69–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 115–72 

STOP SETTLEMENT SLUSH FUNDS ACT OF 2017 

MARCH 30, 2017.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. GOODLATTE, from the Committee on the Judiciary, 

submitted the following 

R E P O R T 

together with 

DISSENTING VIEWS 

[To accompany H.R. 732] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Judiciary, to whom was referred the bill 

(H.R. 732) to limit donations made pursuant to settlement agreements to which the United States is a party, and for other purposes, having considered the same, reports favorably thereon with 

an amendment and recommends that the bill as amended do pass. 

CONTENTS 

Page 

The Amendment ...................................................................................................... 2 

Purpose and Summary ............................................................................................ 2 

Background and Need for the Legislation ............................................................. 2 

Hearings ................................................................................................................... 13 

Committee Consideration ........................................................................................ 13 

Committee Votes ...................................................................................................... 13 

Committee Oversight Findings ............................................................................... 18 

New Budget Authority and Tax Expenditures ...................................................... 19 

Congressional Budget Office Cost Estimate .......................................................... 19 

Duplication of Federal Programs ............................................................................ 20 

Disclosure of Directed Rule Makings ..................................................................... 20 

Performance Goals and Objectives ......................................................................... 20 

Advisory on Earmarks ............................................................................................. 20 

Section-by-Section Analysis .................................................................................... 21 

Dissenting Views ..................................................................................................... 21 


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The Amendment 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Stop Settlement Slush Funds Act of 2017’’. 

SEC. 2. LIMITATION ON DONATIONS MADE PURSUANT TO SETTLEMENT AGREEMENTS TO 

WHICH THE UNITED STATES IS A PARTY. 

(a) LIMITATION ON REQUIRED DONATIONS.—An official or agent of the Government 

may not enter into or enforce any settlement agreement on behalf of the United 

States, directing or providing for a payment or loan to any person or entity other 

than the United States, other than a payment or loan that provides restitution for 

or otherwise directly remedies actual harm (including to the environment) directly 

and proximately caused by the party making the payment or loan, or constitutes 

payment for services rendered in connection with the case or a payment pursuant 

to section 3663 of title 18, United States Code. 

(b) PENALTY.—Any official or agent of the Government who violates subsection (a), 

shall be subject to the same penalties that would apply in the case of a violation 

of section 3302 of title 31, United States Code. 

(c) EFFECTIVE DATE.—Subsections (a) and (b) apply only in the case of a settlement agreement concluded on or after the date of enactment of this Act. 

(d) DEFINITION.—The term ‘‘settlement agreement’’ means a settlement agreement 

resolving a civil action or potential civil action, a plea agreement, a deferred prosecution agreement, or a non-prosecution agreement. 

(e) REPORTS ON SETTLEMENT AGREEMENTS.— (1) IN GENERAL.—Beginning at the end of the first fiscal year that begins after 

the date of the enactment of this Act, and annually thereafter, the head of each 

Federal agency shall submit electronically to the Congressional Budget Office 

a report on each settlement agreement entered into by that agency during that 

fiscal year that directs or provides for a payment or loan to a person or entity 

other than the United States that provides restitution for or otherwise directly 

remedies actual harm (including to the environment) directly and proximately 

caused by the party making the payment or loan, or constitutes payment for 

services rendered in connection with the case, including the parties to each settlement agreement, the source of the settlement funds, and where and how such 

funds were and will be distributed. 

(2) PROHIBITION ON ADDITIONAL FUNDING.—No additional funds are authorized to be appropriated to carry out this subsection. 

(3) SUNSET.—This subsection shall cease to be effective on the date that is 

7 years after the date of the enactment of this Act. 

(f) ANNUAL AUDIT REQUIREMENT.— 

(1) IN GENERAL.—Beginning at the end of the first fiscal year that begins after 

the date of the enactment of this Act, and annually thereafter, the Inspector 

General of each Federal agency shall submit a report to the Committees on the 

Judiciary, on the Budget and on Appropriations of the House of Representatives 

and the Senate, on any settlement agreement entered into in violation of this 

section by that agency. 

(2) PROHIBITION ON ADDITIONAL FUNDING.—No additional funds are authorized to be appropriated to carry out this subsection. 

Purpose and Summary 

H.R. 732, the ‘‘Stop Settlement Slush Funds Act of 2017,’’ prohibits terms in Justice Department settlements that direct or provide for payments to non-victim third-parties. 

Background and Need for the Legislation 

An extended House Judiciary Committee investigation has revealed that the previous Administration’s Department of Justice 

(DOJ) subverted Congress’ spending power by requiring settling defendants to donate money to non-victim third-parties. 

Donations earned up to double credit against defendants’ overall 

payment obligations while credit for direct relief to consumers was 

merely dollar-for-dollar. What is more, documents show that groups 


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1Todd Peterson, Protecting the Appropriations Power: Why Congress Should Care About Settlements at the Dep’t of Justice, 2009 BYU L. Rev. 327, 335 (2009). 2The Federalist No. 58 (James Madison). 

that stood to gain from these mandatory donations lobbied DOJ to 

include them. The Justice Department funneled third-party groups 

over a billion dollars in just the last 30 months of the previous Administration. These payments occured entirely outside of the Congressional appropriations and grant oversight process. What is 

worse, in some cases, the DOJ-required mandatory donations restored funding that Congress specifically cut. 

DOJ’s 2016 settlement with Volkswagen required the company to spend $2 billion on an Administration electric vehicle initiative 

after Congress twice refused to pay for it. It is critical that Congress act to prevent these activities in the future. 

This is fundamentally a bipartisan, institutional issue. Serious 

people on both sides of the aisle understand this. A former deputy 

Assistant Attorney General for the Office of Legal Counsel in the 

Clinton administration warned, in 2009, that DOJ ‘‘has the ability 

to use settlements to circumvent the appropriations authority of 

Congress.’’ 1 In 2008, a top Republican DOJ official restricted mandatory donation provisions, because they ‘‘can create actual or perceived conflicts of interest and/or other ethical issues.’’ 

Opponents’ central concern is that there may be cases of ‘‘generalized harm’’ to communities that cannot be addressed by restitution. But this misses the fundamental point. DOJ has authority to 

obtain redress for victims. Federal law defines victims to be those 

‘‘directly and proximately harmed’’ by a defendant’s acts. Once 

those victims have been compensated, deciding what to do with additional funds extracted from defendants becomes a policy question 

properly decided by elected representatives in Congress, not agency 

bureaucrats or prosecutors. It is not that DOJ officials would necessarily fund bad projects, it is that, outside of compensating actual 

victims, it is not their decision to make. 

The ‘‘Stop Settlement Slush Funds Act of 2017’’ bars mandatory 

donation terms in DOJ settlements. It is a bipartisan bill. It makes 

clear that payments to provide restitution for actual harm, directly 

caused, are permitted. 

It explicitly references the environmental context for which the 

injury to the environment may be diffuse and there may be no 

identifiable victims. The bill deals with this by explicitly permitting 

payments to remediate environmental damage. If direct remediation of the harm is impossible or impractical, the violator is not 

let off the hook. The full penalty is paid, but into the Treasury. 

I. THE IMPORTANCE OF CONGRESS’ SPENDING POWER

Congress’ spending power is its most effective tool for oversight 

and reining in Executive overreach. 

In Federalist No. 58, James Madison described the power of the 

purse as ‘‘that powerful instrument by which we behold, in the history of the British Constitution, an infant and humble representation of the people . . . finally reducing . . . all the overgrown prerogatives of the other branches of government.’’ 2 Accordingly, Article I section 9, clause 7 provides that, ‘‘No Money shall be drawn 

from the Treasury, but in Consequence of Appropriations made by 

Law.’’ Alexander Hamilton noted that this provision gives Congress 


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3 Abner J. Mikva, The Congress, The Purse, The Purpose, and The Power, 21 Georgia Law Rev. 

1, 2 (1986). 4 Id. 

5Peterson, supra note 3, at 339. 6 31 U.S.C. § 3302. 

7 Andy Spalding, The Much Misunderstood Miscellaneous Receipts Act (Part 1), The FCPA 

Blog (Sept. 29, 2014, 7:18 AM), http://www.fcpablog.com/blog/2014/9/29/the-much-misunderstoodmiscellaneous-receipts-act-part-1.html. 

the power to control not only the amount of an expenditure, but its 

purpose. ‘‘[N]o money can be expended, but for an object, to an extent, and out of a fund, which the laws have prescribed.’’ 

Similarly, as renowned liberal legal scholar Abner Mikva explained, the Founders knew the Spending Power was ‘‘the most far 

reaching and effectual’’ and they wanted ‘‘[t]o ensure that Congress 

would act as the first branch of government.’’ 3 Accordingly, they 

understood Congress ‘‘would less efficiently and less coherently devise fiscal policy than would a single ‘treasurer’ or ‘fiscal czar.’ Yet 

they chose, for good reason, to suffer this cost and bear its risks.’’ 4

II. EFFORTS BY AGENCIES TO CIRCUMVENT CONGRESS’ 

SPENDING POWER

Precisely because the spending power so effectively reins in agency overreach, the Executive Branch has long sought ways around 

it. 

A. The Antideficiency Act 

As early as 1809, a Congressional resolution called for methods 

to ‘‘prevent the improper expenditure of Federal funds.’’ Executive 

departments 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), which provided that 

‘‘no contract shall hereafter be made . . . except under law authorizing the same, or under appropriation adequate to its fulfillment.’’ 

The statute applied only to the Departments of War, State and 

Treasury. In 1870, Congress expanded it to cover all Federal agencies. In 1905, seeing that compliance problems persisted, Congress 

added criminal penalties. Even though no criminal prosecutions 

have been brought under the Antideficiency Act ‘‘the in terrorem effect of the criminal sanctions has been enough to get the executive 

branch to take the provisions of the Act seriously.’’ 5

B. The Miscellaneous Receipts Act 

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). It provides that officials ‘‘receiving 

money for the Government from any source shall deposit the 

money in the Treasury.’’ 6 The law reflects the Separation of Powers principle. The Executive Branch negotiates settlements, but 

Congress gets to decide how to allocate the money recovered.7 As 

the Government Accountability Office (GAO) explains, the MRA is 

‘‘another element in the statutory pattern by which Congress reVerDate Sep 11 2014 22:28 Mar 30, 2017 Jkt 069006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6601 E:\HR\OC\HR072.XXX HR072

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8Peterson, supra note 3, at 341. 9 Id. at 348. 10 Andrew B. Spalding, Restorative Justice for Multinational Corporations, University of Richmond Scholarship Repository 35 (2015). 11Peterson, supra note 3, at 352. 12 Id. at 354. 13 Id. 

tains control of the public purse under the Separation of Powers 

doctrine.’’ 8

Unfortunately, previous Administrations devised a way around 

the MRA too. The loophole is lamented in an article by Todd Peterson, former deputy Assistant Attorney General for the Office of 

Legal Counsel (OLC) in the Clinton administration: ‘‘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.’’ 9

That is precisely what has happened, prior to and through the 

end of the Obama administration. 

Beginning in the 1980’s, various Federal enforcement agencies, 

including the Commodity Futures Trading Commission, Nuclear 

Regulatory Commission and the Environmental Protection Agency 

(EPA), wanted to use settlement money to fund community service 

projects.10

In 1991, Representative John Dingell, then Chair of the Energy 

and Commerce Committee’s Oversight Subcommittee sought a 

GAO opinion on the practice. He asked particularly about the permissibility of EPA including Supplementary Environmental 

Projects (SEPs) in settlements with polluters. A SEP is a ‘‘beneficial project that a violator voluntarily agrees to perform in addition to actions required to correct the violation . . . as part of a 

settlement.’’ 11

When GAO concluded that SEPs violated the Miscellaneous Receipts Act, EPA protested. GAO reexamined its opinion, but reaffirmed the conclusion: 

An interpretation of an agency’s prosecutorial authority to 

allow an enforcement scheme involving supplemental 

projects that go beyond remedying the violation in order to 

carry out other statutory goals of the agency would permit 

the agency to improperly augment its appropriations for 

those other purposes in circumvention of the congressional 

appropriations process.12

In subsequent face-to-face meetings between Rep. Dingell’s staff, 

DOJ and EPA, it was agreed that this analysis did not apply to all 

SEPs and that EPA would issue guidelines to avoid violations of 

the MRA and the related augmentation problem. SEPs continued 

in the meantime. The guidelines were finally released in 1998.13


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14 Application of the Gov’t Corp. Control Act and The Miscellaneous Receipts Act to the Canadian Softwood Lumber Settlement Agreement, Op. O.L.C. (2006), https://www.justice.gov/sites/ 

default/files/olc/opinions/attachments/2015/05/29/op-olc-v030-p0111.pdf. 15 U.S. Attorney’s Manual 9–16.325, Plea Agreements, Deferred Prosecution Agreements, NonProsecution Agreements and Extraordinary Restitution (emphasis added). 16Kris Dighe, Organizational Community Serv. in Envtl. Crimes Cases, 60 U.S. Attorneys’ 

Bulletin 101 (July 2012). 17 Id. 18 Id. 

One tactic DOJ has used is to structure the transaction as an 

‘‘adjustment of penalty.’’ The government simply reduces the 

amount owed to it by the amount that the defendant agrees to pay 

directly to the community service project. Since the government 

never receives the money the MRA is not triggered. This idea is 

echoed in a 2006 DOJ Office of Legal Counsel memo. It advises 

that ‘‘[t]o avoid the Government’s constructively ‘receiving money 

for the Government,’ ’’ settlements that include payments to thirdparties should ‘‘be executed before an admission or finding of liability in favor of the United States; and . . . the United States 

[should] not retain post-settlement control over the disposition or 

management of the funds.’’ 14

C. The U.S. Attorney’s Manual’s Limits on Defendant Funded Community Service Projects 

A May 14, 2008 memo from then Deputy Attorney General Mark 

Filip announced the following amendment to the U.S. Attorney’s 

Manual pertaining to defendant-funded community service projects. 

Plea agreements . . . should not include terms requiring 

the defendant to pay funds to a charitable . . . community, or other organization . . . that is not a victim of the 

criminal activity or is not providing services to redress the 

harm caused by the defendant’s criminal conduct. . . . [T]his practice is restricted because it can create actual or 

perceived conflicts of interest and/or other ethical issues.15

The history of this provision is instructive. According to a 2012 

U.S. Attorney’s Bulletin, the amendment was recommended ‘‘due to 

instances of perceived abuse of extraordinary restitution by some offices.’’ The original plan was to end all forms of such ‘‘extraordinary 

community restitution,’’ except as statutorily authorized for certain 

drug crimes. 

After intense discussion, the Criminal Chief’s Working Group decided to make an exception for environmental crimes. This concession ‘‘was due in large part to guidance that was issued by the Environment and Natural Resources Division (ENRD).’’ 16 Thus, the 

USAM makes exception for community service provisions in plea 

agreements . . . resolving environmental matters.’’ Importantly, 

when contemplating such provisions, the prosecutor must confer 

with the Environment and Natural Resources Division, ‘‘which has 

issued guidance to ensure that the community service requirements 

are narrowly tailored to the facts of the case.’’ 17 Exception is also 

made for certain drug offenses where there is an ‘‘absence of identifiable victims, as well as a nexus between the payment and the offense.’’ 18

There are several reasons why the USAM language did not prove 

a barrier to DOJ’s expanding mandatory donation provisions in 


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19Settlement Agreement between DOJ and JPMorgan, Annex2—Consumer Relief, Nov. 19, 

2013, Menu Item 4D, https://www.justice.gov/iso/opa/resources/64420131119164759163425.pdf. 20Settlement Agreement between DOJ and Citi, Annex2—Consumer Relief, July 14, 2014, 

Menu Items 4D, 4E, 4F, http://www.justice.gov/iso/opa/resources/649201471413721380969.pdf; 

Settlement Agreement between DOJ and Bank of America, Annex2—Consumer Relief, Menu 

Items 3E, 3F, 3G, Aug. 21, 2014, http://www.justice.gov/iso/opa/resources/8492014829141239 

967961.pdf. 21Settlement Agreement between DOJ and Bank of America, Annex3—Tax Fund, Aug. 21, 

2014, http://www.justice.gov/iso/opa/resources/4922014829141329620708.pdf; Settlement between 

DOJ and Bank of America, Aug. 21, 2014, pg. 9, http://www.justice.gov/iso/opa/resources/ 

3392014829141150385241.pdf. 

civil matters such as the banking settlements. First, strictly speaking, the USAM provision covers only criminal matters. In addition, 

the USAM’s language permits payments ‘‘to redress the harm 

caused.’’ This phraseology fails to impose a tight nexus between the 

harm and the payment. Without demanding a direct causal link between the two, connections may be easy to manipulate. 

III. DOJ’S UNPRECEDENTED MANDATORY-DONATION BANK

SETTLEMENT TERMS

A. The Emergence of Troubling Terms in DOJ Mortgage Banking 

Settlements 

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 JPMorgan, Citi and Bank of America. The concern was 

that DOJ was systematically subverting Congress’ spending power 

by using settlements to funnel money to third-party groups. 

The evidence was a progression of troubling terms in DOJ’s 

major mortgage banking settlements. 

It began with the 2013 JPMorgan settlement which merely offered the bank credit for donations to community redevelopment 

groups.19 Next came Citi and Bank of America settlements in 2014, 

which required $150 million in donations to housing non-profits.20

These donations earned double credit against the banks’ overall obligations. Meanwhile, credit for direct forms of consumer relief remained dollar-for-dollar. 

Bank of America’s settlement went further. It required the bank to set aside $490 million to pay potential consumer tax liability 

arising from loan modifications. Logic dictates that if there is no 

consumer tax liability to cover, that money should revert to the 

bank. Instead, under the terms of the settlement, since Congress 

extended the non-taxable treatment of loan modifications in December 2015, the money is split between NeighborWorks America 

and Interest on Lawyer’s Trust Account entities (IOLTAs) that 

fund legal aid.21

B. Committee Oversight & DOJ Delay 

The Committee’s investigation formally commenced on November 

25, 2014, when the Judiciary and Financial Services Committees 

requested DOJ documents pertaining to the genesis of these unprecedented and controversial settlement terms. 

