59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–694 

STOP SETTLEMENT SLUSH FUNDS ACT OF 2016 

JULY 18, 2016.—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. 5063] 

[Including cost estimate of the Congressional Budget Office] 

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

(H.R. 5063) 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 ................................................................................................................... 11 

Committee Consideration ........................................................................................ 11 

Committee Votes ...................................................................................................... 11 

Committee Oversight Findings ............................................................................... 16 

New Budget Authority and Tax Expenditures ...................................................... 16 

Congressional Budget Office Cost Estimate .......................................................... 16 

Duplication of Federal Programs ............................................................................ 18 

Disclosure of Directed Rule Makings ..................................................................... 18 

Performance Goals and Objectives ......................................................................... 18 

Advisory on Earmarks ............................................................................................. 18 

Section-by-Section Analysis .................................................................................... 18 

Dissenting Views ..................................................................................................... 19 


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The Amendment 

The amendment is as follows: 

Strike all that follows 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 2016’’. 

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 to any person or entity other than the 

United States, other than a payment 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 constitutes payment for services rendered in connection with the case. 

(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. 

Purpose and Summary 

H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ prohibits terms in Department of Justice (DOJ) settlements that direct 

or provide for payments to non-victim third-parties. 

Background and Need for the Legislation 

A year-long Committee investigation has revealed that the DOJ 

is pushing and even requiring settling defendants to donate money 

to non-victim third-parties. 

Donations can earn up to double credit against defendants’ overall payment obligations, while credit for direct relief to consumers 

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

groups that stood to gain from these mandatory donations lobbied 

DOJ to include them in settlements. DOJ has funneled third-party 

groups as much as $880 million dollars in just the last 2 years. 

These payments occur entirely outside of the Congressional appropriations and grant oversight process. What is worse, in some 

cases, DOJ-mandated donations restore funding that Congress specifically cut. 

It is critical that Congress act. DOJ is ignoring Congress’ concerns—increasing the use of third-party payments, even as Congress objects. Just last month, DOJ included such terms in its settlement with Goldman Sachs. 

The purpose of DOJ enforcement actions should be punishment 

and redress to actual victims. Carrying that concept to communities at large or community groups, however worthy, is a matter 

for the Legislative branch and is not to be conducted at the unilateral discretion of the Executive. 

This is fundamentally a bipartisan, institutional issue. That is 

one reason that an amendment banning mandatory donations in 

last year’s Commerce, Justice, Science and Related Agencies Appropriations Act passed the House by voice vote. 


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1The Federalist No. 58 (James Madison). 

2Todd Peterson, Protecting the Appropriations Power: Why Congress Should Care About Settlements at the Dep’t of Justice, 2009 BYU L. Rev. 327, 335 (2009). 3Peterson, supra note 2, at 339. 

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.’’ 1 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 gave Congress 

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.’’ 

Legal experts note that the Framers ‘‘vested Congress with this 

authority precisely because it was the most representative branch; 

the immediate accountability of Congress . . . insures equitable 

distribution of government funds.’’ 2

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.’’ 3

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 


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4 31 U.S.C. § 3302. 

5 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. 6Peterson, supra note 2, at 341. 7Peterson, supra note 2, at 348. 8 Andrew B. Spalding, Restorative Justice for Multinational Corporations, University of Richmond Scholarship Repository, 35 (2015). 9Peterson, supra note 2, at 352. 10Peterson, supra note 2, at 354. 

money for the Government from any source shall deposit the 

money in the Treasury.’’ 4 The law reflects the Separation of Powers principle. The Executive Branch negotiates settlements, but 

Congress gets to decide how to allocate the money recovered.5 As 

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

‘‘another element in the statutory pattern by which Congress retains control of the public purse under the Separation of Powers 

doctrine.’’ 6

Unfortunately, DOJ has 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.’’ 7

That is precisely what has happened. 

