My Working Theory is that every single expansion of the welfare state is merely a means to pass graft into the hands of Democratic Party cronies and leftwing activists. Today’s data point: Merrick Garland is bringing back Obama-era legally-mandated slush funds for leftwing activist groups scrapped by Trump.
President Biden’s Department of Justice appears to be rebuilding a dubious money chain known as “settlement slush funds.” The Obama DOJ used these funds to channel cash from corporate settlements to bankroll private progressive organizations, circumventing the budget and oversight authority of Congress.
On May 5, Attorney General Merrick Garland revoked a Trump-era rule that specifically prohibited the DOJ from directing funds from corporate settlements to finance third-party organizations and causes. The use of these so-called settlement slush funds became so rampant under the Obama administration that the House passed the Stop Settlement Slush Funds Act in 2017 in an attempt to end it. A similar bill was introduced in the Senate but failed to pass.
Under the Obama Justice Department, corporate fines were directed to organizations including the Sierra Club, the National Community Reinvestment Coalition, and the National Council of La Raza.
So payoff to the left, payoff to the left, and payoff to the left.
Through arrangements known as Supplemental Environmental Projects (SEPs) and third-party payments, corporations could have their fines reduced if they paid money to organizations that, although not victims in the DOJ suit, were nonetheless approved as beneficiaries.
In addition to reducing fines, these arrangements also gave penalized companies a tax deduction for their charitable contributions, which bought corporate support for the practice and prevented legal challenges. There were hundreds of such arrangements under the Obama administration.
The most notable cases include Volkswagen’s settlement of its emissions cheating scandal, which included a requirement that VW spend $2 billion to build electric filling stations. The Obama administration had twice requested these funds from Congress and been denied, so it used the VW settlement to fund the project instead. Of the $2 billion that VW paid, $800 million went to the state of California.
Settlements with Wall Street banks after the mortgage crisis also featured payments to progressive groups that were favored by Obama’s DOJ. A 2017 congressional hearing revealed internal DOJ memos regarding these settlements, one of which was addressed to then-Associate Attorney General Tony West, asking: “Can you explain to Tony the best way to allocate some money to an organization of our choosing?” Another DOJ email stated that the settlement with Citibank, which included third-party payments, should “not allow Citi to pick a statewide intermediary like the Pacific Legal Foundation,” which the official said “does conservative property-rights free legal services.”
You can’t let anyone else get their fingers in the pie you’re trying to get your crony’s fingers into.
Third-party settlement payments include no provision to track where the funds went, how they were being used, or if they achieved the goals the DOJ intended when arranging the payments.
The DOJ itself was not forthcoming with information regarding these payments. Although the congressional investigation began in November 2014, the report noted that “for over a year, DOJ provided none of the requested internal communications pertaining to the controversial settlement provisions.”
The House Judiciary Committee, however, obtained emails from the president of one of the organizations that received donations from settlement funds, the National Association of Interest On Lawyer Trust Accounts (IOLTA) Programs, stating, “I would like to discuss ways we might want to recognize and show appreciation for the Department of Justice and specifically Associate Attorney General Tony West, who by all accounts was the one person most responsible for including the IOLTA provisions [in the settlement].”
In response, the executive director of the Hawaii Legal Aid Foundation, another recipient, wrote that he “would be willing to have us build a statue [of West] and then we could bow down to this statue each day after we get our $200,000.”
In order to stop this practice, in June 2017 then-Attorney General Jeff Sessions enacted what has become known as the “Sessions Rule,” prohibiting third-party settlements at the DOJ. Immediately upon assuming office in January 2021, however, President Biden directed his administration to review this rule, which his DOJ has now rescinded.
“The fact that they’re spending resources on getting rid of an anti-corruption regulation shows that they intend to engage in the corruption that the regulation was intended to prevent,” said Ted Frank, senior attorney at the Hamilton Lincoln Law Institute. “It’s a good way to avoid voter accountability, and it gives power to the DOJ that Congress didn’t give them. They can direct hundreds of millions or even billions of dollars to pet causes.”
Of course they will. The Democratic Party and its vast panoply of left-wing fellow travelers are corrupt, parasitic institutions that can only thrive when they suck the lifeblood out of taxpayers.
The only surprise here is that it took over a year for the Biden Administration to give their cronies the greenlight to stick their snouts back into the trough.
(Hat tip: Director Blue.)