Nevertheless, for over a year, DOJ provided none of the requested internal communications pertaining to the controversial 

settlement provisions. Rather, DOJ provided just sixty pages of 

emails between DOJ and outside parties. Furthermore, because of 

duplicative email chains, those sixty pages amounted to fewer than 


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22 Email from Bob LeClair, Executive Director of the Hawaii Legal Aid Foundation, to Charles 

Dunlap et al, President of NAIP, Aug 22, 2014, on file with the House Judiciary Committee. 23 In re Belzak, Case No. 10–23963–dob (Bankruptcy Court E. D. Mi, Northern Div. Bay City) 

(Order Approving Settlement between the United States Trustee Program and JPMorgan Chase 

Bank N.A.), http://www.justice.gov/ust/eo/public_affairs/press/docs/2015/pr20150303_order.pdf. 

ten distinct emails. What little information DOJ did provide confirmed that third-party groups which stood to gain from mandatory 

donation provisions actively lobbied for their inclusion in the settlements. 

In response to further Judiciary Committee inquiries, DOJ 

claimed in September 2015 not to have understood that internal 

communications were sought. This contention is difficult to credit 

in light of the unambiguous language in Committee letters and 

hearing questions. 

Finally, on March 18, 2016, 15 months after the initial request, 

DOJ agreed to let the Committee review the internal documents, 

but only at DOJ, and subject to restrictions on releasing the documents’ contents. 

The internal documents confirm that DOJ conceived of the mandatory donation provisions. They also make clear that then Associate Attorney General Tony West was the driving force behind the 

effort. Indeed, an August 22, 2014, email from the President of the 

National Association of IOLTA Programs (NAIP) to senior legal aid 

colleagues, obtained independently by the Committee, stated: 

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 response, the Executive Director of the Hawaii Legal Aid 

Foundation wrote, ‘‘[f]rankly, I 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+.’’ 22

On April 8, 2016, the Committee requested transcribed interviews with four DOJ subordinates who, according to the documents 

the Committee reviewed, were closely involved in inserting the 

mandatory donation provisions into the settlements. On July 19, 

2016, the Judiciary and Financial Services Committees held a transcribed interview with Maame Frimpong, Tony West’s deputy. On 

December 8, 2016, following the Presidential election, DOJ released 

key documents into the Committee’s custody, on condition that 

DOJ be consulted before they are made public. 

C. DOJ Has Ignored Congressional Concerns 

Rather than suspend the practice of mandatory donation provisions in response to legitimate Congressional concerns, however, 

the Obama administration doubled down. 

On March 3, 2015, a full 3 months after the Judiciary Committee 

first expressed concerns with mandatory donations, the U.S. Trustee Program (UST) entered into an over $50 million settlement with 

JPMorgan relating to robo-signing. Seven-and-one-half million of 

those dollars did not make it to victims. Instead, they went to a 

third-party, largely to educate high school and college students 

about using credit cards responsibly.23


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24 Consent Order with Hudson City Savings Bank at 17 (Sept. 24, 2015), https:// 

www.justice.gov/opa/pr/justice-department-and-consumer-financial-protection-bureau-reachsettlement-hudson-city. 25Settlement Agreement between DOJ and Goldman Sachs, Annex2—Consumer Relief, Apr. 

11, 2016, Menu Item 2, https://www.justice.gov/opa/file/839906/download. 26https://www.justice.gov/opa/file/839906/download. 27Settlement Agreement between DOJ and Credit Suisse, Annex2—Consumer Relief, Jan. 18, 

2017, https://www.justice.gov/opa/press-release/file/928486/download. 28 Id. at 5. 

Similarly, DOJ’s September 2015 settlement with Hudson City 

Savings Bank requires the defendant to ‘‘[s]pend $750,000 on local 

partnerships.’’ 24

On April 11, 2016, DOJ announced a $5 billion Residential Mortgage Backed Securities (RMBS) settlement with Goldman Sachs.25

The consumer relief provision requires $240 million credit dollars 

in ‘‘Financing and/or donations to fund affordable rental and for 

sale housing.’’ 26

Most recently, in the final hours of the Obama administration, 

DOJ entered into a mortgage settlement with Credit Suisse. The 

terms required the bank to spend $240 million credit dollars to finance affordable housing projects.27 This provision highlighted 

DOJ’s shift in tactics late in the Obama administration. Facing increased scrutiny for mandatory donation terms, DOJ began forcing 

settling defendants to make donations in the guise of loans. 

To understand this, it is important to appreciate that low income 

housing projects typically feature four layers of financing. The first 

layer of debt is conventional financing provided by different lenders 

and repaid at market rates. A second and third layer are equitybased financing structures featuring both common and preferred 

equity, which govern who receives valuable tax breaks typically associated with such projects. The fourth layer is provided by the government and is debt that is never repaid. These government grants 

are used because low-income housing projects are not otherwise 

profitable for developers. Beginning in 2014, DOJ required settling 

defendants to provide over $340 million in this fourth type of 

project financing, which is never paid back. That is precisely why 

the settlement documents described these financing provisions as 

defendants earning credit for the ‘‘loss’’ associated with the loans.28

The financing was simply a donation in the guise of a loan. 

IV. THE CRUX OF THE SUBVERSION OF CONGRESS’ SPENDING POWER

The subversion of Congress’ spending power can take several 

forms. In some cases, mandatory donation provisions reinstate 

funding Congress specifically cut. In others, funding is not reinstated, but funding decisions that can properly be made only by an 

accountable Congress are instead made at the unilateral discretion 

of the Executive. In both cases, it is not only Congress that is 

sidestepped, but also the standard grant-oversight process that ensures money is spent as intended. 

A. Reinstating Funding Congress Specifically Cut or Denied 

In the most egregious cases, DOJ used mandatory donations to 

restore funding that Congress specifically cut. 


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29Department of Defense and Full-Year Continuing Appropriations Act of 2011, Pub. L. No. 

112–10, § 2245, 125 Stat 38. 30Press Release, Nat’l Council of La Raza, Settlement With Top Mortgage Service Providers 

A Win For Struggling Homeowners (Feb. 9, 2012), http://www.nclr.org/index.php/about_us/news/ news_releases/settlement_with_top_mortgage_service_providers_a_win_for_struggling_ homeowners. 31See http://www.lis.gov/cgi-lis/query/D?c113:7:./temp/∼c113yBgthU::; see also Consolidated Appropriations Act of 2014, Pub. L. No. 113–76. 32Press Release, Dept. of Justice, Volkswagen to Spend Up to $14.7 Billion to Settle Allegations of Cheating Admissions Tests and Deceiving Customers on 2.0 Liter Diesel Vehicles 

(June 28, 2016), https://www.justice.gov/opa/pr/volkswagen-spend-147-billion-settle-allegationscheating-emissions-tests-and-deceiving. 33 In re Volkswagen ‘‘Clean Diesel’’ Mktg., Sales, Practices, and Prods. Liab. Litig., MDL No. 

2672, at 5 (N.D. Cal. June 28, 2016). 34 Comments of the Competitive Enterprise Institute et al., Notice of Lodging of Proposed Partial Consent Decree Under the Clean Air Act, 81 Fed. Reg. 44051 (July 6, 2016). 35 18 U.S.C. § 3771(e). 

In 2011, Congress eliminated $88 million in funding for HUD’s 

‘‘housing counseling assistance’’ program.29 Congress reinstated about $45 million for the program in 2012.30 Grantee groups lamented the 50% cut. For 2014 and 2015, Congress continued to 

provide just $45 MM and $47MM respectively.31 Thus, the groups 

were understandably pleased with the mandatory donation provisions in the 2014 Citi settlement. 

The settlements promised to reinstate all or more of the elimi- nated funding. Compared to the pre-2011 baseline of $88MM, HUD 

grants for 2014 and 2015 fell ‘‘short’’ by a combined $84MM. The 

DOJ settlements required $30MM to go specifically to groups in the 

HUD grant program, so 36% was recouped directly. In addition, 

some HUD grantees were also eligible for a portion of the remaining $120MM in mandatory donations, not to mention the $490MM 

in the tax relief fund. For example, NeighborWorks was an eligible 

HUD grantee, but also received $122MM from BoA’s Tax Fund 

since Congress extended the non-taxable treatment of loan forgiveness in December 2015. This means that DOJ’s mandatory donation provisions, which were negotiated in consultation with HUD, 

restored at least $152MM ($122 + $30) to HUD grantees in place of 

the $88MM reduction mandated by Congress. 

More recently, DOJ’s 2016 Volkswagen settlement required the 

company to pay $2 billion to increase the use of electric vehicles.32

This spending cannot be justified as a mitigation payment, because 

the settlement states explicitly that a separate $2.7 billion ‘‘mitigation trust’’ payment would ‘‘fully mitigate’’ the pollution that Volkswagen caused.33 Rather, DOJ used the settlement to fund an Administration electric vehicle initiative for which Congress had twice 

refused to pay.34

B. Usurping Congress’ Authority to Decide Funding Priorities 

The beneficiaries of mandatory donation provisions may or may 

not be worthy, non-partisan entities, but that is entirely beside the 

point. Under our system of government, Congress gets to decide 

how money is spent, not DOJ. 

The authority to settle cases necessarily includes the ability to 

obtain redress and remediation for victims. That is not in dispute. 

The issue is that Federal law understands victims to be those ‘‘directly and proximately harmed’’ by a defendant’s bad acts.35 Once 

those victims have been compensated, deciding what to do with additional funds extracted from defendants becomes a policy question 

properly decided by elected representatives in Congress, not agency 


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36 About CARE, http://care4yourfuture.org/about. 37 American Bankruptcy Institute, 2014 Annual Report, http://www.abi.org/about-us/annualreports. 

bureaucrats or prosecutors. It is not that DOJ officials would necessarily fund bad projects; it is that outside of compensating actual 

victims, it is not their decision to make. 

For example, consider UST’s March 3, 2015 robo-signing settlement referenced above. It required JPMorgan to donate $7.5 million to a third-party: the American Bankruptcy Institute’s (ABI) endowment for financial education and support for the Credit Abuse 

Resistance Education Program (CAREP.) 

The CAREP educates high school and college students on the responsible use of credit and credit cards.36 The underlying harm 

UST was addressing in the settlement was compliance failures at 

banks impacting homeowners already in bankruptcy. As such, the 

connection between the activity giving rise to the settlement and 

the work of the third-party receiving donations under it is attenuated. This creates a significant question whether the payment violates the Miscellaneous Receipts Act. Either way, it is clear that 

CAREP is not remediating the direct harm caused by JPMorgan’s 

alleged wrongdoing. As such, CAREP has no clearer claim to settlement funds than any number of other worthy causes. The spending-priority issue is a question for Congress, not DOJ. 

Importantly, UST seemed unaware of just how much money the 

settlement provided to ABI as a percentage of ABI’s current assets. 

According to its financial statements, at the end of 2013, ABI had 

$13.6 MM in total assets, with $9.5 MM in net assets. The mandatory donation was $7.5 MM.37

ABI is not an ideological group. It is a non-profit with a reputation for solid work. Nevertheless, if its efforts are to be subsidized 

by the government, that is a decision Congress must make, for 

which Congress will be accountable to the people. It is inappropriate for the entire net worth of an organization, however worthy, 

to be nearly doubled at the unilateral discretion of the Executive 

Branch. 

C. Circumventing Grant Oversight 

Federal grants come with a litany of rules and procedures designed to ensure that funds are used as intended. When entities 

are funded out of settlements rather than appropriations, this careful system of oversight and accountability is undone. That is a key 

reason that requiring third-party payments in DOJ settlements is 

so troubling. It evades oversight. 

Federal grant recipients are subject to a variety of administrative 

requirements detailed in the grant agreement, including detailed financial and program reporting requirements. Federal agencies are 

required to follow government-wide guidance, known as circulars, 

when entering into grant agreements. These circulars, issued by 

the Office of Management and Budget, set standards for a range 

of grant management activities, including financial reporting, audit 

requirements and suspension and debarment provisions. Federal 


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38 Congressional Research Service, Federal Grant Recipient Financial Reporting Requirements, 

April 24, 2015. 39 Consent Order with Hudson City Savings Bank, supra note 23 (emphasis added.). 40 18 U.S.C. § 3663. 

agencies administering grant programs then incorporate the standards into regulations for specific grant programs.38

Such controls were entirely absent in DOJ’s banking settlements. 

DOJ officials claim that there is oversight because each settlement 

has an independent monitor. That is misleading. It is true that a 

monitor ensures that the banks comply with all the settlement 

terms, including the mandatory donations. However, the monitor’s 

jurisdiction extends only to the banks, not to the grant recipients. 

Nothing in the settlement agreements gives the monitor authority 

to conduct ongoing oversight of recipients to ensure that they are 

using donated funds as intended. 

In fact, in some settlements, DOJ explicitly disclaimed any oversight responsibility for the donations defendants were required to 

make. Consider again, DOJ’s March 3, 2015 settlement with 

JPMorgan which required a $7.5 million donation to the American 

Bankruptcy Institute (ABI). DOJ was adamant that neither it nor 

the bank retained ongoing oversight over ABI to ensure the donated money is used as directed. Indeed, the settlement specifically 

provides that ‘‘the Parties understand and agree that neither has 

any involvement in or oversight over the American Bankruptcy Institute or the Credit Abuse Resistance Education Program and neither will monitor the use of the contribution by the recipient.’’ 39

This is a remarkable admission. 

V. THE ‘‘STOP SETTLEMENT SLUSH FUNDS ACT OF 2017’’ 

H.R. 732 prohibits terms in DOJ settlements that direct or provide for payments or loans to non-victim third-parties. 

The legislation makes clear that prohibited payments do not include payments to entities to remediate direct harm, including environmental harm, done by defendants’ wrongful activity. This is 

particularly important in the environmental context, in which the 

injury to the environment may be diffuse and there may be no 

identifiable victims. The bill deals with this by explicitly permitting 

payments to remediate environmental damage. If direct remediation of the harm is impossible or impractical, the violator is not 

let off the hook. The full penalty is paid, but into the Treasury. It 

is simply that the decision as to what is the next best thing to do 

with the money is left to the people’s elected representatives in 

Congress rather than the Executive Branch. 

Similarly, the bill’s prohibition on terms requiring defendants to 

make loans is aimed at donations in the guise of loans and not at 

loan modifications. Modifications for direct victims are, in fact, expressly permitted as remedial. 

The bill also explicitly permits payments for services rendered in 

connection with the case, for example, to a settlement monitor. The 

bill applies prospectively only, so as not to disturb any settlements 

already concluded. The bill covers both civil and criminal settlements, with the exception of certain drug crimes for which Congress explicitly authorized community restitution payments.40 Nor 

is this bill intended to interfere with the Federal False Claims Act, 

the moiety statute or similar statutes that permit whistleblowers 


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41 31 U.S.C. § 3729–3733; 19 U.S.C. § 1619. 

who expose fraud against the government to collect a reward.41 In 

those cases, money is not being directed to a whistleblower instead 

of the government. Rather the government is simply paying a reward to the whistleblower out of funds that it has recovered 

through a settlement. Congress has explicitly authorized such payments to whistleblowers. 

The Committee received statements or letters of support for H.R. 

732 from Americans for Tax Reform, the U.S. Chamber of Commerce, Americans for Limited Government, FreedomWorks, National Taxpayers Union, and the Small Business & Entrepreneurship Council. 

Hearings 

The Committee did not hold a hearing on H.R. 732. However, the 

bill is nearly identical to a 2016 bill on which the Committee did 

hold a hearing. 

On April 28, 2016, the Subcommittee on Regulatory Reform, 

Commercial and Antitrust Law conducted a legislative hearing on 

the ‘‘Stop Settlement Slush Funds Act of 2016.’’ The witnesses at 

the hearing were: The Honorable Daniel E. Lungren, Esq., Principal, Lungren Lopina LLC; Prof. Paul F. Figley, Esq., Associate 

Director of Legal Rhetoric, American University Washington College of Law; Prof. David M. Uhlmann, Esq., Director, Environmental Law and Policy Program, The University of Michigan Law 

School. 

Two of the three witnesses testified in support of the bill. They 

detailed the importance of Congress’ spending power and the need 

to preserve it. They also suggested improvements to the bill, including revisions incorporated into the substitute amendment. The 

Minority witness testified that he understood the concern that 

mandatory donations encroach on legislative authority and can create the appearance of conflicts of interest. Nevertheless, he objected 

to the bill because he was concerned that it could prevent the government from addressing generalized harm particularly in environmental cases. However, the bill is clear that DOJ may require payments to redress direct environmental harm. Generalized harm 

may be addressed as well, but how best to do so is a policy question 

that is left to Congress rather than DOJ. 

On May 11, 2016, the Committee met in open session and ordered the bill H.R. 5063 favorably reported, with an amendment, 

by a rollcall vote of 18 to 6. 

On September 7, 2016, the House passed H.R. 5063 in a bipartisan 241–174 vote. 

Committee Consideration 

On February 7, 2017, the Committee met in open session and ordered the bill H.R. 732 favorably reported, with an amendment, by 

a rollcall vote of 17 to 8, a quorum being present. 

Committee Votes 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the following 


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rollcall votes occurred during the Committee’s consideration of H.R. 

732. 

1. An amendment by Mr. Conyers to exempt settlement terms 

that address indirect harm from violations of laws minimizing lead 

or copper in drinking water. Defeated 10 to 14. 

ROLLCALL NO. 1 

Ayes Nays Present 

Mr. Goodlatte (VA), Chairman ................................. X 

Mr. Sensenbrenner, Jr. (WI) .....................................