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.8

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.’’ 9

When GAO concluded that SEPs violated the MRA, 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.10


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11 Id. 12 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. 13 U.S. Attorney’s Manual 9–16.325, Plea Agreements, Deferred Prosecution Agreements, NonProsecution Agreements and Extraordinary Restitution, http://www.justice.gov/usao/eousa/ 

foia_reading_room/usam/title9/16mcrm.htm#9-16.325 (emphasis added). 14Kris Dighe, Organizational Community Serv. in Envtl. Crimes Cases, 60 U.S. Attorneys’ 

Bulletin 101 (July 2012) (emphasis added). 

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 1998.11

One key tactic the Executive Branch uses 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 third-parties 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.’’ 12

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

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

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

(USAM) 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.13 (Emphasis added.) 

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).’’ 14 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 


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15 Id. 16 Id. 17Settlement Agreement between DOJ and JP Morgan, Annex2—Consumer Relief, Nov. 19, 

2013, Menu Item 4D available at https://www.justice.gov/iso/opa/resources/644201311191647591 

63425.pdf. 18Settlement Agreement between DOJ and Citi, Annex2—Consumer Relief, July 14, 2014, 

Menu Items 4D, 4E, 4F, available at http://www.justice.gov/iso/opa/resources/649201471413 

721380969.pdf; Settlement Agreement between DOJ and Bank of America, Annex2—Consumer 

Relief, Menu Items 3E, 3F, 3G, Aug. 21, 2014, available at http://www.justice.gov/iso/opa/resources/8492014829141239967961.pdf. 19Settlement Agreement between DOJ and Bank of America, Annex3—Tax Fund, Aug. 21, 

2014, available at http://www.justice.gov/iso/opa/resources/4922014829141329620708.pdf; Settlement between DOJ and Bank of America, Aug. 21, 2014, pg. 9, available at, http:// 

www.justice.gov/iso/opa/resources/3392014829141150385241.pdf. 

are narrowly tailored to the facts of the case.’’ 15 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.’’ 16

There are several reasons why the USAM language has not proven a barrier to DOJ’s expanding mandatory donation provisions in 

civil matters such as the recent banking settlements. First, strictly 

speaking, the USAM provision covers only criminal matters. In addition, the USAM’s language leaves loopholes. It 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 JP Morgan, Citi and Bank of America (BoA). The concern 

was that DOJ was systematically subverting Congress’ spending 

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

The initial evidence supporting the committees’ concern was a 

progression of troubling terms in DOJ’s major mortgage banking 

settlements. This began with the 2013 JP Morgan settlement that 

offered the bank credit against its settlement obligations for donations to community redevelopment groups.17 Next came Citi and 

Bank of America settlements in 2014 which required $150 million 

in donations to housing non-profits.18 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 not only required 

direct donations to housing non-profits, but 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.19


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20Ongoing 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 H. Subcomm. 

On Reg. Reform, Com. and Antitrust Law, 114th Cong. 81 (2015) (statement by Rep. Bob Goodlatte, Chairman, H. Judiciary Comm.). 21 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. 

B. Committee Oversight & DOJ Delay 

The 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 

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. For example, at a May 19, 2015 hearing, Chairman Goodlatte pressed Civil Division Principal Deputy Assistant 

Attorney General Benjamin Misner specifically on internal documents: ‘‘the Department has sent a paltry 60 pages of email between the Department of Justice and outside groups, no internal 

Department of Justice emails. And those are critical . . . When 

will we get those documents?’’ 20

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

DOJ relented and 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. It also seems quite possible 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. (Emphasis added.) 

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+.’’ 21

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

Committee reviewed, were most involved in inserting the mandatory donation provisions into the settlements. 


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22 Robo-signing is the practice of signing legal documents without verifying the accuracy of 

their contents. In this case, DOJ alleged that bank officials filed ‘‘payment change notices’’ required in certain bankruptcy cases that ‘‘were improperly signed, under penalty of perjury, by 

persons who had not reviewed the accuracy of the notices.’’ 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.) available at, http://www.justice.gov/ust/eo/public_affairs/press/docs/2015/pr201503 

03_order.pdf. 

