Congressional investigators say a slush fund set up at the Obama Department of Justice has paid billions of dollars to activist groups rather than the victims of misdeeds the government sued financial companies over.
A Wall Street Journal editorial by Kimberly Strassel described the scheme thusly back in 2015:
The Justice Department prosecutes cases against supposed corporate bad actors. Those companies agree to settlements that include financial penalties. Then Justice mandates that at least some of that penalty money be paid in the form of “donations” to nonprofits that supposedly aid consumers and bolster neighborhoods.
The Justice Department maintains a list of government-approved nonprofit beneficiaries. And surprise, surprise: Many of them are liberal activist groups. The National Council of La Raza. The National Urban League. The National Community Reinvestment Coalition. NeighborWorks America (which awards grants to left-leaning community organization groups, and has been compared with Acorn).
This strategy kicked off with the $13 billion J.P. Morgan settlement in late 2013, though in that case the bank was simply offered credit for donations to nonprofits. That changed with the Citigroup and Bank of America settlements, which outright required $150 million in donations. The BofA agreement contains a provision that potentially tees up nonprofit groups for another $490 million. Several smaller settlements follow the same mold.
To further induce companies to go the donation route, Justice considers these handouts to be worth “double credit” against penalty obligations. So while direct forms of victim relief are still counted dollar-for-dollar, a $500,000 donation by BofA to La Raza takes at least $1 million off the company’s bill.
Critics of the practice rightfully argue that banks fined by the government for discrimination or mortgage abuse are provided an incentive to donate to the slush fund rather than pay fines to the Treasury Department to remove Congress from the process of reallocating the funds.
“The underlying problem with the slush funds is we don’t know exactly where the money is going,” Competitive Enterprise Institute Center for Class Action Fairness director Ted Frank told Fox News. “Using enforcement authority to go after corporate defendants, DOJ bureaucrats are taking billions away from taxpayers to fund their pet projects overriding congressional preferences.”
Congressional efforts to end the practice fizzled out last year following declarations by the Government Accountability Office and Congressional Research Service that lawmaker complaints of violations of the power of the purse were invalid.
But lawmakers are reviving the efforts under the Trump administration.
Sen. James Lankford ( R-Okla.), who is sponsoring the Stop Settlement Slush Fund Act of 2017, told Fox: “Democrats thought it was an attack on Obama. This is not a Republican or Democrat issue, but one of good government. Actions settled by the federal government should go back to the federal government, back to the taxpayer.”
Similar legislation has been introduced in a House by Judiciary Chairman Bob Goodlatte (R-Va.).