Mr. Smith (TX) ..........................................................

Mr. Chabot (OH) ........................................................

Mr. Issa (CA) .............................................................. X 

Mr. King (IA) .............................................................

Mr. Franks (AZ) ......................................................... X 

Mr. Gohmert (TX) ...................................................... X 

Mr. Jordan (OH) ........................................................ X 

Mr. Poe (TX) ...............................................................

Mr. Chaffetz (UT) ...................................................... X 

Mr. Marino (PA) ........................................................ X 

Mr. Gowdy (SC) ......................................................... X 

Mr. Labrador (ID) ......................................................

Mr. Farenthold (TX) ..................................................

Mr. Collins (GA) ........................................................

Mr. DeSantis (FL) ..................................................... X 

Mr. Buck (CO) ............................................................ X 

Mr. Ratcliffe (TX) ....................................................... X 

Mr. Bishop (MI) ......................................................... X 

Ms. Roby (AL) ............................................................ X 

Mr. Gaetz (FL) ...........................................................

Mr. Johnson (LA) ....................................................... X 

Mr. Biggs (AZ) ........................................................... X 

Mr. Conyers, Jr. (MI), Ranking Member ................. X 

Mr. Nadler (NY) ......................................................... X 

Ms. Lofgren (CA) .......................................................

Ms. Jackson Lee (TX) ................................................

Mr. Cohen (TN) ..........................................................

Mr. Johnson (GA) ...................................................... X 

Ms. Chu (CA) .............................................................

Mr. Deutch (FL) ......................................................... X 

Mr. Gutierrez (IL) ......................................................

Ms. Bass (CA) ............................................................ X 

Mr. Richmond (LA) ....................................................

Mr. Jeffries (NY) ........................................................

Mr. Cicilline (RI) ........................................................ X 

Mr. Swalwell (CA) ..................................................... X 

Mr. Lieu (CA) ............................................................. X 

Mr. Raskin (MD) ........................................................

Ms. Jayapal (WA) ...................................................... X 

Total ............................................................. 10 14 


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2. An amendment by Mr. Johnson (D-GA) to exempt settlement 

terms addressing indirect harm from violations of the Clean Air 

Act. Defeated 10 to 14. 

ROLLCALL NO. 2 

Ayes Nays Present 

Mr. Goodlatte (VA), Chairman ................................. X 

Mr. Sensenbrenner, Jr. (WI) .....................................

Mr. Smith (TX) ..........................................................

Mr. Chabot (OH) ........................................................

Mr. Issa (CA) .............................................................. X 

Mr. King (IA) .............................................................

Mr. Franks (AZ) ......................................................... X 

Mr. Gohmert (TX) ...................................................... X 

Mr. Jordan (OH) ........................................................

Mr. Poe (TX) ...............................................................

Mr. Chaffetz (UT) ...................................................... X 

Mr. Marino (PA) ........................................................

Mr. Gowdy (SC) ......................................................... X 

Mr. Labrador (ID) ......................................................

Mr. Farenthold (TX) .................................................. X 

Mr. Collins (GA) ........................................................ X 

Mr. DeSantis (FL) .....................................................

Mr. Buck (CO) ............................................................ X 

Mr. Ratcliffe (TX) ....................................................... X 

Mr. Bishop (MI) ......................................................... X 

Ms. Roby (AL) ............................................................ X 

Mr. Gaetz (FL) ...........................................................

Mr. Johnson (LA) ....................................................... X 

Mr. Biggs (AZ) ........................................................... X 

Mr. Conyers, Jr. (MI), Ranking Member ................. X 

Mr. Nadler (NY) ......................................................... X 

Ms. Lofgren (CA) .......................................................

Ms. Jackson Lee (TX) ................................................

Mr. Cohen (TN) ..........................................................

Mr. Johnson (GA) ...................................................... X 

Ms. Chu (CA) .............................................................

Mr. Deutch (FL) ......................................................... X 

Mr. Gutierrez (IL) ......................................................

Ms. Bass (CA) ............................................................ X 

Mr. Richmond (LA) ....................................................

Mr. Jeffries (NY) ........................................................

Mr. Cicilline (RI) ........................................................ X 

Mr. Swalwell (CA) ..................................................... X 

Mr. Lieu (CA) ............................................................. X 

Mr. Raskin (MD) ........................................................ X 

Ms. Jayapal (WA) ...................................................... X 

Total ............................................................. 10 14 

3. An amendment by Mr. Cicilline to exempt settlement terms 

providing for payments to HUD-approved housing counseling agencies, legal aid organizations performing housing related work, or 


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community redevelopment organizations in cases arising out of 

mortgage lending activity prior to 2009. Defeated 9 to 16. 

ROLLCALL NO. 3 

Ayes Nays Present 

Mr. Goodlatte (VA), Chairman ................................. X 

Mr. Sensenbrenner, Jr. (WI) .....................................

Mr. Smith (TX) ..........................................................

Mr. Chabot (OH) ........................................................

Mr. Issa (CA) .............................................................. X 

Mr. King (IA) .............................................................

Mr. Franks (AZ) ......................................................... X 

Mr. Gohmert (TX) ...................................................... X 

Mr. Jordan (OH) ........................................................ X 

Mr. Poe (TX) ...............................................................

Mr. Chaffetz (UT) ...................................................... X 

Mr. Marino (PA) ........................................................ X 

Mr. Gowdy (SC) .........................................................

Mr. Labrador (ID) ......................................................

Mr. Farenthold (TX) .................................................. X 

Mr. Collins (GA) ........................................................ X 

Mr. DeSantis (FL) .....................................................

Mr. Buck (CO) ............................................................ X 

Mr. Ratcliffe (TX) ....................................................... X 

Mr. Bishop (MI) ......................................................... X 

Ms. Roby (AL) ............................................................ X 

Mr. Gaetz (FL) ........................................................... X 

Mr. Johnson (LA) ....................................................... X 

Mr. Biggs (AZ) ........................................................... X 

Mr. Conyers, Jr. (MI), Ranking Member ................. X 

Mr. Nadler (NY) ......................................................... X 

Ms. Lofgren (CA) .......................................................

Ms. Jackson Lee (TX) ................................................

Mr. Cohen (TN) ..........................................................

Mr. Johnson (GA) ...................................................... X 

Ms. Chu (CA) .............................................................

Mr. Deutch (FL) .........................................................

Mr. Gutierrez (IL) ......................................................

Ms. Bass (CA) ............................................................ X 

Mr. Richmond (LA) ....................................................

Mr. Jeffries (NY) ........................................................

Mr. Cicilline (RI) ........................................................ X 

Mr. Swalwell (CA) ..................................................... X 

Mr. Lieu (CA) ............................................................. X 

Mr. Raskin (MD) ........................................................ X 

Ms. Jayapal (WA) ...................................................... X 

Total ............................................................. 9 16 

4. An amendment by Ms. Jayapal to exempt settlement terms 

providing for payments to HUD-approved faith-based or community 

organizations that aid homeowners. Defeated 6 to 17. 


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ROLLCALL NO. 4 

Ayes Nays Present 

Mr. Goodlatte (VA), Chairman ................................. X 

Mr. Sensenbrenner, Jr. (WI) .....................................

Mr. Smith (TX) ..........................................................

Mr. Chabot (OH) ........................................................

Mr. Issa (CA) .............................................................. X 

Mr. King (IA) .............................................................

Mr. Franks (AZ) ......................................................... X 

Mr. Gohmert (TX) ...................................................... X 

Mr. Jordan (OH) ........................................................ X 

Mr. Poe (TX) ...............................................................

Mr. Chaffetz (UT) ...................................................... X 

Mr. Marino (PA) ........................................................ X 

Mr. Gowdy (SC) ......................................................... X 

Mr. Labrador (ID) ......................................................

Mr. Farenthold (TX) .................................................. X 

Mr. Collins (GA) ........................................................ X 

Mr. DeSantis (FL) ..................................................... X 

Mr. Buck (CO) ............................................................ X 

Mr. Ratcliffe (TX) .......................................................

Mr. Bishop (MI) ......................................................... X 

Ms. Roby (AL) ............................................................ X 

Mr. Gaetz (FL) ........................................................... X 

Mr. Johnson (LA) ....................................................... X 

Mr. Biggs (AZ) ........................................................... X 

Mr. Conyers, Jr. (MI), Ranking Member ................. X 

Mr. Nadler (NY) ......................................................... X 

Ms. Lofgren (CA) .......................................................

Ms. Jackson Lee (TX) ................................................

Mr. Cohen (TN) ..........................................................

Mr. Johnson (GA) ...................................................... X 

Ms. Chu (CA) .............................................................

Mr. Deutch (FL) .........................................................

Mr. Gutierrez (IL) ......................................................

Ms. Bass (CA) ............................................................

Mr. Richmond (LA) ....................................................

Mr. Jeffries (NY) ........................................................

Mr. Cicilline (RI) ........................................................ X 

Mr. Swalwell (CA) ..................................................... X 

Mr. Lieu (CA) .............................................................

Mr. Raskin (MD) ........................................................

Ms. Jayapal (WA) ...................................................... X 

Total ............................................................. 6 17 

5. Motion to report H.R. 732 favorably, as amended. Passed by 

a rollcall vote of 17 to 8. 


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ROLLCALL NO. 5 

Ayes Nays Present 

Mr. Goodlatte (VA), Chairman ................................. X 

Mr. Sensenbrenner, Jr. (WI) .....................................

Mr. Smith (TX) ..........................................................

Mr. Chabot (OH) ........................................................

Mr. Issa (CA) .............................................................. X 

Mr. King (IA) .............................................................

Mr. Franks (AZ) ......................................................... X 

Mr. Gohmert (TX) ...................................................... X 

Mr. Jordan (OH) ........................................................ X 

Mr. Poe (TX) ...............................................................

Mr. Chaffetz (UT) ...................................................... X 

Mr. Marino (PA) ........................................................ X 

Mr. Gowdy (SC) ......................................................... X 

Mr. Labrador (ID) ......................................................

Mr. Farenthold (TX) .................................................. X 

Mr. Collins (GA) ........................................................ X 

Mr. DeSantis (FL) ..................................................... X 

Mr. Buck (CO) ............................................................ X 

Mr. Ratcliffe (TX) .......................................................

Mr. Bishop (MI) ......................................................... X 

Ms. Roby (AL) ............................................................ X 

Mr. Gaetz (FL) ........................................................... X 

Mr. Johnson (LA) ....................................................... X 

Mr. Biggs (AZ) ........................................................... X 

Mr. Conyers, Jr. (MI), Ranking Member ................. X 

Mr. Nadler (NY) ......................................................... X 

Ms. Lofgren (CA) .......................................................

Ms. Jackson Lee (TX) ................................................

Mr. Cohen (TN) .......................................................... X 

Mr. Johnson (GA) ...................................................... X 

Ms. Chu (CA) .............................................................

Mr. Deutch (FL) .........................................................

Mr. Gutierrez (IL) ......................................................

Ms. Bass (CA) ............................................................ X 

Mr. Richmond (LA) ....................................................

Mr. Jeffries (NY) ........................................................

Mr. Cicilline (RI) ........................................................ X 

Mr. Swalwell (CA) ..................................................... X 

Mr. Lieu (CA) .............................................................

Mr. Raskin (MD) ........................................................

Ms. Jayapal (WA) ...................................................... X 

Total ............................................................. 17 8 

Committee Oversight Findings 

In compliance with clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the findings 

and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of RepVerDate Sep 11 2014 22:28 Mar 30, 2017 Jkt 069006 PO 00000 Frm 00018 Fmt 6659 Sfmt 6601 E:\HR\OC\HR072.XXX HR072

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resentatives, are incorporated in the descriptive portions of this report. 

New Budget Authority and Tax Expenditures 

Clause 3(c)(2) of rule XIII of the Rules of the House of Representatives is inapplicable because this legislation does not provide new 

budgetary authority or increased tax expenditures. 

Congressional Budget Office Cost Estimate 

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, the Committee sets forth, with respect to 

the bill, H.R. 732, the following estimate and comparison prepared 

by the Director of the Congressional Budget Office under section 

402 of the Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, February 24, 2017. 

Hon. BOB GOODLATTE, CHAIRMAN, 

Committee on the Judiciary, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 732, the ‘‘Stop Settlement 

Slush Funds Act of 2017.’’ 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Mark Grabowicz, who 

can be reached at 226–2860. 

Sincerely, 

KEITH HALL, 

DIRECTOR. 

Enclosure 

cc: Honorable John Conyers, Jr. 

Ranking Member 

H.R. 732—Stop Settlement Slush Funds Act of 2017. 

As ordered reported by the House Committee on the Judiciary 

on February 7, 2017. 

H.R. 732 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 third party. That prohibition 

would not include payments to provide restitution or another remedy that is associated with the basis for the settlement agreement. 

In recent settlements with the United States, large corporations 

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. 

By precluding any such donations in civil settlements that have 

not been finalized, H.R. 732 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 inVerDate Sep 11 2014 22:28 Mar 30, 2017 Jkt 069006 PO 00000 Frm 00019 Fmt 6659 Sfmt 6601 E:\HR\OC\HR072.XXX HR072

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crease or a decrease in the number of such settlements or to a 

change in the Federal receipts and forfeitures stemming from future settlements. 

Pay-as-you-go procedures apply because enacting H.R. 732 could 

affect direct spending and revenues; however, CBO cannot determine the magnitude or timing of those effects. 

CBO also cannot determine the long-term effects of the bill on direct spending or on-budget deficits but such effects are very unlikely to increase net direct spending or on-budget deficits by more 

than $5 billion in any of the four consecutive 10-year periods beginning in 2028. 

The bill also would require Federal agencies, for seven years 

after enactment, to submit an annual report to the Congress if certain settlement agreements were entered into during that year by 

the agency. Based on the cost of similar activities, CBO estimates 

that preparing those reports would cost less than $500,000 annually; such spending would be subject to the availability of appropriated funds. 

H.R. 732 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of state, local, or tribal governments. 

The CBO staff contact for this estimate is Mark Grabowicz. The 

estimate was approved by H. Samuel Papenfuss, Deputy Director 

for Budget Analysis. 

Duplication of Federal Programs 

No provision of H.R. 732 establishes or reauthorizes a program 

of the Federal Government known to be duplicative of another Federal program, a program that was included in any report from the 

Government Accountability Office to Congress pursuant to section 

21 of Public Law 111–139, or a program related to a program identified in the most recent Catalog of Federal Domestic Assistance. 

Disclosure of Directed Rule Makings 

The Committee estimates that H.R. 732 specifically directs to be 

completed no specific rule makings within the meaning of 5 U.S.C. 

§ 551. 

Performance Goals and Objectives 

The Committee states that pursuant to clause 3(c)(4) of rule XIII 

of the Rules of the House of Representatives, H.R. 732 prohibits 

terms in Justice Department settlements that direct or provide for 

payments to non-victim third-parties. 

Advisory on Earmarks 

In accordance with clause 9 of rule XXI of the Rules of the House 

of Representatives, H.R. 732 does not contain any congressional 

earmarks, limited tax benefits, or limited tariff benefits as defined 

in clause 9(e), 9(f), or 9(g) of Rule XXI. 


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Section-by-Section Analysis 

The following discussion describes the bill as reported by the 

Committee. 

Sec. 1: Short Title: Provides that the bill may be cited as the Stop 

Settlement Slush Funds Act of 2017. 

Sec. 2: Limitation on Donation Terms in Settlements to which the 

U.S. is a Party 

(a) Limitation on Required Donations—A U.S. official or 

agent may not enter into or enforce any U.S. government 

settlement directing or providing for a payment or loan to 

any person other than the United States. However, it permits a payment or loan that provides restitution for, or 

otherwise directly remedies, actual harm (including to the 

environment) directly and proximately caused by the party 

making the payment or loan, or constitutes payment for 

services rendered in connection with the case or is authorized by 18 U.S.C. § 3663 relating to drug prosecutions. 

(b) Penalties—Violators of section (a) are subject to the 

same penalties applicable to violations of 31 U.S.C. § 3302 

(the Miscellaneous Receipts Act). 

(c) Effective Date—Subsections (a) and (b) apply only in 

the case of a settlement agreement concluded on or after 

the date of enactment of this Act. 

(d) Definitions—‘‘Settlement Agreement’’ means a settlement agreement resolving a civil action or potential civil 

action, a plea agreement, a deferred prosecution agreement, or a non-prosecution agreement. 

(e) Reports on Settlement Agreements—Each agency shall 

submit an annual report to CBO detailing any settlement 

agreements that provide payments to non-victim third-parties pursuant to the allowed exceptions in section (a). Reports should detail the parties, source of funds and how 

they are spent. No additional funding is provided for such 

reports and the requirement lapses after 7 years. 

(f) Annual Audit Requirement—Each agency Inspector 

General shall report annually to the House Judiciary, 

Budget and Appropriation Committees on any settlements 

that violate this Act. No additional funds are provided for 

such reports. 

Dissenting Views 

H.R. 732, the ‘‘Stop Settlement Slush Funds Act of 2017,’’ is a 

deeply flawed proposal that would undermine the ability of civil enforcement agencies to hold corporate wrongdoers accountable for 

unlawful conduct. Based on unsubstantiated allegations that ignore 

established law and agency practice, the bill would prohibit any official or agent from consummating or enforcing a settlement agreement that includes payments to parties who are not ‘‘directly and 

proximately’’ harmed by the unlawful conduct of the settling party. 

