Washington, D.C. – The Wall Street Journal Editorial Board today applauded the Department of Justice’s decision to prohibit the use of third party settlements. Under Chairman Bob Goodlatte’s (R-Va.) leadership, the House Judiciary Committee has worked for years to shine light on and end this abusive practice.
The Death of Obama’s Slush Funds
Sessions ends an abuse of law enforcement as income redistributor.
Wall Street Journal Editorial Board
June 8, 2017
Despite the tweets and Comey maelstrom, some good things are happening in the executive branch. An important example is Attorney General Jeff Sessions’s Monday order ending a program to treat legal settlements like political appropriations.
The misuse of settlement slush funds was one of the Obama Administration’s worst practices, which it used to end run Congress’s constitutional spending power. After the GOP took the House and tried to cut spending for liberal interest groups, the Obama Justice Department began to force corporate defendants to allocate a chunk of their financial penalties to those same groups.
Banks were made to fund left-wing activists such as NeighborWorks—though these groups were neither victims nor parties to lawsuits. In 2015 JP Morgan was required to pay $7.5 million to the American Bankruptcy Institute’s endowment for financial education. In 2016 Volkswagen was required to invest $2 billion in zero-emissions technology and promote zero-emissions cars. Government enforcement became an income redistribution mechanism without having to go through Congress.
Mr. Sessions’s brief memo instructs Justice’s 94 U.S. Attorneys to immediately halt the practice. It correctly notes that financial penalties are designed to punish and provide relief to victims—not to generate political payola. Save for limited exceptions—such as payments expressly authorized by statute—the memo instructs that future settlement money will go directly to victims or to the U.S. Treasury.
Credit in particular goes to Virginia Republican Bob Goodlatte, who introduced legislation in 2016 to stop the practice. Mr. Goodlatte has more recently called on Justice to claw back an estimated $380 million the Agriculture Department paid to special interests to settle a discrimination class action—which is worth investigating. But at least this abuse of enforcement power is over for now.