24 Consent Order with Hudson City Savings Bank, p 17, Sept. 24, 2015, available at 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 available at https://www.justice.gov/opa/file/839906/download. 26https://www.justice.gov/opa/file/839906/download. 27Department of Defense and Full-Year Continuing Appropriations Act, 2011, Pub. L. No. 

112–10, § 2245, 125 Stat 38 (2011). 28Press 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. 

C. DOJ is Ignoring Congressional Concerns 

In the meantime, rather than suspending the practice of mandatory donation provisions in response to legitimate Congressional 

concerns, the Department of Justice has 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 

JP Morgan relating to robo-signing.22 Seven-and-one-half million of 

those dollars did not make it to victims. Instead, it went to a thirdparty, largely to educate high school and college students about 

using credit cards responsibly.23

Similarly, DOJ’s September 2015 settlement with Hudson City 

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

partnerships.’’ 24

Most recently, 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 in ‘‘Financing and/or donations to fund affordable rental and 

for-sale housing.’’ 26

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 should 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 

In the most egregious cases, DOJ is using mandatory donations 

to restore funding that Congress specifically cut. 

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

‘‘housing counseling assistance’’ program.27 Congress reinstated 

about $45 million for the program in 2012.’’ 28 Grantee groups lamented the 50% cut. For 2014 and 2015, Congress continued to 


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29See, http://www.lis.gov/cgi-lis/query/D?c113:7:./temp/∼c113yBgthU; see also, H.R.3547—Consolidated Appropriations Act, 2014, U.S. Congress, https://www.congress.gov/bill/113thcongress/house-bill/3547/text. 30 18 U.S.C. § 3771(e). 31 About CARE, available at, http://care4yourfuture.org/about. 

provide just $45 MM and $47MM respectively.29 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 eliminated funding. Compared to the pre-2011 baseline of $88MM, HUD 

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

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

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

HUD grantees will also be eligible for a portion of the remaining 

$120MM in mandatory donations, not to mention the $490MM in 

the tax relief fund. For example, NeighborWorks is an eligible 

HUD grantee, but will also receive $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, 

are restoring at least $152MM ($122+$30) to HUD grantees in 

place of the $88MM reduction mandated by Congress. 

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.30 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 are necessarily funding bad projects, it is that, outside of securing compensation for actual victims, it is not their decision to make. 

For example, consider UST’s March 3, 2015 robo-signing settlement referenced above. It required JP Morgan 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). 

CAREP educates high school and college students on the responsible use of credit and credit cards.31 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 JP Morgan’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. 


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32 American Bankruptcy Institute, 2014 Annual Report, available at, http://www.abi.org/aboutus/annual-reports. 33 Congressional Research Service, Federal Grant Recipient Financial Reporting Requirements, 

April 24, 2015. 

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.32

ABI is not an ideological group. It is a non-profit with a reputation for good 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 Executive Branch to secure, at its unilateral discretion, the near-doubling of the entire net worth of an organization— 

however worthy the organization may be. 

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 

agencies administering grant programs then incorporate the standards into regulations for specific grant programs.33

Such controls are 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 

monitors ensure that the banks comply with all the settlement 

terms, including the mandatory donations. However, the monitors’ 

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

Nothing in the settlement agreements gives the monitors authority 

to conduct ongoing oversight of recipients to ensure that they are 

using donated funds as intended. 

In fact, in some settlements, DOJ has explicitly disclaimed any 

oversight responsibility for the donations defendants are required 

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

Morgan that 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 intended. 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 


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34Supra note 23 (emphasis added). 

neither will monitor the use of the contribution by the recipient.’’ 34

This is a remarkable admission. 

V. THE ‘‘STOP SETTLEMENT SLUSH FUNDS ACT OF 2016’’ 

H.R. 5063 prohibits terms in DOJ settlements that direct or provide for payments to non-victim third-parties. 