In doing so, H.R. 732 would prevent agencies from ensuring wrongdoers make complete restitution for violations of the law and from 

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1Memorandum from U.S. Rep. Bob Goodlatte (R-VA) for Markup of H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ to Members of the H. Comm. on the Judiciary 9 (May 9, 

2016) (on file with Democratic staff of the H. Comm. on the Judiciary); Consumers Short 

Changed? Oversight of the Justice Department’s Mortgage Lending Settlements: Hearing Before 

the Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the 

Judiciary, 114th Cong. 8 (2015) (statement of U.S. Rep. Bob Goodlatte, Chairman, H. Comm. 

on the Judiciary) [hereinafter ‘‘Judiciary Oversight Hearing’’]. 2See, e.g., DAVID CARPENTER, CONG. RESEARCH SERV., LEGAL PRINCIPLES ASSOCIATED WITH

MONETARY RELIEF PROVIDED AS PART OF FINANCIAL-RELATED LEGAL SETTLEMENTS & ENFORCE- MENT ACTIONS 1 (2015); DAVID CARPENTER & EDWARD LIEU, CONG. RESEARCH SERV., MONETARY

RELIEF TO THIRD PARTIES AS PART OF FEDERAL LEGAL SETTLEMENTS 3 (2016); U.S. GOV’T ACCOUNTABILITY OFFICE, B–210210, MATTER OF: COMMODITY FUTURES TRADING COMM’N—DONATIONS UNDER SETTLEMENT AGREEMENTS (1983) (donations must be reasonably related to prosecutorial authority under statutory goals); U.S. GOV’T ACCOUNTABILITY OFFICE, B–238419, MATTER OF: NUCLEAR REGULATORY COMMISSION’S AUTH. TO MITIGATE CIVIL PENALTIES (1990) (settlements may not impose punishments unrelated to prosecutorial objectives). 3Memorandum from U.S. Rep. Bob Goodlatte (R-VA) for Markup of H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ to Members of the H. Comm. on the Judiciary 1 (May 9, 

2016) (‘‘Since the government never receives the money the MRA is not triggered. This idea is 

echoed in a 2006 DOJ Office of Legal Counsel memo.’’) (on file with Democratic staff of the H. 

Comm. on the Judiciary). 4 Comments from the Dep’t of Justice on H.R. 5063, the ‘‘Stop Settlement Slush Funds Act 

of 2016,’’ to Members of the H. Comm. on the Judiciary 1, 3 (May 17, 2016) (on file with Democratic staff of the H. Comm. on the Judiciary). 5Stop Settlement Slush Funds Act of 2016: Hearing on H.R. 5063 Before the Subcomm. on 

Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the Judiciary, 114th 

Cong. 3 (2016) [hereinafter ‘‘H.R. 5063 Hearing’’] (written statement of Joel Mintz, Professor, 

Nova Southeastern University College of Law) (on file with Democratic staff of the H. Comm. 

on the Judiciary); Id. (statement of David Uhlmann, Director, Environmental Law and Policy 

Program, University of Michigan School of Law, and former Chief of the Environmental Crimes 

Section of the Justice Department), https://judiciary.house.gov/wp-content/uploads/2016/04/ 

Uhlmann-Testimony.pdf; Settling the Question: Did Bank Settlement Agreements Subvert Congressional Appropriations Powers?: Hearing Before the Subcomm. on Oversight and Investigations of the H. Comm. on Financial Services, 114th Cong. (2016) [hereinafter ‘‘Financial Services 

Oversight Hearing’’] (statement of David K. Min, Assistant Professor of Law, University of California Irvine School of Law), http://financialservices.house.gov/uploadedfiles/hhrg-114-ba09- 

wstate-dmin-20160519.pdf. 

tifiable victims, the public health, or the environment. By forcing 

agencies into needless litigation, the bill would also delay the timely enforcement of the law and would waste agency time and resources. 

Although proponents of this legislation argue that settlement 

payments to third parties are effectively ‘‘slush funds’’ paid to ‘‘activist groups,’’ 1 there is no evidence to substantiate such concerns. 

For example, for several years the Majority has conducted an extensive investigation into certain settlement agreements structured 

by the Department of Justice. To date, however, no credible facts 

have been discovered that would suggest that these settlements included so-called slush funds otherwise subject to appropriations. 

Proponents also ignore well-established law and agency practice 

governing the propriety of settlement payments to third parties, as 

recognized by the non-partisan and independent Government Accountability Office (GAO) and Congressional Research Service 

(CRS),2 and which the Majority itself admits is lawful.3

Not surprisingly, the Justice Department, in its strenuous opposition to a substantively identical version of the legislation considered last Congress, stated that the bill would ‘‘unwisely constrain 

the government’s settlement authority and preclude many permissible settlements that would advance the public interest,’’ while 

interfering with the Department’s ability to address, remedy, and 

deter systemic harm caused by unlawful conduct.4 Several leading 

environmental and banking law experts similarly opposed that legislation because it would undermine the restitution of generalized 

harm in various cases.5 In the context of a veto threat of that bill, 

the Obama Administration stated that the ‘‘legislation seeks to adVerDate Sep 11 2014 22:28 Mar 30, 2017 Jkt 069006 PO 00000 Frm 00022 Fmt 6659 Sfmt 6601 E:\HR\OC\HR072.XXX HR072

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6 EXEC. OFFICE OF THE PRESIDENT, OFFICE OF MGM’T & BUDGET, STATEMENT OF ADMINISTRATION POLICY: H.R. 5063, STOP SETTLEMENT SLUSH FUNDS ACT OF 2016 (2016). 7Letter from Public Citizen to H. Comm. on the Judiciary (Feb. 1, 2017) (on file with Democratic staff of the H. Comm. on the Judiciary); Letter from Marc H. Morial, President, the National Urban League, to Chairman Goodlatte & Ranking Member Conyers, H. Comm. of the Judiciary (Feb. 1, 2017) (on file with Democratic staff of the H. Comm. on the Judiciary); Letter 

from Americans for Financial Reform, et al. (Sept. 7, 2016) (on file with Democratic staff of the 

H. Comm. on the Judiciary). 8 31 U.S.C. § 3302 (b), (d) (2017). 

9Memorandum from U.S. Rep. Tom Marino (R-PA) for Hearing on H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ to Members of the Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the Judiciary 6 (Apr. 25, 2016). 10 U.S. CONST. art. I, § 9 (‘‘No Money shall be drawn from the Treasury but in Consequence 

of Appropriations made by Law.’’). 11 Nelson D. Schwartz, Can the Mortgage Crisis Swallow a Town?, N.Y. TIMES, Sept. 4, 2007. 12 Id; Judiciary Oversight Hearing, supra note 1, at 1 (statement of Geoffrey Graber, Deputy 

Associate Attorney General and Director of the Residential Mortgage-Backed Securities Working 

Group of the Financial Fraud Enforcement Task Force), https://judiciary.house.gov/wp-content/ 

uploads/2016/02/Graber-RMBS-Testimony-HJC-Sbcmte-Hearing-12Feb15.pdf. 13Daniel Indiviglio, Could Foreclosuregate Really Cost Big Banks $17 Billion? THE ATLANTIC

(May 28, 2011), http://www.theatlantic.com/business/archive/2011/05/could-foreclosuregate-reallycost-big-banks-17-billion/239600/#; see REALTYTRAC, 1.1 Million U.S. Properties with Foreclosure 

Continued 

dress a problem that does not exist’’ and ‘‘would interfere with the 

just and fair settlement of cases.’’ 6 Not surprisingly, a coalition of 

public interest organizations—including the National Urban 

League, Public Citizen, and Americans for Financial Reform, and 

The Leadership Conference on Civil and Human Rights—opposes 

H.R. 732.7

For these reasons and those discussed below, we respectfully dissent and urge our colleagues to oppose this seriously flawed bill. 

DESCRIPTION AND BACKGROUND

DESCRIPTION

H.R. 732, the ‘‘Stop Settlement Slush Funds Act of 2017,’’ prohibits the enforcement or consummation of settlement agreements 

that direct payments or loans to parties not ‘‘directly and proximately’’ harmed by the unlawful conduct of the settling party (‘‘settlement payments’’). A violation of this measure would constitute 

a violation of the Miscellaneous Receipts Act, which prohibits the 

augmentation of agency appropriations through enforcement policy.8 The intent of this legislation is to prevent the Justice Department and other civil enforcement agencies from crafting settlement 

agreements that direct funds to non-government organizations, 

which according to the Majority,9 circumvents Congress’ appropriations power under article I, section 9, clause 7 of the U.S. Constitution.10 A detailed section-by-section explanation of the bill appears 

at the end of these views. 

BACKGROUND

I. PROSECUTION OF MISCONDUCT IN CONNECTION WITH THE

GREAT RECESSION

In 2008, the economy of the United States nearly collapsed, resulting in millions of Americans losing their jobs and their 

homes.11 Unprecedented since the Great Depression, the crisis severely depressed the values of home prices nationwide, destabilized 

the home building sector and other industries, and created international economic instability.12 More than 13 million homes were 

lost to foreclosure between 2006 and 2014.13


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Filings in 2014, Down 18 Percent From 2013 to Lowest Level Since 2006 (Jan. 14, 2015), http:// 

www.realtytrac.com/news/foreclosure-trends/1-1-million-u-s-properties-with-foreclosure-filings-in2014-down-18-percent-from-2013-to-lowest-level-since-2006/. 14 United States v. Bank of Am. Corp., No. 3:13–CV–00446–MOC, 2014 WL 2777397, at *8 

(W.D.N.C. June 19, 2014) (‘‘The court need not reach far outside the Complaint or be an expert 

in economics to take notice that it was the trading of toxic RMBS between financial institutions 

that nearly brought down the banking system in 2008.’’); Judiciary Oversight Hearing, supra 

note 1, at 2 (statement of Geoffrey Graber, Deputy Associate Attorney General and Director of 

the Residential Mortgage-Backed Securities Working Group of the Financial Fraud Enforcement 

Task Force), https://judiciary.house.gov/wp-content/uploads/2016/02/Graber-RMBS-TestimonyHJC-Sbcmte-Hearing-12Feb15.pdf; The Administration’s Report to Congress: Reforming America’s Housing Finance Market: Hearing Before the S. Comm. on Banking, Housing and Urban 

Affairs, 112th Cong. (2011) (prepared statement of Timothy Geithner, Secretary, U.S. Treasury 

Dep’t). 15 A residential mortgage-backed security is comprised of a ‘‘pool of mortgage loans created 

by banks and other financial institutions’’ that derives value from the ‘‘characteristics of the borrowers and the value of the properties underlying’’ the security. DEP’T OF JUSTICE, Morgan Stanley Agrees to Pay $2.6 Billion Penalty in Connection with Its Sale of Residential Mortgage 

Backed Securities (Feb. 11, 2016), https://www.justice.gov/opa/pr/morgan-stanley-agrees-pay-26- 

billion-penalty-connection-its-sale-residential-mortgage-backed. 16 Judiciary Oversight Hearing, supra note 1, at 2 (statement of Geoffrey Graber, Deputy Associate Attorney General and Director of the Residential Mortgage-Backed Securities Working 

Group of the Financial Fraud Enforcement Task Force), https://judiciary.house.gov/wp-content/ 

uploads/2016/02/Graber-RMBS-Testimony-HJC-Sbcmte-Hearing-12Feb15.pdf. 17DEP’T OF JUSTICE, U.S. Attorney General Holder, State and Federal Officials Announce 

Collaboration to Investigate Residential Mortgage-backed Securities Market (2012), 

http://www.justice.gov/opa/pr/us-attorney-general-holder-state-and-federal-officials-announcecollaboration-investigate. 18WHITE HOUSE, OFFICE OF THE PRESS SECRETARY, REMARKS BY THE PRESIDENT IN STATE OF

THE UNION ADDRESS (Jan. 24, 2012), https://www.whitehouse.gov/the-press-office/2012/01/24/remarks-president-state-union-address (announcing the creation of an investigatory unit to ‘‘hold 

accountable those who broke the law, speed assistance to homeowners, and help turn the page 

on an era of recklessness that hurt so many Americans.’’); Edward Wyatt & Shaila Dewan, New 

Housing Task Force Will Zero in on Wall Street, N.Y. TIMES (Jan. 25, 2012), http:// 

www.nytimes.com/2012/01/26/business/new-housing-task-force-takes-aim-at-wall-st.html. 19 Judiciary Oversight Hearing, supra note 1, at 1 (statement of Geoffrey Graber, Deputy Associate Attorney General and Director of the Residential Mortgage-Backed Securities Working 

Group of the Financial Fraud Enforcement Task Force), https://judiciary.house.gov/wp-content/ 

uploads/2016/02/Graber-RMBS-Testimony-HJC-Sbcmte-Hearing-12Feb15.pdf. 

A significant cause of this fiscal crisis 14 was the fraudulent packaging and trading of residential mortgage-backed securities 

(RMBS).15 Investments in these securities created a cycle of failure 

in the housing market: weaknesses in the market undermined the 

value of these securities, while the securities’ declining value 

‘‘cratered the housing market.’’ 16

In response, the Justice Department established the RMBS 

Working Group ‘‘to investigate those responsible for misconduct 

contributing to the financial crisis through the pooling and sale of 

residential mortgage-backed securities.’’ 17 In a 2012 State of the 

Union Address, President Obama stated that the broader purpose 

of the RMBS Working Group was to ‘‘hold accountable those who 

broke the law, speed assistance to homeowners, and help turn the 

page on an era of recklessness that hurt so many Americans.’’ 18

The broad focus of the Justice Department’s investigation reflects 

the diffuse impact of misconduct in the mortgage-backed securities 

market on the ‘‘entire financial system and the American economy 

as a whole.’’ 19

To date, the RMBS Working Group has facilitated record settlements with six financial institutions—Bank of America, Citigroup, 

Goldman Sachs, Morgan Stanley, Deutsche Bank, and JPMorgan 

Chase—for alleged misconduct involving the packaging, marketing, 

and sale of residential mortgage-backed securities. In 2013, the 

Justice Department agreed to a $13 billion settlement with 

JPMorgan Chase following an investigation by the RMBS Working 

Group of the bank’s sale, marketing, and use of residential mortVerDate Sep 11 2014 22:28 Mar 30, 2017 Jkt 069006 PO 00000 Frm 00024 Fmt 6659 Sfmt 6601 E:\HR\OC\HR072.XXX HR072

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20DEP’T. OF JUSTICE, Justice Department, Federal and State Partners Secure Record $13 Billion Global Settlement with JPMorgan for Misleading Investors about Securities Containing 

Toxic Mortgages (2013), http://www.justice.gov/opa/pr/justice-department-federal-and-statepartners-secure-record-13-billion-global-settlement. 21 Id; 12 U.S.C. § 1833a (2017); United States v. Bank of New York Mellon, No. 11 Civ. 6969 

LAK 2 (S.D.N.Y. Apr. 24, 2013). 22DEP’T. OF JUSTICE, Justice Department, Federal and State Partners Secure Record $7 Billion 

Global Settlement with Citigroup for Misleading Investors about Securities Containing Toxic 

Mortgages (2014), http://www.justice.gov/opa/pr/justice-department-federal-and-state-partners-secure-record-7-billion-global-settlement. 23DEP’T OF JUSTICE, BANK OF AMERICA TO PAY $16.65 BILLION IN HISTORIC JUSTICE DEPART- MENT SETTLEMENT FOR FINANCIAL FRAUD LEADING UP TO AND DURING THE FINANCIAL CRISIS

(2014), http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-historic-justice-departmentsettlement-financial-fraud-leading. 24 Id. 25DEP’T OF JUSTICE, Morgan Stanley Agrees to Pay $2.6 Billion Penalty in Connection with 

Its Sale of Residential Mortgage Backed Securities (Feb. 11, 2016), https://www.justice.gov/opa/ 

pr/morgan-stanley-agrees-pay-26-billion-penalty-connection-its-sale-residential-mortgage-backed. 26DEP’T OF JUSTICE, Goldman Sachs Agrees to Pay More than $5 Billion in Connection with 

Its Sale of Residential Mortgage Backed Securities (Apr. 11, 2016), https://www.justice.gov/opa/ 

pr/goldman-sachs-agrees-pay-more-5-billion-connection-its-sale-residential-mortgage-backed. 27DEP’T OF JUSTICE, Deutsche Bank Agrees to Pay $7.2 Billion for Misleading Investors in its 

Sale of Residential Mortgage-Backed Securities (Jan. 17, 2017), https://www.justice.gov/opa/pr/ 

deutsche-bank-agrees-pay-72-billion-misleading-investors-its-sale-residential-mortgage-backed. 28 Id. 

gage-backed securities.20 At the time, this settlement represented 

the largest settlement with a single entity in American history, as 

well as the largest civil penalty for a claim rising under Financial 

Institutions Reform, Recovery, and Enforcement Act (FIRREA).21

Thereafter, the Justice Department in 2014 agreed to a $7 billion 

settlement with Citigroup stemming from its allegedly fraudulent 

‘‘packaging, securitization, marketing, sale, and issuance of residential mortgage-backed securities,’’ 22 which also included a $4 billion civil penalty under FIRREA. That same year, the Justice Department entered into a settlement agreement with the Bank of 

America for nearly $17 billion to resolve claims arising from the 

company’s fraudulent sale, arrangement, marketing, and other uses 

of mortgage-backed securities and collateralized-debt obligations.23

Anne Tompkins, U.S. Attorney for the Western District of North 

Carolina, said that the settlement ‘‘attests to the fact that fraud 

pervaded every level of the RMBS industry, including purportedly 

prime securities,’’ and that the settlement demonstrates that even 

‘‘reputable institutions like Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of 

their customers.’’ 24 In 2016, the Justice Department settled potential claims relating to Morgan Stanley’s alleged misconduct in the 

mortgage-backed securities market pursuant to which it agreed to 

pay a $2.6 billion penalty.25 In April 2016, the Justice Department 

announced a $5.06 billion settlement with Goldman Sachs—including a $2.385 billion civil penalty under FIRREA—relating to its allegedly fraudulent packaging, securitization, marketing, sale and 

issuance of mortgage-backed securities.26 Most recently, the Justice 

Department finalized a $7.2 billion settlement with Deutsche 

Bank.27 According to then-Attorney General Loretta E. Lynch, this 

settlement ‘‘holds Deutsche Bank accountable for its illegal conduct 

and irresponsible lending practices, which caused serious and lasting damage to investors and the American public.’’ 28

