On Wednesday, Attorney General Jeff Sessions and the Justice Department announced that it would end an Obama-era practice that allowed prosecutors to make deals with big companies through “slush fund” payments. The practice saw big prosecutors making agreements with big business. In this scenario, the company would make a large payment to outside groups. Republicans have long argued that this practice was simply a way of making money for liberal or Democrat-linked interest groups.
A memo was sent to the 94 offices of United States attorneys on Wednesday from Jeff Sessions, in which he explained that companies will no longer be allowed to meet their settlement burdens by simply offering money to groups. These groups, in most cases, had no link to the victim or any of the other parties in the case, meaning that justice wasn’t actually being achieved. Attorney General Sessions had said that the money should instead either go directly to the victims or to the Treasury Department, which takes politics out of the situation entirely.
In his official statement, Sessions explained that when the federal government settles legal cases against companies who have done wrong, the money shouldn’t be used to bankroll third-party groups or political groups supported by whichever party is currently in power. Specifically, he said that the settlements should benefit the American people and the people who were affected by the case.
Conservatives and Republicans have been fighting against this practice since it was introduced under Obama’s presidency, and in early 2017, Republican lawmakers put forward new legislation that would change it. The bill set out to stop the Department of Justice from requiring defendants to donate money to these outside groups, after numerous concerns were raised that the donations actually bypass important congressional appropriations measures.
Bob Goodlatte, Republican Representative from Virginia and the Chair of the House Judiciary Committee, introduced the bill. In an official statement, he said that the bill includes both action and oversight. He claimed that Congress should not tolerate political appointees in the Justice Department using these financial settlements to fund their friends and friendly organizations. He said that this is a major institutional issue, and that once the direct victims of the case have received their settlement, the rest of the funds should be distributed after consideration. Specifically, he said that the distribution of extra funds is a policy question that should be decided by Congress – not by prosecutors or bureaucrats. The move by Sessions makes moves towards achieving this.
Was It Legal?
In 2016, Paul Larkin, who is a senior legal research fellow from The Federalist Society, said that this practice was both unlawful and improper. He claimed that the Appropriations Clause, the Miscellaneous Receipts Act, and the Antideficiency Act all make the act illegal, too. He said that no private lawyer would be able to give away the settlement money for their client; therefore, no lawyer acting on behalf of the government should be able to do the same.
One example of slush funds is a case involving Bank of America. The bank was required to pay a record settlement of $17 billion following an investigation into its involvement with the mortgage crisis that resulted in the 2008 crash. The bank was required to pay this money to a number of nonprofit organizations. The groups that received the money, perhaps illegally if Larkin is right, included groups that offered community redevelopment assistance, foreclosure prevention, and housing support and counseling.