Should Congress ban the federal government from requiring settlement funds to be donated to third parties?

This bill has Passed the House of Representatives
Bill Summary

H.R. 788 intends to prohibit the federal government from offering conditional settlement agreements in which civil defendants agree to donate a portion of their settlement to a specified third party, often in exchange for a reduced settlement. Supporters of the bill argue that this amounts to “slush funds” that the government can use to fund partisan policies. Sponsor: Rep. Lance Gooden (Republican, Texas, District 5)
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Opponents say

•    "On behalf of The Leadership Conference on Civil and Human Rights, I urge you to oppose [the Stop Settlement Slush Funds Act]. Last year, representatives of The Leadership Conference and other organizations met with House Judiciary Committee majority staff to discuss the important work of housing counseling agencies and their record of success in helping homeowners to avoid foreclosure. There was no dispute over the effectiveness of such work. Instead, the sponsors take issue with the process by which the settlements were reached, and with several of the specific groups that received funds for housing counseling work under the Bank of America and Citibank settlements. We remain puzzled by this objection. The Department of Justice had no control over which of the more than 2,000 HUD-approved organizations received contributions from either of these banks. Both of these defendant banks, to their credit, maintain strong relationships with a wide range of community-based organizations, and they had sole discretion to determine (sic) which of these organizations whose housing counseling work they chose to support. Ultimately, it appears to us that the sponsors… are more troubled with who the banks chose to support than with any broader legal or policy principle." Source: The Leadership Conference on Civil and Human Rights in a letter opposing a similar bill


•    "We urge you to oppose [the Stop Settlement Slush Funds Act]... [S]ettlements from federal enforcement actions can include payments to third parties to advance programs that assist with recovery, benefits, and relief for communities harmed by lawbreakers, to the extent such payments further the objectives of the enforcement action. H.R. 732 would cut off any payments to third parties other than individualized restitution and other forms of direct payment for “actual harm.” That restriction would handcuff federal enforcement officials by limiting the ability of federal enforcement officials to negotiate real relief for harms caused to the public by illegal conduct that is the subject of federal enforcement actions. This bill would be a gift to lawbreakers at the expense of families and communities suffering from injuries that cannot be addressed by direct restitution… These forms of relief are crucial when harm is difficult to monetize, such as damage to the environment, the collateral consequences to communities resulting from predatory lending by financial institutions, or unknown health outcomes to individuals resulting from chemical exposures in the workplace." Source: Alliance for Justice in a letter opposing a similar bill 

Proponents say

•    "Directing legal settlements to third-party groups is nothing short of legal extortion to fund the Biden Administration’s partisan agenda. Congress can no longer allow the Executive Branch to circumvent our Constitutional power of the purse to fund their activist pet projects and must pass my legislation to end this corrupt practice." Source: Rep. Lance Gooden (Republican, Texas, District 5), sponsor of the bill 


•    "It should be alarming to every tax-paying citizen that the government could turn federal settlement funds into fuel for activist groups that exert power and influence over Washington. When the federal government settles a case, the settlement dollars should go to the victims or the Treasury – period. Unelected bureaucrats should not have the ability to direct settlement funds to progressive organizations under the guise of ‘donations,’ especially when these groups could turn right around and use that money to put pressure on members of Congress to vote with their agenda. This weaponizes settlement funds to push progressive policy agendas that Alabamians don’t want. It’s the swamp at its worst." Source: Sen. Tommy Tuberville (Republican, Alabama)


•    "H.R. 788 prohibits the executive branch from using “enforcement slush funds,” the practice where funds paid under settlement agreements are sent to third party groups rather than the federal government. On May 5, 2022, Attorney General Merrick Garland issued a memorandum to the heads of DOJ components and United States Attorneys entitled, “Guidelines and Limitations for Settlement Agreements Involving Payments to Non-Governmental Third Parties.” This memorandum revoked a DOJ policy, in place since 2017, which generally prohibited DOJ components from entering into settlement agreements that direct defendants to make payments to non-governmental third parties. These payments are made outside of the standard appropriations process, lack meaningful oversight, and present considerable separation of powers concerns.Source: U.S. Chamber of Commerce