In addition to significant monetary penalties, these settlements 

also include statements of facts describing the significant fraud and 

misrepresentation relating to the settling banks’ sale and underwriting of securities, serving as ‘‘an acknowledgement by the banks 


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29 Judiciary Oversight Hearing, supra note 1, at 3 (statement of Geoffrey Graber, Deputy Associate Attorney General and Director of the Residential Mortgage-Backed Securities Working 

Group of the Financial Fraud Enforcement Task Force), https://judiciary.house.gov/wp-content/ 

uploads/2016/02/Graber-RMBS-Testimony-HJC-Sbcmte-Hearing-12Feb15.pdf. 30DEP’T OF JUSTICE, JPMORGAN STATEMENT OF FACTS 6–8 (2013), http://www.justice.gov/iso/ 

opa/resources/94320131119151031990622.pdf. 31 Id. 32DEP’T. OF JUSTICE, Justice Department, Federal and State Partners Secure Record $7 Billion 

Global Settlement with Citigroup for Misleading Investors about Securities Containing Toxic 

Mortgages (July 14, 2014), http://www.justice.gov/opa/pr/justice-department-federal-and-statepartners-secure-record-7-billion-global-settlement. 33 Id. 34See, e.g, DEP’T. OF JUSTICE, Justice Department, Federal and State Partners Secure Record $7 Billion Global Settlement with Citigroup for Misleading Investors About Securities Containing 

Toxic Mortgages (July 14, 2014), http://www.justice.gov/opa/pr/justice-department-federal-andstate-partners-secure-record-7-billion-global-settlement; DEP’T OF JUSTICE, ANNEX 2: CITIGROUP

CONSUMER RELIEF REPORT (2014), http://www.justice.gov/iso/opa/resources/6492014714137 

21380969.pdf [hereinafter ‘‘Citigroup Consumer Relief Report’’]; Citi Monitorship First Report, 

JENNER & BLOCK LLP at 6–7 (Jan. 2015), http://www.citigroupmonitorship.com/uploads/3/5/1/9/ 

3519321/citi_monitorship_initial_report_2015-01-21.pdf. 35Financial Services Oversight Hearing, supra note 5, at 3 (statement of David K. Min, Assistant Professor of Law, University of California Irvine School of Law), http://financial 

services.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf; see, e.g., Citigroup 

Consumer Relief Report, supra note 14, at 11–15; DEP’T OF JUSTICE, ANNEX 2: CONSUMER RELIEF REPORT (2013), http://www.justice.gov/iso/opa/resources/64420131119164759163425.pdf. 36The consumer relief portions of the Justice Department’s settlement with Citigroup include 

a two-to-one payment credit for donations to legal assistance groups to ‘‘help rectify the harm 

caused by Citi’s conduct.’’ These groups include: (1) community development financial institutions (CDFIs), land banks subject to state or local regulation, or community development funds 

administered by non-profits or local governments (at least $25 million); (2) state-based Interest 

on Lawyers’ Trust Account (IOLTA) organizations that provide funds to legal aid organizations 

(at least $15 million); and (3) HUD-approved housing counseling agencies (HCAs) to ‘‘provide 

foreclosure prevention assistance and other housing counseling activities’’ (at least $10 million). 

DEP’T OF JUSTICE, ANNEX 2: CITIGROUP CONSUMER RELIEF REPORT 11–15 (2014), http:// 

www.justice.gov/iso/opa/resources/649201471413721380969.pdf. 37The Bank of America settlement includes a two-to-one credit for donations to third-party 

groups, such as donations to: (1) Community Development Financial Institutions (CDFIs), land 

banks, or community development funds administered by non-profits or local governments; and 

(2) state-based Interest on Lawyers’ Trust Account (IOLTA) organizations that provide funds to 

legal aid organizations; and (3) HUD-approved housing counseling agencies (HCAs) to ‘‘provide 

foreclosure prevention assistance and other housing counseling activities.’’ DEP’T OF JUSTICE, 

ANNEX 2: BANK OF AMERICA CONSUMER RELIEF REPORT 6–8 (2014), https://www.justice.gov/iso/ 

opa/resources/8492014829141239967961.pdf. 

to their shareholders and the American public of the misconduct 

uncovered by the Department of Justice.’’ 29 For example, one of the 

settling banks acquired pools of mortgage-backed securities that 

the bank graded poorly, such as loans with high loan-to-value or 

debt-to-income ratios.30 Notwithstanding the poor qualities of these 

securities, the bank continued to securitize, package, and sell them 

to investors.31 In another example, a settling bank ‘‘knowingly 

securitized and sold mortgage loans with significant percentages of 

material defects,’’ while making positive representation to investors 

about the quality of the loans it securitized.32 In an internal communication, one of the bank’s traders stated that he ‘‘would not be 

surprised if half of these loans went down,’’ and that the bank 

should ‘‘start praying.’’ 33

Several of these settlements also include ‘‘consumer relief’’ provisions that require the settling banks to remediate harms resulting 

from the banks’ allegedly unlawful conduct.34 These provisions provide the settling banks with discretion to choose various forms of 

consumer relief, including principal forgivingness, community reinvestment and stabilization initiatives to remediate neighborhood 

blight, foreclosure prevention programs, affordable housing resources, and income-based lending for ‘‘borrowers who lost homes 

to foreclosure.’’ 35 Additionally, two of these settlements, with 

Citigroup 36 and Bank of America,37 required donations to thirdparty charitable organizations, including legal aid organizations, 


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38Letter from Julia Gordon, Center for American Progress (CAP), to Members of the H. 

Comm. on the Judiciary (Feb. 12, 2015) (on file with Democratic staff of the H. Comm. on the 

Judiciary). 39 Judiciary Oversight Hearing, supra note 1, at 3 (statement of Geoffrey Graber, Deputy Associate Attorney General and Director of the Residential Mortgage-Backed Securities Working 

Group of the Financial Fraud Enforcement Task Force), https://judiciary.house.gov/wp-content/ 

uploads/2016/02/Graber-RMBS-Testimony-HJC-Sbcmte-Hearing-12Feb15.pdf. 40Memorandum from U.S. Rep. Bob Goodlatte (R-VA), Chair, H. Comm. on the Judiciary, for 

Markup of H.R. 732, the ‘‘Stop Settlement Slush Funds Act of 2017,’’ to Members of the H. 

Comm. on the Judiciary 1 (Feb. 1, 2017) (on file with Democratic staff of the H. Comm. on the 

Judiciary); Memorandum from U.S. Rep. Tom Marino (R-PA) for Hearing on H.R. 5063, the 

‘‘Stop Settlement Slush Funds Act of 2016,’’ to Members of the Subcomm. on Regulatory Reform, 

Commercial and Antitrust Law of the H. Comm. on the Judiciary 6 (Apr. 25, 2016) (on file with 

Democratic staff of the H. Comm. on the Judiciary). 41 Id. at 3, 6. 

community development financial institutions, and housing counseling groups certified by the U.S. Department of Housing and 

Urban Development (HUD). These donations account for less than 

1% of the overall amount of each settlement and ‘‘support services 

provided by housing counselors and other trusted intermediaries 

that enable consumers to access the consumer relief to which they 

are entitled under the settlements.’’ 38 Geoffrey Graber, who formerly served as the Director of the RMBS Working Group, testified 

that these settlements embody the goals of the RMBS Working 

Group in several ways: 

First, each settlement achieved accountability by requiring 

a significant (and in some cases record) monetary penalty, 

as well as a statement of facts acknowledging the evidence 

underlying the government’s allegations. These penalties 

will hopefully serve to deter future misconduct; and the 

statements of facts serve as an acknowledgement by the 

banks to their shareholders and the American public of the 

misconduct uncovered by the Department of Justice. 

Second, each bank committed to provide many billions of 

dollars of consumer relief, of a type that is designed to enable many Americans to stay in their homes, and will enable many more to secure homeownership for the first time 

(the particular settling banks had origination and/or servicing operations that helped facilitate this type of relief). 

These consumer relief provisions—in which the settling 

banks agreed to provide billions of dollars in relief for consumers in the housing market—provide an especially salient feature of these settlements. This type of relief likely 

could not have been ordered by a court, even if the government had prevailed at trial.39

II. OVERSIGHT OF THE JUSTICE DEPARTMENT’S INCLUSION OF

DONATIONS IN SETTLEMENT AGREEMENTS

Since 2014, the Majority has conducted an ‘‘extended’’ investigation into the consumer relief provisions of the Justice Department’s 

settlements with Citigroup and Bank of America (‘‘RMBS settlements’’).40 On November 25, 2014, House Judiciary Committee 

Chairman Bob Goodlatte (R-VA) and Financial Services Chairman 

Jeb Hensarling (R-TX) commenced a formal ‘‘pattern-or-practice investigation’’ into these settlements.41 They issued a joint letter to 

the Justice Department requesting production of ‘‘all communications relating to what became the ‘Community Reinvestment and 


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42Letter from Rep. Bob Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. Jeb Hensarling, Chairman, H. Comm. on Financial Services, to Eric Holder, U.S. Attorney General 3 

(Nov. 25, 2014) (on file with staff of the H. Comm. on the Judiciary). 43 Id. at 3. 44Letter from Rep. Spencer Bachus, Chairman, Subcomm. on Regulatory Reform, Commercial 

and Antitrust Law of the H. Comm. on the Judiciary, to Stuart Delery, Dep’t of Justice, Civil 

Div., Assistant Attorney Gen. (Sept. 10, 2014). 45 Judiciary Oversight Hearing, supra note 2. 46 H. COMM. ON THE JUDICIARY, Regulatory Reform Subcommittee Holds Hearing on the Justice 

Department’s Controversial Mortgage-Lending Settlements (Feb. 5, 2015), https://judiciary. 

house.gov/press-release/regulatory-reform-subcommittee-holds-hearing-on-the-justice-department 

-s-controversial-mortgage-lending-settlements/. 47Letter from Rep. Bob Goodlatte, Chairman, H. Comm. on the Judiciary, to Loretta Lynch, 

U.S. Attorney General (May 14, 2015) (on file with staff of the H. Comm. on the Judiciary). 48Ongoing Oversight: Monitoring The Activities of the Justice Dep’t’s Civil, Tax And Env’t And 

Nat. Resources Divisions And The U.S. Trustee Program: Hearing Before the Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the Judiciary, 114th Cong. 

81 (2015) (statement by Rep. Bob Goodlatte, Chairman, H. Comm. on the Judiciary). 49 Id. (‘‘the Department has sent a paltry 60 pages of email between the Department of Justice 

and outside groups, no internal Department of Justice emails. . . . When will we get those documents?’’). 50Letter from Peter J. Kadzik, Assistant Attorney General, to Rep. Bob Goodlatte, Chairman, 

H. Comm. on the Judiciary, et al. (May 29, 2015) (on file with staff of the H. Comm. on the 

Judiciary). 

Neighborhood Stabilization’ provisions in the Citigroup and BoA 

settlements,’’ 42 explaining that the settlements ‘‘appear to serve as 

a vehicle for funding activist groups.’’ 43 Prior to the Majority’s investigatory letter, Spencer Bachus (R-AL), the former Chairman of 

the Regulatory Reform, Commercial and Antitrust Law (RRCAL) 

Subcommittee, sent a letter to the Justice Department’s Civil Division expressing similar concerns and also requesting additional information on the consumer-relief portions of these settlements.44

On February 12, 2015, the RRCAL Subcommittee held an oversight 

hearing entitled ‘‘Consumers Short Changed? Oversight of the Justice Department’s Mortgage Lending Settlements,’’ 45 where Chairman Goodlatte and RRCAL Subcommittee Chairman Tom Marino 

(R-PA) accused the Justice Department of using ‘‘its controversial 

settlements’’ to ‘‘funnel money to activist groups instead of consumers.’’ 46 Chairman Goodlatte and Chairman Hensarling sent another letter on May 14, 2015 asking for ‘‘all documents and communications generated or transmitted by non-profit, charitable, or 

similar organizations,’’ as well as ‘‘all communications pertaining to 

what became Annex Three (‘‘Tax Fund’’) of the Bank of America 

settlement.’’ 47 At a subsequent oversight hearing in the RRCAL 

Subcommittee on March 19, 2015,48 Chairman Goodlatte complained that the Justice Department’s production of 60 pages of 

emails did not include internal communications.49

The Justice Department initially complied with the Majority’s request on May 29, 2015 through a production of ‘‘hundreds of pages 

of documents’’ relating to the consumer relief provisions of the 

RMBS settlements.50 In a letter to Chairman Goodlatte describing 

the full scope of the Justice Department’s efforts to accommodate 

the Majority’s request, Assistant Attorney General Peter Kadzik 

explained: 

The Department has provided written responses dated 

January 6, 2015, March 31, 2015, May 18, 2015, May 29, 

2015, and November 6, 2015, which included the production of hundreds of pages of documents. The Department 

also testified about the RMBS settlements on February 12, 

2015, and responded to written questions for the record on 

May 18, 2015. In addition to this testimony and our formal 


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51 Id. 52Letter from Peter J. Kadzik, Assistant Attorney General, to Rep. Bob Goodlatte, Chairman, 

H. Comm. on the Judiciary, et al. (Nov. 6, 2015) (on file with staff of the H. Comm. on the Judiciary). 53 Id. 54Letter from Peter J. Kadzik, Assistant Attorney General, to Rep. Bob Goodlatte, Chairman, 

H. Comm. on the Judiciary, et al. (Feb. 29, 2016) (on file with staff of the H. Comm. on the 

Judiciary). 55Memorandum from U.S. Rep. Bob Goodlatte (R-VA), Chair, H. Comm. on the Judiciary, for 

Markup of H.R. 732, the ‘‘Stop Settlement Slush Funds Act of 2017,’’ to Members of the H. 

Comm. on the Judiciary 7 (Feb. 1, 2017). 56Memorandum from U.S. Rep. Bob Goodlatte (R-VA) for Markup of H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ to Members of the H. Comm. on the Judiciary 9 (May 9, 

2016). 57 H.R. 5063 Hearing, supra note 5, at 1, 5 (written statement of Joel Mintz, Professor, Nova 

Southeastern University College of Law) (on file with Democratic staff of the H. Comm. on the 

Judiciary). 58Letter from Peter J. Kadzik, Assistant Attorney General, to Rep. Bob Goodlatte, Chairman, 

H. Comm. on the Judiciary, et al. (Feb. 29, 2016) (on file with staff of the H. Comm. on the 

Judiciary). 

written responses, the Department also briefed your staff 

on January 15, 2015, and has spoken with your staff during numerous telephone conversations. Through these actions, the Department has sought to address all of the 

Committee’s stated information needs regarding the RMBS 

settlements. The Department’s accommodation efforts described above have been guided by discussions with your 

staff regarding the scope and focus of the Committee’s inquiry.51

Following this production, the Justice Department supplemented 

its earlier responses through another transmission of documents on 

November 6, 2015.52 This production includes approximately 300 

additional pages of emails, internal Justice Department communications as well as references to communications with third parties.53 The Justice Department also provided an in camera review 

of nearly 500 pages of documents, including internal work product, 

memoranda, and communications relating to the inclusion of the 

consumer relief provisions in the RMBS settlement agreements.54

Notwithstanding the Justice Department’s substantial cooperation with the Majority’s request, proponents of H.R. 732 now argue 

that the Justice Department has ignored congressional concerns 

with settlement agreements and ‘‘doubled down’’ on ‘‘mandatory donation provisions’’ in settlements.55

CONCERNS WITH H.R. 732

I. H.R. 732 IS A POORLY-DESIGNED SOLUTION TO A

NON-EXISTENT PROBLEM

Proponents of H.R. 732 argue that the Justice Department has 

structured settlements to direct ‘‘slush funds’’ to ‘‘activist 

groups,’’ 56 even though they offer no proof in support of their contention.57 Notwithstanding significant document production by the 

Justice Department—including an extensive in camera review, private briefings and telephone conversations, and internal work product and communications,58 along with hundreds of pages of documents produced by private parties—the Majority’s investigation of 

the Justice Department’s settlement agreements has produced no 


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59See H.R. 5063 Hearing, supra note 5, at 2 (written statement of Joel Mintz, Professor, Nova 

Southeastern University College of Law) (‘‘The Random House Dictionary of the English Language defines the phrase ‘slush fund’ as ‘a sum of money used for illicit or corrupt political purposes, as for buying influence or votes, bribing public officials, or the like.’ The SEPs permitted 

by EPA cannot be fairly considered slush funds in any sense.’’) (on file with Democratic staff 

of the H. Comm. on the Judiciary). 60See generally Memorandum from U.S. Rep. Bob Goodlatte (R-VA) for Markup of H.R. 5063, 

the ‘‘Stop Settlement Slush Funds Act of 2016,’’ to Members of the H. Comm. on the Judiciary 

9 (May 9, 2016). 61 28 U.S.C. § 516 (2017); Letter from Peter J. Kadzik, Assistant Attorney General, to Rep. 

