House Acts to Block Slush Fund Payments

Published March 31, 2017

U.S. Rep. Bob Goodlatte (R-VA), the House Judiciary Committee chairman, introduced House Resolution 732, the Stop Settlement Slush Funds Act, to block the U.S. Department of Justice (DOJ) from “entering into or enforcing a settlement agreement on behalf of the United States … that provides for a payment to any person or entity other than the United States,” according to the bill’s text.

The bill is aimed at preventing the federal government from requiring defendants being prosecuted for federal civil or criminal actions who accept a settlement agreement to make donations to third-party organizations—such as environmental groups, civil-rights groups, or charities—as part of the legal settlement.

The bill would allow exceptions in cases in which the third-party recipient is harmed by the defendant’s action.

The House passed the same legislation on September 7, 2016, by a vote of 241 to 174, but the companion bill in the Senate was never brought to a vote after then-President Barack Obama threatened to veto the legislation.

Funding Obama’s Allies

In House testimony in 2016, before the bill passed, Goodlatte and Rep. Tom Marino (R-PA) joined other congressmen in saying the bill is needed to prevent the Justice Department from funneling funds to activist groups in avoidance of the constitutional appropriations process. A two-year House Judiciary Committee Investigation found the Obama-era DOJ paid up to $880 million to third-party groups that often supported or lobbied for Obama’s initiatives.

The House Judiciary Committee investigation cited numerous settlements in which DOJ proposed defendants could reduce their fines by donating to third parties selected by DOJ. For instance, instead of paying a $2 million fine to the U.S. Treasury to settle a case, a defendant could pay $1 million to the treasury and $500,000 to an environmental group or a public-interest law firm chosen by DOJ.

Objecting to such settlements, Marino said on the House floor on September 7, 2016, “under federal law—under federal law—all money obtained through Department of Justice settlements must be deposited directly to the Treasury.”

Stopping the Slush Fund

David Ridenour, president of the National Center for Public Policy Research says HR 732 would stop an outrageous and unconstitutional practice introduced by Obama.

“The Stop Settlement Slush Funds Act of 2017 would eliminate the shocking practice begun by the Obama administration in which millions of dollars won by the government in lawsuits against corporations are diverted to left-wing activist groups, instead of to victims or to the federal Treasury,” Ridenour said. “Congress, not the Department of Justice, is empowered to determine how federal monies are spent. Diverting settlement funds to political allies, or anyone else, is unconstitutional and wrong.

“The DOJ is not only diverting the funds, it is crediting the corporations double when it pays off settlements to activists instead of to the Treasury, thereby making it even more likely the taxpayers will never see a dime,” Ridenour said.

HR 732 was referred to the House Subcommittee on Regulatory Reform, Commercial, and Antitrust Law on January 31. A companion bill was offered by Sen. James Lankford (R-OK) in the Senate on February 7.

Michael McGrady ([email protected]writes from Colorado Springs, Colorado.