Biden administration should resist ‘slush-fund’ settlements

Barely 10 weeks into the Biden administration, we’ve not only learned to expect the unexpected, but also the return of some of the Obama administration’s signature executive branch overreach.

And while the entire Congress agrees on very little these days, every Democrat and Republican who cares about the institution has a special stake in protecting its proper standing as a co-equal branch of government.

For example, Article I of the U.S. Constitution gives Congress the exclusive power to raise taxes and spend money. It doesn’t give career bureaucrats the power to unilaterally hand out federal dollars to outside groups they favor.

Fundamentally, these deals don’t just bypass the constitutional authority of Congress to spend money. They hand to unelected officials the enormous power to enrich organizations that they favor with almost no oversight or accountability. Department of Justice attorneys have directed literally billions of dollars from various settlements over the years.

Fortunately, Attorney General Jeff Sessions instituted changes that stopped this practice so federal prosecutors could no longer steer money obtained through legal settlements to third parties not involved in the litigation.

With narrow exceptions, the final rule adopted in December 2020 bans settlements that require companies to pay “non-governmental, third-party organizations who are not victims or parties to the lawsuit.” Seems simple enough, but it’s an essential bulwark against threatening companies with legal and financial oblivion unless they give money to groups preferred by those in power.

Consider that in 2013, the government crafted a JPMorgan settlement that called for donations to community redevelopment groups. Next came a Bank of America settlement in 2014 that required the bank to set aside $490 million, some of which went to the nonprofit NeighborWorks.

The Department of Justice’s 2016 settlement with Volkswagen required the company to spend $2 billion on an Obama administration electric vehicle initiative after the Congress refused — twice — to fund it.

In the final hours of the Obama administration, the DOJ finalized a mortgage settlement with Credit Suisse that compelled the bank spend $240 million to finance affordable housing projects after increased scrutiny inspired the DOJ to craft donations in the guise of loans.

This history matters because the Biden administration is threatening to unravel this important reform.

In his first day in office, President Biden signed an executive order ominously titled “Protecting Public Health and the Environment” instructing executive agencies to review and possibly reverse orders and policies dating back to January 2017. Among them is the rule against payments to outside groups.

To be sure, the government can require payments reimbursing the victims of a financial scam or for the environmental remediation of a chemical spill. But only groups involved in the underlying litigation should receive money as the result of a government settlement.

Otherwise, the picking of winners and losers by the government is all but inevitable. Not only are federal prosecutors unqualified to select which groups should receive the money, but they open themselves up to the perception or reality of conflicts of interest by doing it.

There’s simply no legal or sensible justification for using the fearsome power of the DOJ to extract payments to unrelated parties for unrelated projects that have nothing to do with the case at hand. Prosecutors still have plenty of tools to go after wrongdoers and obtain the money needed to compensate victims and deter bad behavior in the future. They don’t need the added power to compel a donation to some outside group that was never involved in the first place.

Given the power grabs of the Biden administration thus far, there is real concern that the current White House will both yield to temptation and repeat past practice, seeing this as an opportunity to further empower bureaucrats and political supporters that will — even unwittingly — undermine the rule of law.

The Biden administration should adhere to the strong reasoning behind the current Justice Department rule and leave it in place.

Issa represents California’s 50th District.