COLUMN: End Justice Department Settlement Slush Fund
The purpose of any legal settlement is to right a wrong against victims, not to enrich political allies of any presidential administration, Democrat or Republican. Under U.S. Attorney General Eric Holder, it was no secret that President Obama’s Department of Justice steered settlements involving large companies to either supersede Congress’ appropriations authority or to support third-party liberal activist groups that were not parties to the case at hand. Billions of dollars in settlements have been used as a Justice Department “slush fund” in the form of civil penalties or forced “donations.”
Congress has sole constitutional authority to appropriate federal funds, so in cases where Congress has refused to provide funding, settlement funds directed by the executive branch to third parties violate the principle of separation of powers. A clear example of executive overreach at the expense of legislative powers is the settlement with Volkswagen over its falsifying of vehicles’ diesel emissions. The Obama administration required the company to pay $2.0 billion of the $14.7 billion settlement in civil penalties toward electric vehicle infrastructure that Congress has refused to fund. The correct recipient of settlement funds in cases involving a harm against the American public is the taxpayer, so the U.S. Department of Treasury should be the destination for settlement penalties—not programs or infrastructure for which elected representatives in Congress have not appropriated federal funds.
On the House floor last week, House Judiciary Chairman Bob Goodlatte (R-VA), whose committee has conducted a longstanding investigation into the Justice Department’s slush fund, cited newly-uncovered evidence that demonstrates how Obama Justice Department officials blocked settlement payouts to conservatives. In a July 2014 email related to a settlement with Citibank, a senior Justice Department official explicitly advised that a recipient of settlement funds—a legal group that provides “conservative property-rights legal services”—was a cause of “concern.” In legal-speak, that means that the conservative group should not be awarded with settlement funds.
That concern on the part of the Justice Department did not apply to political allies of the Obama Administration, including the National Urban League and the National Community Reinvestment Coalition. The Justice Department directed hundreds of millions of dollars in settlement funds to these and other activist organizations that were not parties to litigation and not harmed.
Last week, I voted to support Chairman Goodlatte’s legislation, H.R. 732, Stop Settlement Slush Funds Act of 2017, to permanently bar federal agencies from requiring defendants to donate money to outside groups as part of settlement agreements. The legislation also requires that settlement money goes either directly to victims or to the U.S. Department of Treasury.
U.S. Attorney General Jeff Sessions announced earlier this year that the Justice Department would prohibit use of third party settlements, but this legislation would make that prohibition permanent regardless of any administration’s affiliation. It is time to stop the executive branch’s overreach and abuse of settlements.