H.R. 5063, Stop Settlement Slush Funds Act of 2016

H.R. 5063

Stop Settlement Slush Funds Act of 2016

Committee
Judiciary

Date
September 7, 2016 (114th Congress, 2nd Session)

Staff Contact
John Huston

Floor Situation

On Wednesday, September 7, 2016, the House will begin consideration of H.R. 5063, the Stop Settlement Slush Funds Act of 2016, under a structured rule. H.R. 5063 was introduced on April 26, 2016, by Rep. Bob Goodlatte (R-VA) and was referred to the Committee on Judiciary, which ordered the bill reported, as amended, by a vote of 16 to 8 on May 11, 2016.

Bill Summary

H.R. 5063 would prohibit government officials from entering into or enforcing any settlement agreement for civil actions on behalf of the United States if that agreement requires the other party to the settlement to make a donation to a non-victim third party. That prohibition would not include payments to provide restitution or another remedy that is associated with the basis for the settlement agreement.

Background

In recent settlements with the United States, large corporations, such as Goldman Sachs and Bank of America, have been required to donate funds to charitable institutions as a part of their restitution. Such donations typically constitute a very small fraction of overall settlement amounts; however, non-victim third-party groups have received over $880 million dollars as part of settlement agreements in the past two years alone. According to the Committee, in some cases, DOJ-mandated donations to certain entities to restore funding that Congress had previously cut.[1]

In the early 1800s Executive Branch agencies would enter into vendor contracts without authorization, knowing that Congress could not in good conscience deny payment once the goods were provided. These “coercive deficiencies” prompted the 1820 Antideficiency Act (ADA) to prevent unappropriated spending.[2]

 

“The Executive Branch soon found ways around the ADA. The Constitution requires an appropriation to withdraw money from the Treasury, it does not, agencies argued, require that money be placed there to begin with. Thus, agencies began to ‘divert funds received by an agency to that agency’s uses before it is placed in the [T]reasury.’ Congress closed this loophole with the 1849 Miscellaneous Receipts Act (MRA).[3]

“Unfortunately, DOJ has devised a way around the MRA too. […] Because the Department of Justice has such broad settlement authority, it has the ability to use settlements to circumvent the appropriations authority of Congress.’ In particular, DOJ has the power ‘to short circuit the Miscellaneous Receipts Act by agreeing to settlement terms that require the violator of a Federal statute to undertake certain responsibilities or actions that might inure to the benefit of the executive branch.’ Thus, the Department could effectively ‘‘augment the appropriations of the Executive Branch without running afoul of the technical requirements of the Miscellaneous Receipts Act—although creating an unconstitutional interference with Congress’ appropriations power.’[4]

In the 2013 JP Morgan settlement with DOJ, the bank was offered credit against its settlement obligations for donations to community redevelopment groups.[5] The Citi and Bank of America settlements in 2014 required $150 million in donations to housing non-profits.[6]These donations earned double credit against the banks’ overall obligations. Meanwhile, credit for direct forms of consumer relief remained dollar-for-dollar.[7] “In November 2014, the House Judiciary and Financial Services Committees opened a pattern-or-practice investigation into the Justice Department’s mortgage lending settlements with major banks, including JP Morgan, Citi and Bank of America (BoA). The initial evidence supporting the committees’ concern was a progression of troubling terms in DOJ’s major mortgage banking settlements.”[8] H.R. 5063 closes this loophole that is being used by DOJ by ensuring that government officials do not enter into settlement agreements that require payment to non-victim third-parties.

According to the bill sponsor, “This common sense bill merely ensures that settlement money goes either to direct victims or to the Treasury for the people’s elected representatives to decide how best to allocate these resources with appropriate oversight to ensure accountability. It is critical that we act. DOJ is ignoring Congress’s concerns — increasing the use of mandatory donation terms, even as we object. The purpose of DOJ enforcement actions should be punishment and redress to actual victims. Carrying that concept to communities at large or community groups, however worthy, is a matter for the Legislative branch and is not to be conducted at the unilateral discretion of the Executive.”[9]

——————-
[1] See House Report 114-694 at 2.
[2] Id at 3.
[3] Id.
[4] Todd Peterson, Protecting the Appropriations Power: Why Congress Should Care About Settlements at the Dep’t of Justice, 2009 BYU L. Rev. 327, 335 (2009).
[5] Settlement Agreement between DOJ and JP Morgan, Annex2—Consumer Relief, Nov. 19, 2013,
[6] Settlement Agreement between DOJ and Citi, Annex2—Consumer Relief, July 14, 2014; Settlement Agreement between DOJ and Bank of America, Annex2—Consumer Relief.
[7] See House Report 114-694 at 6.
[8] Id.
[9] See Judiciary Committee Website, “Hearing on H.R. 5063,” Wednesday April 20, 2016.

Cost

The Congressional Budget Office (CBO) estimates that enacting H.R. 5063 could affect direct spending and revenues; however, CBO cannot determine the magnitude or timing of those effects. By precluding any such donations in civil settlements that have not been finalized, H.R. 5063 could affect the number and content of future settlements relative to current law. However, CBO cannot determine whether enacting the legislation would lead to an increase or a decrease in the number of such settlements or to a change in the federal receipts and forfeitures stemming from future settlements.

Amendments

  1. Rep. John Conyers (D-MI) –This amendment exempts from the bill any settlement pertaining to discrimination based on race, religion, national origin, or any other protected category.
  2. Rep. David Cicilline (D-RI) –This amendment exempts settlement agreements that strengthen the personal privacy of Americans from the blanket prohibition in this legislation.
  3. Rep. Sheila Jackson Lee (D-TX)—This amendment exempts settlement agreements that pertain to providing restitution for a State.
  4. Rep. Sheila Jackson Lee (D-TX)—This amendment exempts settlement agreements that resolves a civil action or potential civil action in relation to sexual harassment, violence, or discrimination in the work place.
  5. Rep. Paul Gosar (R-AZ)—This amendment caps settlement payments for attorney fees provided in relation to environmental cases at $125 per hour.
  6. Rep. Tom Price (R-GA)—This amendment requires the head of each Federal agency to electronically submit a report to the Congressional Budget Office on each settlement agreement entered into pursuant to this bill.
  7. Rep. Tom Price (R-GA)—This amendment requires each agency’s Inspector General to report annually to the House and Senate Committees on the Budget, the Judiciary, and Appropriations on any settlement agreement entered into by an during the previous year that are in violation of section 2.

Additional Information

For questions or further information please contact John Huston with the House Republican Policy Committee by email or at 6-5539.