is spent, and this bill will put an end to this gross abuse of power.”

    “For too long, the Department of Justice has used its ability to require settling defendants to donate money to third parties as a way to skirt Congress’s spending authority and funnel money to favored groups,” said Hatch. “Settlement payments should be used to redress harm, not line the pockets of groups that government lawyers happen to favor. This bill will prevent the Department of Justice from continuing to treat settlement agreements as a source of free money for pet projects.”

    “The Department of Justice’s continued action to circumvent Congress and direct money for their political agenda is the definition of abuse,” said Lankford. “When the Department of Justice agrees to settlements on behalf of the US government that include financial penalties, it is not their job to force penalty money to be paid in the form of donations to third-parties of their choice. This bill will simply ensure the money awarded through settlements through the Department of Justice goes to victims. This will ensure the legislative branch can do their job to allocate spending through an independent, transparent process.”

    “The Department of Justice is supposed to work for all Americans, not just whichever special interests are favored by whoever is currently in this White House,” Lee said. “This bill would provide a sorely needed check on executive power by making sure DOJ settlements go to the true victims of an injustice, not some third party group favored by political appointees.”

    House Judiciary Committee Chairman Bob Goodlatte (R-Va.) has introduced companion legislation to the Stop Settlements Slush Fund Act.


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