[Corruption]Foxnews: The Obama Administration's secret DOJ slush fund

https://www.forbes.com/sites/jvdelong/2016/09/11/settlements-and-slush-funds/2/#2ae219353949

On September 7, the House of Representatives passed the Stop Settlement Slush Funds Act of 2016 (H.R. 5063).

The bill is important, but, unlike much current legislative mush, its operative language is brief. It forbids government lawyers to enter into settlements providing for payments to anyone except the government itself unless the payments represent restitution for harm caused directly by the payer.

The vote followed party lines, with 236 Republicans and only 5 Democrats in favor, and 171 Democrats and no Republicans against.

There is good reason for the party divide, because legal settlements have become a significant mechanism for leftist government officials (such as Department of Justice lawyers) to make the government itself into a funding mechanism for leftist ideological organizations.

The most egregious recent example is the mortgage settlements between DOJ and various banks, where millions of dollars were channeled to third parties for such services as housing counseling, or credit abuse education. The problems are documented in the House Report, and more extensively in two set of hearings conducted by House Judiciary. (Here and here.)


The Heritage Foundation has been instrumental in spotlighting the issues, noting that payments have gone to a gamut of groups ranging from La Raza to the National Fish and Wildlife Foundation to Acorn.

Andy Koenig, in the Wall Street Journal, recently documented how completely shameless the process has become:


Combined, the banks must divert well over $11 billion into “consumer relief,” which is supposed to benefit homeowners harmed during the Great Recession. Yet it is unknown how much, if any, of the banks’ settlement money will find its way to individual homeowners. Instead, a substantial portion is allocated to private, nonprofit organizations drawn from a federally approved list. Some groups on the list—Catholic Charities, for instance—are relatively nonpolitical. Others—La Raza, the National Urban League, the National Community Reinvestment Coalition and more—are anything but.

This is a handout to the administration’s allies. Many of these groups engage in voter registration, community organizing and lobbying on liberal policy priorities at every level of government. They also provide grants to other liberal groups not eligible for payouts under the settlements. Thanks to the Obama administration, and the fungibility of money, the settlements’ beneficiaries can now devote hundreds of thousands or even millions of dollars to these activities.

The settlements also give banks a financial incentive to fund these groups. Most of the deals give double credit or more against the settlement amount for every dollar in “donations.” Bank of America’s donation list—the only bank to disclose exactly where it sends its money—shows how this benefits liberal groups. The bank has so far given at least $1.15 million to the National Urban League, which counts as if it were $2.6 million against the bank’s settlement. Similarly, $1.5 million to La Raza takes $3.5 million off the total amount of “consumer relief” owed by the bank. There are scores of other examples.

. . . .

New York hit the jackpot too. Attorney General Eric Schneiderman, also a Democrat and chairman of the RMBS Working Group, arranged for Morgan Stanley to fork over $400 million to New York nonprofits and $150 million to the state.

The anti-Slush Funds bill was shepherded by Judiciary Chair Bob Goodlatte, who worked to frame it as an issue of congressional power and prerogative, not as a partisan squabble. His point is that these settlements allow agencies to circumvent Congress’ appropriations processes, in some cases channeling money to particular groups when Congress had clearly rejected requests for funding. Judging by the lop-sided partisan vote, Goodlatte’s pitch failed. The Dems are well aware that the practice destroys congressional power, but as long as Congress is controlled by the Republicans that is a feature, not a bug.

The House vote also indicates that the Senate Democrats are unlikely to buy Goodlatte’s pitch, so a filibuster is probable. If the bill did sneak through the Senate, then Obama would veto it, says OMB, because there is actually no problem to fix.


Obviously, this issue, like many others, waits on the election.

If the Republicans win, then of course the legal issue will be whether these settlements can be undone, as they should be.

Whichever party wins, serious questions about the legal of these settlements exist. Take a paradigm case: suppose the Feds lets a confessed bank robber off the hook in exchange for his promise to contribute a million dollars to a consumer education group for which the prosecutor formerly worked. The deal smells, but who can challenge it, in what court and on what grounds? It is a legal puzzlement.


Despite its importance, the bill has not received much attention. It should, because it represents an effort to push back against the Progressives effort to use the power of the government to bolster the left politically in every possible way – through regulation and grants as well as through these third party payments. No political system can last long when one side can call on the financial resources of the government. The left understands this. Conservatives seem a bit dense.