The legislation explicitly permits payments to remediate or otherwise directly remedy the direct harm, including environmental 

harm, done by defendants’ wrongful activity. For example, a liable 

defendant could be required to pay for long-term healthcare monitoring for individuals poisoned by toxic exposure to the defendant’s 

carcinogenic chemicals. Such care directly remedies direct harm to 

victims. 

The bill also explicitly permits payments for services rendered in 

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

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

already concluded. 

Hearings 

On May 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, Associate Director of 

Legal Rhetoric, American University Washington College of Law; 

and Prof. David M. Uhlmann, 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. The bill, however, 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 appropriately left to Congress rather than DOJ. 

Committee Consideration 

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, 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 

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

5063: 


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1. Amendment #1, by Mr. Conyers. The Amendment would exempt certain discrimination settlements from the bill’s ban on 

third-party payments. Defeated by a rollcall vote of 9 to 15. 

ROLLCALL NO. 1 

Ayes Nays Present 

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

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

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

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

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

Mr. Forbes (VA) .........................................................

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

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

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

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

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

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

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

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

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

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

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

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

Ms. Walters (CA) ....................................................... X 

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

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

Mr. Trott (MI) ............................................................ X 

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

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

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

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

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

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

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

Mr. Pierluisi (PR) ...................................................... X 

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

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

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

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

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

Ms. DelBene (WA) ..................................................... X 

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

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

Mr. Peters (CA) .......................................................... X 

Total ............................................................. 9 15 

2. Amendment #2, by Ms. Jackson Lee. The Amendments, offered en bloc, would exempt settlements resolving workplace sexual 

harassment, violence or discrimination or providing restitution to a 

State from the bill’s ban on third-party payments. Defeated by a 

rollcall vote of 7 to 16. 


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ROLLCALL NO. 2 

Ayes Nays Present 

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

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

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

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

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

Mr. Forbes (VA) ......................................................... X 

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

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

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

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

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

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

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

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

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

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

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

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

Ms. Walters (CA) ....................................................... X 

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

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

Mr. Trott (MI) ............................................................ X 

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

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

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

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

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

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

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

Mr. Pierluisi (PR) ...................................................... X 

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

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

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

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

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

Ms. DelBene (WA) ..................................................... X 

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

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

Mr. Peters (CA) ..........................................................

Total ............................................................. 7 16 

3. Amendment #3, by Mr. Johnson. The Amendment would exempt antitrust settlements from the bill’s ban on third-party payments. Defeated by a rollcall vote of 7 to 15. 

ROLLCALL NO. 3 

Ayes Nays Present 

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

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

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

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

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

Mr. Forbes (VA) ......................................................... X 


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ROLLCALL NO. 3—Continued 

Ayes Nays Present 

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

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

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

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

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

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

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

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

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

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

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

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

Ms. Walters (CA) ....................................................... X 

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

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

Mr. Trott (MI) ............................................................ X 

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

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

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

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

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

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

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

Mr. Pierluisi (PR) ...................................................... X 

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

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

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

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

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

Ms. DelBene (WA) ..................................................... X 

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

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

Mr. Peters (CA) ..........................................................

Total ............................................................. 7 15 

4. Amendment #4, by Mr. Cicilline. The Amendment would exempt settlements pertaining to protecting privacy from the bill’s 

ban on third-party payments. Defeated by a rollcall vote of 6 to 15. 

ROLLCALL NO. 4 

Ayes Nays Present 

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

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

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

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

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

Mr. Forbes (VA) ......................................................... X 

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

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

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

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

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

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


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ROLLCALL NO. 4—Continued 

Ayes Nays Present 

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

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

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

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

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

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

Ms. Walters (CA) ....................................................... X 

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

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

Mr. Trott (MI) ............................................................ X 

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

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

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

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

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

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

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

Mr. Pierluisi (PR) ...................................................... X 

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

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

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

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

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

Ms. DelBene (WA) ..................................................... X 

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

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

Mr. Peters (CA) .......................................................... X 

Total ............................................................. 6 15 

5. Reporting H.R. 5063. The bill prohibits terms in DOJ settlements that direct or provide for payments to non-victim third-parties. Reported by a rollcall vote of 18 to 6. 

