One of President Joe Biden’s first executive actions was an ordered review of his predecessor’s ban on “slush fund” settlements at the Department of Justice (DOJ), where federal prosecutors direct remediation payments to outside groups beyond the Treasury Department or parties directly injured.
Alabama Republican Sen. Tommy Tuberville is proposing legislation to make that ban permanent. Money from settled lawsuits, Tuberville told The Federalist, “should either go to the victim or the Treasury,” period.
Under the Obama administration, however, judges and prosecutors made a habit of directing settlement money to lists of pre-approved, left-wing entities as a form of political patronage.
The case that motivated Tuberville to re-introduce the legislation titled “Stop the Settlement Slush Fund Act,” previously proposed four years ago in the House but failing to pass the upper chamber, the senator said, was the big bank lawsuit that came out of the 2008 financial crisis. The banks were forced to pay about $110 billion in fines, $49 billion of which went to the Treasury Department. Another $45 billion went to “consumer relief,” $5.3 billion to states, and $10 billion to “others” including agencies and whistleblowers, according to a breakdown of the settlement by the Wall Street Journal.
The $45 billion marked for “consumer relief” included funds “dedicated to helping borrowers and funding housing-related community groups.”
Tuberville highlighted a separate Bank of America lawsuit in particular, where in 2016 the bank was fined $16.6 billion on charges of financial fraud and reduced its penalty by $138 million with a deal with prosecutors for “donations” to pre-determined groups. The bank was credited $2 for every $1 “donated,” and sent $20 million to housing groups, $30 million to legal aid non-profits, and $50 million to community development projects. The groups were overwhelmingly left-wing political organizations. Such gifts of government aid are usually given through legislative processes as opposed to judicial discretion.
Then-Attorney General Jeff Sessions banned such arrangements in 2017 under President Donald Trump. The ban was formalized in the waning days of the outgoing administration that prohibited companies from paying “non-governmental, third-party organizations who are not victims or parties to the lawsuit.” It’s now one of many Trump-era rules under re-examination by the Biden administration, and may end up on the chopping block.
During his February confirmation hearing, Attorney General Merrick Garland told lawmakers he was open to rescinding the Trump ban on slush fund settlements while emphasizing he believed “damages, recoveries should first go to help victims.”
“I don’t know very much at all about the policy, and it would be something I would have to consider if I’m confirmed,” Garland told the Senate Judiciary Committee. “I’d have to hear the arguments on both sides of why the policy obviously started.”
Tuberville, however, wants to codify the ban into federal statute.
“This is a prime example of the swamp with how you circumvent the law,” Tuberville told The Federalist, emphasizing the judiciary’s role in determining guilt or innocence, not rectifying them with decisions on how recovered funds be spent. “Congress has got the power of the purse, not the judges, not the federal prosecutors.”