Bob Goodlatte, Chairman, H. Comm. on the Judiciary, et al. (May 29, 2015) (The Justice Department has ‘‘long been authorized to manage the federal government’s litigation interests . . . a 

responsibility that includes the authority to settle or compromise cases based on such terms as 

the Department sees fit.’’) (on file with Democratic staff of the H. Comm. on the Judiciary). 62 Agencies also have ample discretion when making determination not to enforce a law in 

light of enforcement priorities and resources. Heckler v. Chaney, 470 U.S. 821, 831 (1985). 63 U.S. CONST. art. II, § 3 (the President ‘‘shall take Care that the Laws be faithfully executed.’’). 64DAVID CARPENTER, CONG. RESEARCH SERV., LEGAL PRINCIPLES ASSOCIATED WITH MONETARY

RELIEF PROVIDED AS PART OF FINANCIAL-RELATED LEGAL SETTLEMENTS & ENFORCEMENT AC- TIONS 1 (2015). 65 Assistant Attorney General Theodore Olsen, Office of Legal Counsel, The Attorney General’s 

Role as Chief Litigator for the United States, Memorandum Opinion for the Attorney General, 

Jan. 4, 1982, at 47–48, https://www.justice.gov/sites/default/files/olc/opinions/1982/01/31/op-olcv006-p0047.pdf. 66 Id. at 59. 67 Id. at 60; Smith v. United States, 375 F.2d 243, 248 (5th Cir.), cert. denied, 389 U.S. 841 

(1967). (‘‘The federal government’s decisions concerning enforcement of its criminal statutes comprise a part of its pursuit of national policy.’’). 68 Enforcing the President’s Constitutional Duty to Faithfully Execute the Laws: Hearing Before 

the H. Comm. on the Judiciary, 113th Cong. 55 (2014) (statement of Christopher H. Schroeder, 

Charles S. Murphy Professor of Law and Professor of Public Policy Studies, Duke University), 

https://www.gpo.gov/fdsys/pkg/CHRG-113hhrg86841/pdf/CHRG-113hhrg86841.pdf. 69 Heckler v. Chaney, 470 U.S. 821, 831–32 (1985). 

evidence that these settlements included unlawful or politically motivated terms.59

Although proponents of H.R. 732 claim that the Justice Department’s RMBS settlements are unlawful,60 the Justice Department 

has broad enforcement discretion when settling litigation involving 

the Federal Government,61 a traditional power of the Executive 

Branch.62 Under the Take Care Clause of the Constitution,63 civil 

enforcement agencies have substantial flexibility in crafting settlement agreements within their statutory enforcement authority that 

provide remedies for the alleged misconduct of an entity.64 Since its 

creation in 1789, the Justice Department has possessed plenary authority for all litigation on behalf of the Government or a Federal 

agency except as otherwise provided by law.65 The authority to 

compromise and settle litigation is inherent within this broad grant 

of plenary authority over government litigation,66 and extends beyond mere litigation strategy to include the ‘‘national policies espoused by the Executive.’’ 67 As Professor Christopher Schroeder of 

Duke University Law School observed in his testimony before the 

Committee, this discretion is one of the ‘‘unavoidable features in 

executing almost all laws.’’ 68 In its landmark decision, the Supreme Court noted in Heckler v. Chaney that agency enforcement 

decisions involve ‘‘a complicated balancing of a number of factors 

that are peculiarly within its expertise,’’ making the agency ‘‘far 

better equipped than the courts to deal with the many variables involved in the proper ordering of its priorities.’’ 69 Professor Joel 

Mintz of Nova Southeastern University College of Law, a former 

chief attorney with the Environmental Protection Agency (EPA), 

explains that this same rationale clearly applies to settlement 

terms, which ‘‘involve numerous complicated technical issues as 

well as important judgments respecting the use of limited prosecuVerDate Sep 11 2014 22:28 Mar 30, 2017 Jkt 069006 PO 00000 Frm 00030 Fmt 6659 Sfmt 6601 E:\HR\OC\HR072.XXX HR072

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70See H.R. 5063 Hearing, supra note 5, at 3 (written statement of Joel Mintz, Professor, Nova 

Southeastern University College of Law) (on file with Democratic staff of the H. Comm. on the 

Judiciary). 71Financial Services Oversight Hearing, supra note 5, at 6 (statement of David K. Min, Assistant Professor of Law, University of California Irvine School of Law), http://financial 

services.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf; Comments from the 

Dep’t of Justice on H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ to Members of 

the H. Comm. on the Judiciary 1 (May 17, 2016) (on file with Democratic staff of the H. Comm. 

on the Judiciary). 72 31 U.S.C. § 3302(b) (2017); 19 U.S.C. § 527 (2017) (requiring deposit of customs fines, penalties, and forfeitures to the Treasury). 73 31 U.S.C. § 1301(a) (2017) (restricting the use of appropriated funds to their intended purposes); U.S. GOV’T ACCOUNTABILITY OFFICE, GAO–06–382SP, PRINCIPLES OF FEDERAL APPROPRIATIONS LAW 2 (2004). The Antideficiency Act also prohibits Federal agencies from receiving Federal funds or volunteer services for which there was no existing appropriation. 31 U.S.C. 

§ 1341(a) (2016). 74 U.S. GOV’T ACCOUNTABILITY OFFICE, NUCLEAR REGULATORY COMMISSION’S AUTH. TO MITIGATE CIVIL PENALTIES 17, 19 (1990). 75 U.S. Const. art. I, § 9, cl. 7 (‘‘No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.’’); U.S. Const. art. I, § 8, cl. 1 (‘‘The Congress shall 

have Power . . . to pay the Debts and provide for the common Defense and general Welfare 

of the United States.’’). 76 31 U.S.C. § 3302(b) (2017). Penalties for violating this statute include the possibility of removal from office and forfeiture of funds to the U.S. Treasury. 31 U.S.C. § 3302(d) (2017). 77See, e.g., U.S. GOV’T ACCOUNTABILITY OFFICE, B–210210, MATTER OF: COMMODITY FUTURES

TRADING COMM’N—DONATIONS UNDER SETTLEMENT AGREEMENTS (1983) (donations must be reasonably related to prosecutorial authority under statutory goals); U.S. GOV’T ACCOUNTABILITY

OFFICE, B–238419, MATTER OF: NUCLEAR REGULATORY COMMISSION’S AUTH. TO MITIGATE CIVIL

PENALTIES (1990) (settlements may not impose punishments unrelated to prosecutorial objectives). 78 U.S. GOV’T ACCOUNTABILITY OFFICE, B–210210, MATTER OF: COMMODITY FUTURES TRADING

COMM’N—DONATIONS UNDER SETTLEMENT AGREEMENTS (1983). 79 Id. 80 U.S. ENVTL. PROT. AGENCY, B–247155.2, 1993 WL 798227 (Comp. Gen. Mar. 1, 1993), http:// 

www.gao.gov/assets/200/195921.pdf 

torial resources,’’ and are ‘‘best left in the hands of expert agencies 

and prosecutors, rather than dictated by Congress or the federal 

courts.’’ 70

Furthermore, settlement payments are a lawful exercise of the 

Justice Department’s enforcement discretion.71 The Miscellaneous 

Receipts Act (MRA)72 and other appropriations laws 73 establish a 

general prohibition against augmentation of agency appropriations 

through enforcement policy.74 These laws effectuate Congress’ role 

in appropriating funds and ensuring that Congress retains control 

of the public purse.75 Importantly, however, this prohibition is 

clearly inapplicable to funds that are not received by the Government.76

The non-partisan and independent Government Accountability 

Office (GAO) has issued several opinions clarifying settlement payments are not ‘‘for the Government’’ within the meaning of the 

MRA.77 The GAO explains that an agency’s enforcement discretion 

includes the use of settlement payments as long as the remedies 

have a nexus to the correction of an underlying violation and the 

agency’s prosecutorial objectives. 78 Indeed, GAO has stated that 

‘‘settlements may contain terms and undertakings that go beyond 

the [agency’s] remedies,’’ 79 and that an enforcement agency ‘‘may 

adjust penalties to reflect the special circumstances of the violation 

or concessions exacted from the violator.’’ 80 As Professor David Min 

of the University of California Irvine School of Law observes, the 

thrust of this policy is to allow the Federal Government to ‘‘ ‘adjust’ 

penalties on a case-by-case basis, so long as the remedies are not 


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81Financial Services Oversight Hearing, supra note 5, at 6 (statement of David K. Min, Assistant Professor of Law, University of California Irvine School of Law), http://financial 

services.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 82 Andrew Brady Spalding, Restorative Justice for Multinational Corporations, 76 OHIO ST. 

L.J. 357, 394–95 (2015). 83DAVID CARPENTER & EDWARD LIEU, CONG. RESEARCH SERV., MONETARY RELIEF TO THIRD

PARTIES AS PART OF FEDERAL LEGAL SETTLEMENTS 1 (2016). 84 Id. at 1–2. 85DAVID CARPENTER, CONG. RESEARCH SERV., LEGAL PRINCIPLES ASSOCIATED WITH MONETARY

RELIEF PROVIDED AS PART OF FINANCIAL-RELATED LEGAL SETTLEMENTS & ENFORCEMENT ACTIONS 6 (2015). 86 Id. 87See, e.g., Sierra Club, Inc. v. Elec. Controls Design, Inc., 909 F.2d 1350, 1355 n.7 (9th Cir. 

1990) (‘‘Consent decrees, such as the one at issue here, are also consistent with current practice. 

Courts throughout the country have entered consent judgments in civil suits requiring defendants to make payments to various environmental organizations and, in some cases, the defendants have not been required to pay penalties to the U.S. Treasury.’’). 88Local No. 93, Int’l Ass’n of Firefighters, AFL–CIO C.L.C. v. City of Cleveland, 478 U.S. 501, 

517–18, 525–26 (1986); see Sierra Club, Inc. v. Elec. Controls Design, Inc., 909 F.2d 1350, 1355 

(9th Cir. 1990) (construing Local No. 93) (‘‘While it is clear that a court cannot order a defendant in a citizens’ suit to make payments to an organization other than the U.S. treasury, this 

prohibition does not extend to a settlement agreement whereby the defendant does not admit 

liability and the court is not ordering non-consensual monetary relief.’’). 89Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 49, 53 (1987). 90 Id. at 521. 91See, e.g., Friends of the Earth v. Eastman Kodak Co., 656 F. Supp. 513, 513 (W.D.N.Y.), 

aff’d, 834 F.2d 295 (2d Cir. 1987) (upholding payments to environmental organizations in a consent decree). 

‘unrelated to the correction of the violation in question.’ ’’ 81 Thus, 

in light of GAO decisions on this matter, these settlement terms 

‘‘fall within the Executive’s legitimate enforcement authority and 

[do] not run afoul of either Congress’s Article I power of the purse 

or the MRA.’’ 82

The non-partisan Congressional Research Service (CRS) likewise 

agrees that settlement payments are a lawful exercise of agency 

enforcement discretion.83 Noting that enforcement agencies have 

‘‘tremendous flexibility to craft the terms of legal settlements with 

entities for alleged misbehavior,’’ CRS observes that remediation 

under a settlement ‘‘could take numerous legal forms, such as civil 

money penalties, civil forfeiture, or restitution to harmed investors, 

consumers, or public programs.’’ 84 Furthermore, private parties 

may lawfully distribute relief to third parties—including state or 

local governmental entities or private parties—under the terms of 

a settlement.85 These payments, CRS explains, are ‘‘not ‘for the 

Government’ for purposes of the miscellaneous receipts statute’’ 

and are ‘‘wholly outside ‘the statutory mosaic Congress has enacted 

to implement its constitutional power of the purse.’ ’’ 86

Courts have also broadly upheld the use of settlement payments.87 The Supreme Court has long held that a settlement may 

impose broader relief than would be available through litigation. In 

1986, the Court ruled in Firefighters v. City of Cleveland that settlements may include broader forms of relief than those outlined in 

the underlying statute, as long as these terms come within the general scope of the case, further then objective upon which the law 

is based, and do not violate the underlying statute.88 Unlike civil 

penalties imposed by a court, which must be paid to the U.S. 

Treasury,89 the Court characterized settlements as contracts because the ‘‘voluntary nature of a consent decree is its most fundamental characteristic.’’ 90

Lower courts have similarly held that settlement payments are 

in the public interest.91 In 1990, the Ninth Circuit construed Firefighters v. City of Cleveland to allow lawful payments to third parVerDate Sep 11 2014 22:28 Mar 30, 2017 Jkt 069006 PO 00000 Frm 00032 Fmt 6659 Sfmt 6601 E:\HR\OC\HR072.XXX HR072

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92Sierra Club, Inc. v. Elec. Controls Design, Inc., 909 F.2d 1350, 1356 (9th Cir. 1990). 93 Id. 94 Nw. Envtl. Def. Ctr. v. Unified Sewerage Agency of Washington Cty., No. CIV. 88–1128– 

HO, 1990 WL 191827, at *1–2 (D. Or. July 27, 1990). 95 Id. 

ties under a settlement.92 There, the court found that these payments furthered Congress’ purpose of the underlying statute and 

that Congress did not intend to prevent these forms of payments: 

The Clean Water Act also does not render the proposed 

consent judgment unlawful. The provisions of the Act provide no limitation on the type of payments to which parties 

to citizens’ suits can agree in a settlement. There is no indication that where a defendant agrees to a settlement it 

must also agree to pay penalties to the treasury. Likewise, 

the Act’s legislative history reveals no Congressional intent that private parties be precluded from entering into 

settlements which do not require the defendant to tender 

civil penalties to the United States. . . . We therefore find 

that the proposed consent decree furthers the purpose of 

the statute upon which the complaint was based and does 

not violate its terms or policy. The payments to the environmental organizations are not in recognition of liability 

under the Clean Water Act and are not civil penalties. No 

liability was ever judicially established. The district court 

abused its discretion in failing to enter the proposed consent judgment.93

In Northwest Environmental Defense Center v. Unified Sewerage 

Agency, the District Court for the District of Oregon similarly ruled 

that a consent decree directing funds to restore waters of the 

Tualatin River, which included funding for staff positions to ensure 

compliance with the agreement, was lawful under the Clean Water 

Act.94 The district court explained: 

What better use of the penalty type payments in an action 

like this than to facilitate water quality improvements to 

the affected watershed in ways which could not be required under law. These additional enhancements to water 

quality, the payment for which also serves as a hefty sanction to defendant, fully meet congressional intent that 

there be penalty aspects of Clean Water Act consent decrees to discourage other polluters. The proposed consent 

decree here accomplishes other important and worthwhile 

purposes. It allows rehabilitation of the resource to begin 

immediately, rather than suffer possible future pollutant 

insult and/or exacerbation during months or years more of 

litigation. This is one of the important reasons that courts 

should encourage settlement of these actions. Settlements, 

like that proposed here, fully meet the intent of Congress 

in providing the Clean Water Act as a friend and protector 

of our precious natural water resources. The litigants will 

now become cooperative partners in protecting water quality rather than merely remaining opposing litigants in a 

court battle, which, without more, offers little utility.95


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96Financial Services Oversight Hearing, supra note 5, at 6 (statement of David K. Min, Assistant Professor of Law, University of California Irvine School of Law), http://financial 

services.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 97 Effect of 31 U.S.C. § 484 on the Settlement Authority of the Attorney General, 4B Op. O.L.C. 

684, 688 (1980). 98 Application of the Government Corporation Control Act and the Miscellaneous Receipts Act 

to the Canadian Softwood Lumber Settlement Agreement, 30 Op. O.L.C. 111, 119 (2006). 99 31 U.S.C. § 3302(b) (2017); see Sierra Club v. Electronic Controls Design, Inc., 909 F.2d 

1350, 1355 (1990) (upholding a consent decree directing funds to third-party charitable organizations). 100Letter from Julia Gordon, Center for American Progress (CAP), to Members of the H. 

Comm. on the Judiciary (Feb. 12, 2015) (on file with Democratic staff of the H. Comm. on the 

Judiciary). 101FIRREA authorizes the Department of Justice to file a complaint against any persons who 

commits a predicate offense under FIRREA that involves or affects financial institutions and 

government agencies. FIRREA also authorizes the Department of Justice (DOJ) to issue administrative subpoenas to witnesses requiring production of relevant records. 12 U.S.C. § 1833a 

(2017); United States v. Bank of New York Mellon, No. 11 Civ. 6969 LAK 2 (S.D.N.Y. Apr. 24, 

2013). 

Settlement payments are also valid under longstanding Justice 

Department policy so long as the agency does not actually or constructively receive funds through a settlement.96 In 1980, the Justice Department Office of Legal Counsel (OLC) advised that the 

Government may constructively receive a third part payment under 

a settlement in cases where an ‘‘agency could have accepted possession and retains discretion to direct the use of the money.’’ 97 In 

2006, OLC stated in another opinion that there are two criteria to 

avoid constructively receiving funds through a settlement agreement: 

(1) the settlement be executed before an admission or finding of liability in favor of the United States; and (2) 

the United States not retain post-settlement control 

over the disposition or management of funds or any 

projects carried out under the settlement, except for 

ensuring that the parties comply with the settlement.98

Settlements meeting these conditions do not violate the Miscellaneous Receipts Act because the government does not actually or 

constructively ‘‘receive money for the Government.’’ 99

In the context of the RMBS settlements, the Justice Department 

resolved the potential civil liability of these banks by requiring a 

donation of less than 1% of the overall settlement agreement 

amounts to provide affected consumers with legal assistance funds 

to access the relief they were entitled to under the settlement 

agreements.100 The terms of these agreements arise from the Justice Department’s statutory enforcement authority under 

FIRREA 101 and have a substantial prosecutorial nexus to the underlying conduct giving rise to the claim (i.e., foreclosure prevention). The RMBS settlements also satisfy the Justice Department’s 

own longstanding guidelines. As Professor Min explains: 

They do not include a finding of liability on the part of the 

banks, and the Federal Government does not maintain 

post-settlement control over the disposition or management of the funds. Indeed, the banks themselves maintain 

full control over how they can disburse the funds under 

the consumer relief provisions, and there is no requirement that they donate any funds to third parties under the 


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102Financial Services Oversight Hearing, supra note 5, at 6 (statement of David K. Min, Assistant Professor of Law, University of California Irvine School of Law), http://financial 

services.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 103 Comments from the Dep’t of Justice on H.R. 5063, the ‘‘Stop Settlement Slush Funds Act 

of 2016,’’ to Members of the H. Comm. on the Judiciary 1, 3 (May 17, 2016) (on file with Democratic staff of the H. Comm. on the Judiciary). 104See, e.g., U.S. Const. art. I, § 9, cl. 7 (‘‘No Money shall be drawn from the Treasury, but 

in Consequence of Appropriations made by Law.’’); U.S. Const. art. I, § 8, cl. 1 (‘‘The Congress 

shall have Power . . . to pay the Debts and provide for the common Defense and general Welfare of the United States.’’); 31 U.S.C. § 3302(b) (2017); DAVID CARPENTER & EDWARD LIEU, 

CONG. RESEARCH SERV., MONETARY RELIEF TO THIRD PARTIES AS PART OF FEDERAL LEGAL SETTLEMENTS 3 (2016). 105Memorandum from U.S. Rep. Bob Goodlatte (R-VA) for Markup of H.R. 5063, the ‘‘Stop 

Settlement Slush Funds Act of 2016,’’ to Members of the H. Comm. on the Judiciary 1 (May 

9, 2016) (‘‘Since the government never receives the money the MRA is not triggered. This idea 

is echoed in a 2006 DOJ Office of Legal Counsel memo.’’). 106Financial Services Oversight Hearing, supra note 5, at 6 (statement of David K. Min, Assistant Professor of Law, University of California Irvine School of Law), http://financial 

services.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 107 Judiciary Oversight Hearing, supra note 1, at 2 (statement of Geoffrey Graber, Deputy Associate Attorney General and Director of the Residential Mortgage-Backed Securities Working 

Group of the Financial Fraud Enforcement Task Force), https://judiciary.house.gov/wp-content/ 

uploads/2016/02/Graber-RMBS-Testimony-HJC-Sbcmte-Hearing-12Feb15.pdf. 108See Judiciary Oversight Hearing, supra note 1, at 2 (statement of Alan White, Professor, 

CUNY School of Law), https://judiciary.house.gov/wp-content/uploads/2016/02/AW-testimonyJudiciary-Feb-12-2015.pdf. 109Letter from Julia Gordon, Center for American Progress (CAP), to Members of the H. 

