Garland should oppose Biden effort to reinstate controversial ‘slush funds’ practice

While Attorney General Merrick Garland’s tenure as the Attorney General of the United States is just beginning, trouble is afoot already. President Joe Biden’s administration quietly announced its intent to lift the ban on funneling settlement payments to a government-approved list of outside organizations and special interest groups. The controversial Obama-era practice allows the Department of Justice (DOJ) to operate what amounts to a settlement “slush fund.”

If the Biden administration allows this practice to resume, the fairness of our legal system will be threatened as funds received from settlements are dispersed to politically favored entities.

It should go without stating that proceeds from a lawsuit should be distributed only to the parties actually involved with and affected by that lawsuit. That’s why former Attorney General Jeff Sessions ended this practice. In 2017, Sessions prohibited the DOJ and all U.S. Attorney’s offices throughout the country from “entering into any agreement on behalf of the United States in settlement of federal claims or charges that directs or provides for a settlement payment to non-governmental, third parties that were not directly harmed by the conduct.”

State governments are tackling the issue across the country as well.

Late last year, North Carolina’s Court of Appeals ruled that the state’s attorney general could not keep and distribute money from a settlement.

In Kentucky in 2014, former state Attorney General Jack Conway announced that money from a $32 million settlement with two drug companies, related to alleged cardiovascular risks of certain medications, would be used to expand substance-abuse treatment centers. Senate leadership at that time expressed concerns with the process of dispensing the settlement funds and noted that it “circumnavigates a Kentucky law requiring such funds go into the state’s General Fund.”

Now in Oklahoma, state Attorney General Mike Hunter is engaged in a battle with the legislature over the opioid slush fund from his settlements with pharmaceutical manufacturers. Legislators are now considering S.B. 610, which would create the Opioid Settlement and Judgment Revolving Fund. This is in partial response to Hunter’s intent to use a bulk of the first settlement to establish a Health and Wellness Center at his alma mater, Oklahoma State University, where his son also happens to be employed.

In prohibiting the slush fund practice, Sessions stated, “When the federal government settles a case against a corporate wrongdoer, any settlement funds should go first to the victims and then to the American people — not to bankroll third-party special interest groups or the political friends of whoever is in power.”

Sessions was right to put an end to this practice — these settlement funds belong to the American people, not to special interest groups that are uninvolved in the litigation in question.

Congressional Republicans attempted to codify the directive in 2017 with the Stop Settlement Slush Funds Act. While the bill unfortunately didn’t pass, it did become an official agency rule effective December 2020, which is now included in the Biden administration’s list of agency actions from the previous administration to be reviewed.

If the slush fund practice is allowed to begin yet again, it will open the door for political cronyism to take hold of government litigation by directing settlement money to a list of specific, government-approved outside groups. It does not require even a small stretch of the imagination to conclude that favoritism will seep into the decision-making process in these cases. The American people expect that lawsuits brought on their behalf should serve the public interest, not that of a given administration’s allies.

The question here is not whether any outside group deserve these funds. The issue at hand is that the DOJ should not carry out the responsibility that properly belongs to Congress: disbursing funds paid to the federal government in litigation. Just as is the case with individual states, proceeds from lawsuits should be controlled by our elected legislators who are accountable to their constituents.

Attorney General Merrick Garland should push back on this improper practice and recommend to the president that the current prohibition on slush funds remain intact. Not only is this “good government,” it would burnish General Garland’s reputation as a moderate. Most importantly, this form of lawsuit abuse should continue to be rejected. Otherwise, we may be looking at four years during which cases brought by the DOJ on behalf of the American people serve the interests of favored political allies, not the broader public interest.

Tiger Joyce is the president of the American Tort Reform Association.