ROLLCALL NO. 5 

Ayes Nays Present 

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

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

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

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

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

Mr. Forbes (VA) ......................................................... X 

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

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

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

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

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

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

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

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

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

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

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

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


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ROLLCALL NO. 5—Continued 

Ayes Nays Present 

Ms. Walters (CA) ....................................................... X 

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

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

Mr. Trott (MI) ............................................................ X 

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

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

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

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

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

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

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

Mr. Pierluisi (PR) ...................................................... X 

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

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

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

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

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

Ms. DelBene (WA) ..................................................... X 

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

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

Mr. Peters (CA) .......................................................... X 

Total ............................................................. 18 6 

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 Representatives, 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. 5063, the following estimate and comparison prepared 

by the Director of the Congressional Budget Office under section 

402 of the Congressional Budget Act of 1974: 


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U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, July 13, 2016. 

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. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016.’’ 

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

to provide them. The CBO staff contact is Marin Burnet, who can 

be reached at 226–2860. 

Sincerely, 

KEITH HALL, DIRECTOR. 

Enclosure 

cc: Honorable John Conyers, Jr. 

Ranking Member 

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

As ordered reported by the House Committee on the Judiciary 

on May 11, 2016. 

H.R. 5063 would prohibit government officials from entering into 

or enforcing any settlement agreement for civil actions on behalf of 

the United States if that agreement requires the other party to the 

settlement to make a donation to a 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, 

such as Goldman Sachs and Bank of America, have been required 

to donate funds to charitable institutions as a part of their restitution. Such donations typically constitute a very small fraction of 

overall settlement amounts. 

By precluding any such donations in civil settlements that have 

not been finalized, H.R. 5063 could affect the number and content 

of future settlements relative to current law. However, CBO cannot 

determine whether enacting the legislation would lead to an increase or a decrease in the number of such settlements or to a 

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

Pay-as-you-go procedures apply because enacting H.R. 5063 could 

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

CBO estimates that enacting H.R. 5063 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2027. 

H.R. 5063 contains no intergovernmental or private-sector mandates as defined in the Unfunded mandates Reform Act and would 

not affect the budget of State, local, or trial governments. 


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The CBO staff contact for this estimate is Marin Burnett. The estimate was approved by H. Samuel Papenfuss, Deputy Director for 

Budget Analysis. 

Duplication of Federal Programs 

No provision of H.R. 5063 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. 5063 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. 5063 prohibits 

terms in DOJ 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. 5063 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. 

Section-by-Section Analysis 

The following discussion describes the bill as reported by the 

Committee. 

Section 1. Short title. 

Section 1 sets forth the short title of the bill as the ‘‘Stop Settlement Slush Funds Act of 2016.’’ 

Section 2. Limitation on Donation Terms in Settlements to which 

the U.S. is a Party 

Section 2(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 to any person other than 

the United States. However, it permits a payment 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 that constitutes payment for services 

rendered in connection with the case. 

Section 2(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). 

Section 2(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. 


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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 & ENFORCEMENT 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 

Continued 

Section 2(d) Definitions: ‘‘Settlement Agreement’’ means a settlement agreement resolving a civil action or potential civil action. 

Dissenting Views 

INTRODUCTION

H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ is a 

deeply flawed proposal that would establish sweeping changes to 

the enforcement of the law by civil enforcement agencies. Based on 

unsubstantiated allegations that ignore established law and agency 

practice, the bill would prohibit any official or agent of the government 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. 5063 would undermine the ability of agencies to hold 

unlawful conduct accountable and provide complete restitution for 

violations of the law, or tailor remedies to address systemic or diffuse harms to unidentifiable victims, the public health, or the environment. The cumulative effect of H.R. 5063 would be to deter 

agencies from the efficient resolution of civil complaints through 

settlement agreements. By forcing agencies into needless litigation, 

the bill would waste agency time and resources as well as taxpayer 

dollars and delay the timely enforcement of the law and the provision of full relief for victims. 