Comm. on the Judiciary 2 (Feb. 12, 2015) (on file with Democratic staff of the H. Comm. on 

the Judiciary). 110 Id. 

terms of these agreements. They appear to be clearly permissible under current law.102

In sum, funds paid under the RMBS settlements are not ‘‘drawn 

from the Treasury,’’ nor are they actually or constructively received 

‘‘for the Government.’’ 103 These settlements plainly fall within the 

Justice Department’s lawful enforcement authority and outside the 

‘‘the statutory mosaic Congress has enacted to implement its constitutional power of the purse.’’ 104 Indeed, by the Majority’s own 

admission, settlements donations that the government never receives do not trigger the MRA.105 Further, the Majority ‘‘has implicitly acknowledged the legality of charitable payment terms by 

passing [this bill] out of Committee,’’ as Professor Min notes.106

In addition to clearly satisfying the existing legal framework for 

settlement payments, the RMBS settlements are also well-designed 

as a matter of policy, obviating the need for a legislative fix. Under 

the consumer-relief terms of the Citigroup and Bank of America 

settlements, for example, each bank has committed to providing 

funds to prevent foreclosure and enable first-time homeownership.107 Housing-counseling agencies, as well as other forms of 

legal assistance contemplated by consumer-relief provisions of the 

RMBS settlements, are empirically very effective at foreclosure prevention.108 Julia Gordon, the former Senior Director of Housing 

and Consumer Finance at the Center for American Progress (CAP), 

notes that homeowners that receive assistance from HUD-certified 

housing counselors are three times more likely to avoid foreclosure 

than homeowners that do not receive assistance.109 Housing intermediaries also ensure that banks comply with the terms of settlements, which Ms. Gordon adds, ‘‘is not always a given.’’ 110

While H.R. 732’s proponents claim, without evidence, that the recipients of RMBS settlement payments are ‘‘activist groups,’’ the 

Majority has overlooked the fact that conservative groups may also 


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111Financial Services Oversight Hearing, supra note 5, at 10 (statement of David K. Min, Assistant Professor of Law, University of California Irvine School of Law), http://financial 

services.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 112 Judiciary Oversight Hearing, supra note 1, at 1 (statement of Alan White, Professor, 

CUNY School of Law), https://judiciary.house.gov/wp-content/uploads/2016/02/AW-testimonyJudiciary-Feb-12-2015.pdf. 113 Id. 114Tr. of Markup of H.R. 732, the ‘‘Stop Settlement Slush Funds Act of 2017,’’ by the H. 

Comm. on the Judiciary, 115th Cong. 63 (Feb. 7, 2017). 115 Id. at 76. 

receive funds through the RMBS settlements.111 Furthermore, numerous mechanisms within the settlement terms prevent the misuse of settlement funds.112 At a hearing on the RMBS settlements, 

Professor Alan White of CUNY School of Law addressed the Majority’s concerns directly: 

First, it is entirely up to the banks which legal aid agencies and housing counselors to fund. The banks may choose 

from hundreds of housing counselors and legal aid agencies, including many faith-based organizations and nonpartisan community development groups whose political 

orientations range from left to centrist to nonpartisan to 

right. If a bank sees a particular nonprofit agency as too 

controversial, because of the work that agency does with 

its other funding, the bank can simply leave the group off 

of its donation list. Second, less than one percent of the 

consumer relief dollars in these settlements is earmarked 

for housing counselors and legal aid. There is simply no 

significant diversion of money from the billions in required 

consumer relief. Third . . . the nonprofit legal aid and 

housing counseling agencies are all subject to auditing and 

oversight that prevents misuse of public and private funds 

for political activity of any kind.113

Lastly, even if it were desirable to change existing law in response to the RMBS settlements, H.R. 732 does not achieve this 

goal. The consumer relief provisions of the RMBS settlement agreements were tailored to provide relief to third parties directly affected by the misconduct of the settling banks. These parties are 

likely entitled to direct relief through third-party payments under 

section 2(a) of H.R. 732 as these provide restitution for actual harm 

(i.e., home foreclosures) caused by the settling banks’ allegedly unlawful conduct. 

In recognition of these concerns, Representatives David N. 

Cicilline (D-RI) and Pramila Jayapal (D-WA) offered amendments 

to exclude settlement payments that remedy harms caused by 

fraudulent residential-mortgage backed securities or include payments to faith-based organizations community organizations. Representative Cicilline stated in support of his amendment that the 

consumer relief provisions or the RMBS settlements were ‘‘designed to enable many Americans to stay in their homes by directing funds to distressed homeowners, community reinvestment and 

stabilization, and income-based lending for borrowers who lost 

homes to foreclosure.’’ 114 Representative Jayapal likewise noted 

that housing counseling agencies ‘‘were essential during the foreclosure crisis,’’ particularly among communities that ‘‘bore a disproportionate burden and were targeted by predatory lending practices.’’ 115 Representative Cicilline’s amendment failed by a partyVerDate Sep 11 2014 22:28 Mar 30, 2017 Jkt 069006 PO 00000 Frm 00036 Fmt 6659 Sfmt 6601 E:\HR\OC\HR072.XXX HR072

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116 Id. at 74. 117 Id. at 90. 118Financial Services Oversight Hearing, supra note 5, at 8 (statement of David K. Min, Assistant Professor of Law, University of California Irvine School of Law), http://financial 

services.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 119 Colin S. Diver, The Assessment and Mitigation of Civil Money Penalties by Federal Administrative Agencies, 79 COLUM. L. REV. 1435, 1456 (1979). 120 Charlie Garlow, Environmental Recompense, 1 APPALACHIAN J.L. 1, 5–6 (2002). 

line vote of 16 to 9.116 Representative Jayapal’s amendment was 

likewise rejected along party lines, 17 to 6.117

In the absence of any credible evidence that the Justice Department or other Federal agencies have circumvented Congress’ 

spending power or directed money to favored groups, H.R. 732 simply addresses a non-existent problem. 

II. H.R. 732 WOULD UNDERMINE PUBLIC HEALTH AND SAFETY BY

ELIMINATING THE GENERAL ENFORCEMENT AND REMEDIATION OF

UNLAWFUL CONDUCT IN ALL CIVIL ENFORCEMENT CASES

A. Settlement Payments Serve the Twin Enforcement Goals of General Deterrence and Compensation 

Unlike injuries in the context of tort or contract liability, penalties sought in the public enforcement of Federal statutes are 

based on theories of deterrence and general compensation to society.118 Administrative law expert Colin S. Diver explains that 

while the primary function of civil enforcement is to ‘‘motivate future behavior,’’ an important secondary function is to provide general compensation to society: 

By definition, a civil money penalty does not serve a ‘‘specific’’ compensatory function of making whole an identifiable individual specifically injured by the offending conduct. Money penalties can, however, be used to serve a 

‘‘general’’ compensatory function—that is, to compensate 

‘‘society’’ at large for harm that it has suffered at the 

hands of a violator. Alternatively, one might view the payment as compensation to the government for the costs incurred by it in enforcing the substantive standard.119

This form of ‘‘general compensation’’ is particularly appropriate in 

cases where a party’s unlawful conduct involves diffuse or systemic 

harms, or injures an identifiable victim, the public health, or the 

environment. Charlie Garlow, a former senior EPA attorney, explains that environmental injuries cannot be remedied solely 

through funds directed to the Treasury: 

For violations of environmental statutes, restitution is indeed the correct penalty to be imposed if the goals of rehabilitation, deterrence and retribution are to be served. 

However, to be effective, the doctrine of restitution in environmental law must be defined in terms of restoration and 

recompense, rather than monetary or prison sentencing 

alone.120

To provide for complete restitution to generalized harms, environmental settlements sometimes include ‘‘offset projects’’ to provide generalized relief for unlawful conduct. For example, the EPA 

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121See, e.g., ENVTL. PROTECTION AGENCY, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSUR- ANCE, ISSUANCE OF THE 2015 UPDATE TO THE 1998 U.S. ENVIRONMENTAL PROTECTION AGENCY

SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY (2015), https://www.epa.gov/sites/production/ 

files/2015-04/documents/sepupdatedpolicy15.pdf. 122 Id. at 7. 123See H.R. 5063 Hearing, supra note 5, at 3 (written statement of Joel Mintz, Professor, 

Nova Southeastern University College of Law) (on file with Democratic staff of the H. Comm. 

on the Judiciary). 124 ENVTL. PROTECTION AGENCY, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, ISSUANCE OF THE 2015 UPDATE TO THE 1998 U.S. ENVIRONMENTAL PROTECTION AGENCY SUPPLE- MENTAL ENVIRONMENTAL PROJECTS POLICY 17 (2015), https://www.epa.gov/sites/production/files/ 

2015-04/documents/sepupdatedpolicy15.pdf. 125 Nw. Envtl. Def. Ctr. v. Unified Sewerage Agency of Washington Cty., No. CIV. 88–1128– 

HO, 1990 WL 191827, at *1 (D. Or. July 27, 1990). 126 H.R. 5063 Hearing, supra note 5, at 3 (written statement of Joel Mintz, Professor, Nova 

Southeastern University College of Law) (on file with Democratic staff of the H. Comm. on the 

Judiciary). 

ment terms to offset the harms of unlawful conduct by requiring 

parties to undertake an environmentally beneficial project or activity that ‘‘is not required by law, but that a defendant agrees to undertake as part of the settlement of an enforcement action.’’ 121 As 

with other settlement payments, these projects must have a sufficient nexus to the underlying conduct of the defendant.122 In practice, this requirement entails that these projects ‘‘are generally carried out at the site where the violation occurred, at a different site 

within the same ecosystem, or within the same immediate geographic area.’’ 123 The EPA has also clarified that they cannot include cash donations to community groups, environmental organizations, or other third parties.124 As courts have observed, these 

forms of settlement payments better serve the purposes of the underlying statute than merely directing funds to the Treasury.125

In addition to serving the public interest, settlement payments 

may also be in the interest of private parties. For example, Professor Joel Mintz of Nova Southeastern University College of Law, 

a former chief attorney with the EPA, notes in his written statement on a substantially identical version of H.R. 732 considered in 

the last Congress that these types of donations create ‘‘win-win’’ for 

all parties in civil enforcement cases: 

SEPs demonstrate EPA’s willingness to cooperate with the 

regulated community, and they create a more flexible regulatory climate. SEPs also benefit environmental violators 

by reducing some of the civil penalties those parties would 

otherwise have to pay. They help repair corporate public 

images that would otherwise be further harmed by negative environmental publicity; and they promote settlements, allowing businesses to avoid the costs and risks of 

litigation. Finally, SEPs increase the likelihood that communities forced to bear the burden of environmental degradation will benefit directly from enforcement actions 

against violators.126

B. H.R. 732 Would Prohibit Civil Enforcement Agencies from Fully 

Protecting the Public Interest 

H.R. 732 applies far beyond the Justice Department’s settlement 

authority to all civil enforcement agencies. Section 2(a) of the bill 

prohibits any officer or agent of the Government from resolving the 

civil liability of a party through a settlement agreement that directs or provides payments for a payment to any person or entity 


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127See, e.g., id. (written statement of David Uhlmann, Professor, University of Michigan Law 

School). 128 Assistant Attorney General Theodore Olsen, Office of Legal Counsel, The Attorney General’s Role as Chief Litigator for the United States, Memorandum Opinion for the Attorney General, Jan. 4, 1982, at 47–48, https://www.justice.gov/sites/default/files/olc/opinions/1982/01/31/opolc-v006-p0047.pdf. 129 Comments from the Dep’t of Justice on H.R. 5063, the ‘‘Stop Settlement Slush Funds Act 

of 2016,’’ to Members of the H. Comm. on the Judiciary 1 (May 17, 2016) (on file with Democratic staff of the H. Comm. on the Judiciary). 130 Id. at 2. 131 Id. 132 42 U.S.C. §§ 2000e et seq. (2017). 133Griggs v. Duke Power Co., 401 U.S. 424, 429 (1971) 

other than the Government, subject to minor exceptions. This represents a sweeping change in the enforcement of current law, 

which authorizes civil enforcement agencies to resolve a party’s 

civil liability through a settlement that provides both direct and indirect forms of restitution for injuries caused by unlawful conduct.127 It is therefore unsurprising that the Justice Department, 

which has plenary authority to enforce the law and defend the interests of the United States,128 strongly opposes the bill.129 In comments on a bill substantively identical to H.R. 732 considered in 

the last Congress, the Justice Department expressed concerns that 

it ‘‘would unwisely constrain the government’s settlement authority 

and preclude many permissible settlements that would advance the 

public interest.’’ 130 The Department explained: 

The bill prohibits payments by a party other than those 

made to directly remedy ‘‘actual harm’’ that the party directly and proximately caused or for services rendered in 

connection with the case . . . this language may inhibit or 

restrict settlements from requiring remediation to impacted victims that addresses more intangible harms, or 

from requiring monetary payments to victims in estimated 

amounts where it is impractical or resource-prohibitive to 

quantify the actual harm. The language would further impede the government’s ability to address the root causes of 

violations and establish effective remedies that are effective retrospectively (correcting noncompliance) and prospectively (addressing root causes of noncompliance to prevent recidivism). . . . In certain cases, as part of negotiated settlement terms, a defendant or potential defendant, might undertake to correct the harms, both direct and 

indirect, that its conduct may have caused; to carry out activities making the public less vulnerable to conduct of 

that type; or to modify the conditions and circumstances 

that might otherwise contribute to similar conduct by others. The government legitimately considers such undertakings when it assesses the just resolution of its claims 

or potential claims.131

C. H.R. 732 Would Undermine the Enforcement of Civil Rights 

Laws 

Civil rights laws embody core values of equality of opportunity 

and freedom from discrimination. Congress passed the Civil Rights 

Act of 1964 132 to remove discriminatory barriers and to promote 

equality of employment opportunities.133 As the Supreme Court 

noted, however, ‘‘[m]uch progress remains to be made in our NaVerDate Sep 11 2014 22:28 Mar 30, 2017 Jkt 069006 PO 00000 Frm 00039 Fmt 6659 Sfmt 6601 E:\HR\OC\HR072.XXX HR072

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134Texas Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 

2507, 2525 (2015). 135Mark E. Recktenwald, Collateral Attacks on Employment Discrimination Consent Decrees, 53 U. CHI. L. REV. 147 (1986). 136 Comments from the Dep’t of Justice on H.R. 5063, the ‘‘Stop Settlement Slush Funds Act 

of 2016,’’ to Members of the H. Comm. on the Judiciary 4 (May 17, 2016) (on file with Democratic staff of the H. Comm. on the Judiciary). 137 Id. 

tion’s continuing struggle against racial isolation’’ and toward ‘‘our 

historic commitment to creating an integrated society.’’ 134

Cases involving discrimination claims often occur without identifiable victims and tend to affect the interests of persons who are 

not likely to receive compensation for unlawful conduct (e.g., 

former and future employees).135 In these cases, a settling party 

that violated antidiscrimination laws may seek to resolve its civil 

liability through workplace monitoring or training programs that 

seek to remedy systemic unlawful conduct. As the Justice Department has observed, remedies can correct both noncompliance and 

recidivism through settlement terms that require a party to undertake activity to prevent future misconduct.136 Without the ability 

to include these forms of relief in settlements, this measure, the 

Department has argued, would hamper the enforcement of myriad 

civil rights laws: 

In settling such cases that the Department has brought to 

redress a pattern or practice of systemic discrimination, 

the Department seeks both compensation for individual 

victims harmed by the unlawful practices, and injunctive 

relief to correct or prevent discrimination. Unfortunately, 

it is often extraordinarily difficult to prospectively identify 

all of the possible victims in certain cases, due to the nature of the discriminatory practices, the mobility of the 

possible victims, or both. Accordingly, the Department enters into consent orders requiring defendants to establish 

a settlement fund to compensate victims who will be identified post-settlement. In such cases, the defendants deposit a negotiated amount into an interest-bearing escrow 

account and provide notice targeted to reach possible victims. After the notice period ends, and victims have been 

identified, the United States submits the proposed disbursements to the Court for approval. If unclaimed monies 

remain in the settlement fund after all identified victims 

have been paid, the decrees provide that the court may 

order that unclaimed funds be paid to a non-profit organization that is dedicated to addressing and preventing the 

kind of discriminatory practices that gave rise to the lawsuit. These organizations must have the requisite qualifications and expertise in the areas specified in the consent 

order.137

D. H.R. 732 Would Prevent the General Remediation of Environmental Injuries and Compensation to States and Local Communities 

Environmental laws, such as the Clean Air Act and Clean Water 

Act, expressly authorize restitution for generalized harm. The 

Clean Air Act, for example, grants authority in environmental enforcement cases for ‘‘beneficial mitigation projects’’ to ‘‘enhance the 


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138 42 U.S.C. § 7604 (2017). 139 ENVTL. PROTECTION AGENCY, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, SE- CURING MITIGATION AS INJUNCTIVE RELIEF IN CERTAIN CIVIL ENFORCEMENT SUITS 2 (2012). 140 42 U.S.C. § 7604 (g)(2) (2017). 141See Edward Lloyd, Supplemental Environmental Projects Have Been Effectively Used in 

Citizen Suits to Deter Future Violations As Well As to Achieve Significant Additional Environmental Benefits, 10 WIDENER L. REV. 413, 425 (2004). 142 H.R. 5063 Hearing, supra note 5, at 4 (statement of David Uhlmann, Professor, University 

of Michigan Law School), https://judiciary.house.gov/wp-content/uploads/2016/04/UhlmannTestimony.pdf. 143 Id. 144Memorandum from U.S. Rep. Bob Goodlatte (R-VA) for Markup of H.R. 5063, the ‘‘Stop 

Settlement Slush Funds Act of 2016,’’ to Members of the H. Comm. on the Judiciary 12 (May 

9, 2016) (on file with Democratic staff of the H. Comm. on the Judiciary). 145 H.R. 5063 Hearing, supra note 5, at 5 (written statement of Joel Mintz, Professor, Nova 

Southeastern University College of Law) (on file with Democratic staff of the H. Comm. on the 

Judiciary). 

public health or the environment,’’ 138 which require that a settling 

party remedies, reduces, or offsets the harm caused by its alleged 

violations. These terms are typically included in settlements where 

a party’s unlawful emissions or discharges cause general harm to 

the public, wildlife, or the environment.139 Since the enactment of 

the Clean Air Act, Congress has additionally authorized courts to 

direct funds to beneficial mitigation projects in the final judgment 

of a citizen suit,140 and likewise refrained from enacting guidelines 

for the inclusion of these agreements in civil penalties or settlement agreements, generally deferring to the courts and agencies.141

H.R. 732, however, would effectively circumvent these statutes to 

prevent the general remediation of environmental injuries. Professor David Uhlmann of the Michigan Law School, who formerly 

served as Chief of the Environmental Crimes Section of the Justice 

Department, explained in his testimony on a prior version of the 

bill that corporate defendants in large, catastrophic pollution cases 

are typically required to direct funds to congressionally-chartered 

foundations for the purpose of addressing the general harms 

caused by vessel pollution.142 To resolve its liability for one uniquely catastrophic spill, British Petroleum (BP) agreed to direct funds 

for environmental projects ‘‘to address the catastrophic harm to the 

Gulf of Mexico ecosystem that occurred because of BP’s misconduct,’’ in addition to the largest penalties for an environmental 

crime in history.143 H.R. 732 would eliminate these forms of remedies to major environmental misconduct. 

Proponents of the bill argue that H.R. 732 allows agencies to redress direct environmental harm, and where direct remediation is 

impractical, ‘‘the violator is not let off the hook’’ because funds are 

paid to the Treasury, leaving Congress to decide how best to remediate environmental damage.144 This argument, however, is wrong 

for several reasons. 

First, H.R. 732’s exception for environmental remediation is 

drafted too narrowly to allow for environmental projects.145 As Professor Mintz observes, the bill would prohibit the following ‘‘entirely legitimate, appropriate’’ use of settlement funds permitted 

under current law: 

1) Pollution prevention projects that improve plant procedures and technologies, and/or operation and maintenance practices, that will prevent additional pollution 

at its source; 


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146 Id. 147 Id. 148 ENVTL. PROTECTION AGENCY, MOEX Offshore 2007 LLC Settlement (Feb. 17, 2012), https:// 

www.epa.gov/enforcement/moex-offshore-2007-llc-settlement#sep. 149 Comments from the Dep’t of Justice on H.R. 5063, the ‘‘Stop Settlement Slush Funds Act 

of 2016,’’ to Members of the H. Comm. on the Judiciary 3 (May 17, 2016) (on file with Democratic staff of the H. Comm. on the Judiciary). 

2) Environmental restoration projects including activities 

that protect local ecosystems from actual or potential 

harm resulting from the violation; 

3) Facility assessments and audits, including investigations of local environmental quality, environmental 

compliance audits, and investigations into opportunities 

to reduce the use, production and generation of toxic 

materials; 

4) Programs that promote environmental compliance by 

promoting training or technical support to other members of the regulated community; and 

5) Projects that provide technical assistance or equipment 

to a responsible state or local emergency response entity for purposes of emergency planning or preparedness.146

These projects are unlikely to be construed as redressing the ‘‘actual (environmental) harm, directly and proximately caused’’ by unlawful conduct and, accordingly would be unlawful under H.R. 732, 

notwithstanding the beneficial nature of such settlement payments.147

Secondly, H.R. 732 would foreclose settlement payments to local 

communities and states harmed by violations of the law. In 2012, 

for example, the EPA and Justice Department resolved the civil liability of several corporations in connection with the Deepwater 

Horizon oil spill through a settlement that directed funds to several 

Gulf states, including Texas, which was not party to the complaint 

but received $3.25 million for Supplemental Environmental 

Projects (SEPs) and other responsive actions to remediate the generalized harm of the oil spill.148 As the Justice Department noted, 

this common feature of settlements in environmental enforcement 

actions would likely be barred by legislation, such as H.R. 732: 

The United States frequently enters into joint settlement 

of environmental cases with States; those cases nearly always provide for payment of civil penalties to the participating State. Such civil penalties appear to be payments 

prohibited under the bill. Similarly, the United States may 

settle litigation brought by third parties against Federal 

agencies under various environmental, natural resources, 

and other statutes for the payment of specified monies. 

Such payments are arguably barred by the bill. If the term 

‘‘payment’’ is interpreted to have a meaning broader than 

monetary payments, or to include payments made to third 

parties who implement terms of a settlement, there could 

be additional consequences for environmental settlements.149


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150 42 U.S.C. § 7604 (2017). 151 Nw. Envtl. Def. Ctr. v. Unified Sewerage Agency of Washington Cty., No. CIV. 88–1128– 

HO, 1990 WL 191827, at *1 (D. Or. July 27, 1990). 152 Charlie Garlow, Environmental Recompense, 1 APPALACHIAN J.L. 1, 5–6 (2002). 153See The REINS Act of 2013: Promoting Jobs, Growth, and American Competitiveness: Hearing on H.R. 367 Before the Subcomm. on Regulatory Reform, Commercial and Antitrust L. of 

the H. Comm. on the Judiciary, 113th Cong. (2013) (statement of Ronald M. Levin, William R. 

Orthwein Distinguished Professor of Law, Washington University in St. Louis). 154 Id. 155Tr. of Markup of H.R. 732, the ‘‘Stop Settlement Slush Funds Act of 2017,’’ by the H. 

Comm. on the Judiciary, 115th Cong. 26 (Feb. 7, 2017). 

Third, in response to the Majority’s argument that Congress 

should decide how best to allocate compensatory funds, not agencies, Congress has already made this decision through the passage 

of environmental laws that specifically contemplate settlement payments.150 As courts have noted, the purposes of these laws are ‘‘to 

improve water quality, not endow the Treasury.’’ 151 Furthermore, 

as Charlie Garlow, a former senior EPA attorney, notes, funds directed to the Treasury seldom fully remedy environmental injuries: 

Money served to the Treasury does little to ‘‘make the environment whole again.’’ It is making the environment 

whole that is the ultimate goal of environmental restitution. The environment, for the purposes of this criminal 

law analogy, is ‘‘the victim,’’ against which the offender 

commits a crime. Once a defendant’s egregious acts are 

proven and he is convicted of the environmental crime, restoration and recompense provide the doctrinal mechanism 

through which rehabilitation of the offender can occur. 

Just as in the criminal context, the offender is forced to 

face the responsibility he owes to society as a whole to preserve the environment. Instead of merely paying a fine to 

a general governmental unit and continuing his business 

as usual, the defendant must confront and address the 

damage he has directly caused.152

Lastly, Congress lacks the time, expertise, and resources to properly review and make these enforcement decisions on behalf of Federal agencies.153 Requiring a congressional appropriation for each 

environmental project would greatly strain Congress’ already limited legislative resources and scarce time, while opening the doors 

to industry influence and obstruction in routine enforcement matters.154 The cost of delays associated with this scheme would have 

devastating consequences for the public health, environment, and 

local communities. 

To illustrate this concern, Ranking Member John Conyers, Jr. 

(D-MI) offered an amendment that would have exempted from the 

bill any settlement agreement that directs funds to remediate the 

harms caused by unlawful conduct resulting in lead in drinking 

water.155 He explained that his amendment was a necessary response to the Flint water crisis, which ‘‘has generated numerous 

lawsuits by affected people and public-interest organizations, such 

as the Natural Resources Defense Council and American Civil Liberties Union.’’ The ‘‘systemic nature of lead contamination in drinking water,’’ he argued, may necessitate settlement agreements that 

‘‘require setting aside funds for unidentifiable victims, directing 

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156 Id. at 27. 157 Id. at 29. 158 Id. at 28. 159 Id. at 40. 160 Id. at 42. 161 JUSTICE DEP’T, Volkswagen AG Agrees to Plead Guilty and Pay $4.3 Billion in Criminal 

and Civil Penalties; Six Volkswagen Executives and Employees are Indicted in Connection with 

Conspiracy to Cheat U.S. Emissions Tests (Jan. 11, 2017), https://www.justice.gov/opa/pr/ 

volkswagen-ag-agrees-plead-guilty-and-pay-43-billion-criminal-and-civil-penalties-six. 162Tr. of Markup of H.R. 732, the ‘‘Stop Settlement Slush Funds Act of 2017,’’ by the H. 

Comm. on the Judiciary, 115th Cong. 43 (Feb. 7, 2017). 

mental compliance program to avoid lead contamination in the future.’’ 156

Speaking in opposition to the amendment, Chairman Bob Goodlatte (R-VA) argued that ‘‘Congress can make additional appropriations,’’ but the Justice Department ‘‘should not be permitted to augment these funding decisions entirely outside the congressional appropriation and oversight process.’’ 157 In response, Ranking Member Conyers stated that it is ‘‘unthinkable to suggest that Congress 

should make individual appropriations in response to each instance 

of general harms caused by lead contamination in public drinking 

water’’ because the ‘‘cost, delay, and overall folly of this scheme 

would have a disastrous impacts on public health and local communities.’’ 158 Unfortunately, this amendment failed by a party-line 

vote of 14 to 10.159

Representative Henry C. ‘‘Hank’’ Johnson, Jr. (D-GA) similarly 

offered an amendment to exempt from the bill settlement payments 

that remediate indirect environmental harms that result from the 

‘‘intentional bypassing, defeating, or rendering inoperative a required element of a vehicle’s emissions control system’’ in violation 

of the Clean Air Act.160 He explained that the amendment was necessary in response to the Volkswagen emissions scandal. According 

to the Justice Department, the automobile manufacturer ‘‘plead 

guilty to three criminal felony counts and pay a $2.8 billion criminal penalty as a result of the company’s long-running scheme to 

sell approximately 590,000 diesel vehicles in the U.S. by using a 

defeat device to cheat on emissions tests mandated by the Environmental Protection Agency (EPA) and the California Air Resources 

Board (CARB), and lying and obstructing justice to further the 

scheme.’’ 161 As Representative Johnson noted, while the terms of 

this settlement required a direct payment of $14.7 billion to consumers, it also included a $2.7 billion payment to an environmental 

mitigation trust to fund clean transportation programs and to remedy the indirect harms of Volkswagen’s misconduct.162 The amendment was not adopted, failing by a party-line vote of 14 to 10. 

III. H.R. 732’S VAGUE PROVISIONS WILL RESULT IN NEEDLESS

LITIGATION AND DELAY

As drafted, H.R. 732 is inherently vague. The bill, for instance, 

fails to define key terms, which will undoubtedly engender legal 

challenges to proposed settlements, deter agencies from pursuing 

settlements, and ultimately force courts to interpret them. For example, the bill does not define what constitutes a ‘‘payment.’’ Professor David Uhlmann of the University of Michigan Law School 

explained that ‘‘courts interpreting the legislation could conclude 

that it precludes third-party payments as part of civil settlement 

agreements, other than restitution, even in cases of generalized 


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163 H.R. 5063 Hearing, supra note 5, at 4 (statement of David Uhlmann, Professor, University 

of Michigan Law School), https://judiciary.house.gov/wp-content/uploads/2016/04/UhlmannTestimony.pdf. 164 Email from Prof. David Uhlmann, Professor, University of Michigan Law School, to Democratic staff of the H. Comm. on the Judiciary (May 9, 2016) (on file with Democratic staff of 

the H. Comm. on the Judiciary). 165 U.S.C. § 4205(d)(1) (2017); Comments from the Dep’t of Justice on H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ to Members of the H. Comm. on the Judiciary 2 (May 17, 

2016) (on file with Democratic staff of the H. Comm. on the Judiciary). 166 31 U.S.C. § 3302(d) (2017). 

harm to the environment or consumers.’’ 163 In sum, he warned 

that with respect to substantively identical legislation considered 

in the last Congress that the measure raised a ‘‘host of questions 

about what payments are covered,’’ while failing to meaningfully 

define terms or address the bill’s underlying problems.164

H.R. 732 also fails to define ‘‘official or agent of the Government.’’ 

This term could be construed to apply to any state actor, including 

a Federal judge or local official. Thus, a Federal judge could hesitate to enforce even clearly valid settlements in actions involving 

the government to avoid violating bill’s prohibition. This may also 

be true for purely private actions, as it could be argued that a Federal judge enforces these settlements as an ‘‘official or agent of the 

Government . . . on behalf of the United States.’’ This provision 

may also prevent the payment of funds to private parties through 

a settlement where the government is a defendant in a civil action, 

such as class action litigation directing undistributed funds to charitable organizations. 

Combined with these unclear provisions, the bill’s chilling penalties—removal from office—may prevent Federal agencies from 

making payments even where statutorily authorized, such as payments to whistleblowers under FIRREA.165

SECTION-BY-SECTION EXPLANATION OF H.R. 732

A description of the bill’s principal substantive provisions follows. 

Section 2(a) of the bill prohibits an officer or agent of the government from resolving the civil liability of a party through a settlement agreement that directs or provides payments or loans for a 

payment to any person or entity other than the government, subject to two exceptions. First, settlement agreements may direct payments to third parties to provide restitution for the actual harm 

that was ‘‘directly and proximately’’ caused by the unlawful conduct 

that is the basis of the settlement agreement. Second, settlement 

agreements may include payments to third parties for ‘‘services 

rendered in connection with the case’’ (e.g., attorney’s fees). 

Under section 2(b) of the bill, a violation of section 2(a) constitutes a violation under the Miscellaneous Receipts Act, which include the possibility of removal from office and forfeiture of received funds to the U.S. Treasury.166

Section 2(c) sets forth the effective date as the date of enactment, 

clarifying that the bill only applies to settlement agreements concluded on or after the enactment date. As introduced, 

Section 2(d) defines ‘‘settlement agreement’’ to include a resolution of a civil action or potential civil action through settlement 

agreement. 

Section 2(e) establishes a reporting requirement for each settlement entered into by a Federal agency, requiring that each agency 

submit to the Congressional Budget Office information relating to 


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the settlement, including parties to each settlement agreement, the 

source of the settlement funds, and the manner for distributing 

funds under the settlement agreement. 

Section 2(f) sets forth an additional reporting requirement for the 

Inspectors General of each Federal agency concerning any settlement agreement adopted in violation of the bill. 

CONCLUSION

Similar to the multitude of the Majority’s anti-regulatory bills 

that our Committee has considered over this and the last several 

Congresses, H.R. 732 is a solution in search of a problem that is 

rife with unintended consequences. There is no credible evidence 

substantiating the underlying premise of this bill, namely, that settlement payments are an unconstitutional subversion of congressional spending authority or that agencies have included unlawful 

terms in settlement agreements. Longstanding appropriations law 

and agency policy—as recognized by the Government Accountability Office and the Congressional Research Service—clearly contemplate these concerns and prevent civil enforcement agencies 

from directing funds to politically-favored groups or circumventing 

Congress to augment their own appropriations. Nevertheless, H.R. 

732 would establish sweeping changes to the enforcement of Federal statutes and severely undermine the ability of agencies to respond to unlawful conduct through the provision of general compensation for indirect harm. Further, H.R. 732’s unclear provisions 

and chilling penalties will generate needless litigation and dissuade 

the timely resolution of civil complaints through settlement. 

Accordingly, we strongly oppose H.R. 732 and we urge our colleagues to join us in opposition. 

MR. CONYERS, JR. 

MR. NADLER. 

MS. JACKSON LEE. 

MR. COHEN. 

MR. JOHNSON, JR. 

MR. DEUTCH. 

MR. GUTIERREZ. 

MS. BASS. 

MR. RICHMOND. 

MR. JEFFRIES. 

MR. CICILLINE. 

MR. SWALWELL. 

MR. LIEU. 

MR. RASKIN. 

MS. JAYAPAL. 

Æ 


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