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, the Majority has for the last 18 months conducted an 

extensive investigation into certain settlement agreements structured by the Department of Justice. To date, however, no credible 

facts have been discovered evidencing that these settlements included so-called slush funds otherwise subject to appropriations, 

despite voluminous document production by the Justice Department and private parties. These 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


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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. 6 31 U.S.C. § 3302 (b), (d) (2016). 

7Memorandum 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). 8 U.S. CONST. art. I, § 9 (‘‘No Money shall be drawn from the Treasury but in Consequence 

of Appropriations made by Law.’’). 9 Nelson D. Schwartz, Can the Mortgage Crisis Swallow a Town?, N.Y. TIMES, Sept. 4, 2007. 

Not surprisingly, the Justice Department, in its strenuous opposition to H.R. 5063, states 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 oppose the bill because it would undermine the restitution of generalized harm in 

various cases.5

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. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ prohibits the enforcement or consummation of settlement agreements 

that direct payments to parties not ‘‘directly and proximately’’ 

harmed by the unlawful conduct of the settling party (‘‘settlement 

donations’’). A violation of this measure would constitute a violation of the Miscellaneous Receipts Act, which prohibits the augmentation of agency appropriations through enforcement policy.6

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,7 circumvent Congress’ appropriations power under article I, section 9, clause 7 of the U.S. Constitution.8 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.9

Unprecedented since the Great Depression, the crisis severely deVerDate Sep 11 2014 23:33 Jul 18, 2016 Jkt 059006 PO 00000 Frm 00020 Fmt 6659 Sfmt 6601 E:\HR\OC\HR694.XXX HR694

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10 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. 11Daniel 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 

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/. 12 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). 13 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. 14 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. 15DEP’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. 16WHITE 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. 17 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. 

pressed the values of home prices nationwide, destabilized the 

home building sector and other industries, and created international economic instability.10 More than 13 million homes were 

lost to foreclosure between 2006 and 2014.11

A significant cause of this fiscal crisis 12 was the fraudulent packaging and trading of residential mortgage-backed securities.13 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.’’ 14

In response, the Justice Department established the Residential 

Mortgage-Backed Securities (RMBS) Working Group ‘‘to investigate 

those responsible for misconduct contributing to the financial crisis 

through the pooling and sale of residential mortgage-backed securities.’’ 15 The broader purpose of the RMBS Working Group is 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.’’ 16 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.’’ 17


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18DEP’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. 19 Id; 12 U.S.C. § 1833a (2016); United States v. Bank of New York Mellon, No. 11 Civ. 6969 

LAK 2 (S.D.N.Y. Apr. 24, 2013). 20DEP’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-partnerssecure-record-7-billion-global-settlement. 21DEP’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. 22 Id. 23DEP’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. 24DEP’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. 

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

Goldman Sachs, Morgan Stanley, 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 mortgage-backed securities.18 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).19 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,’’ 20 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.21 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.’’ 22 In 2016, the Justice Department settled potential claims relating to Morgan Stanley’s alleged misconduct in the 

market pursuant to which Morgan Stanley would pay a $2.6 billion 

penalty.23 Most recently, 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.24

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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25 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. 26DEP’T OF JUSTICE, JPMORGAN STATEMENT OF FACTS 6–8 (2013), http://www.justice.gov/iso/ 

opa/resources/94320131119151031990622.pdf. 27 Id. 28DEP’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. 29 Id. 30See, 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. 31Financial 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:// 

financialservices.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/6442013111916 

4759163425.pdf. 32The 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). 

Citigroup Consumer Relief Report, supra note 30, at 11–15. 33The 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.’’ 25 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.26 Notwithstanding the poor quality of these 

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

to investors.27 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.28 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.’’ 29

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

from the banks’ allegedly unlawful conduct.30 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.’’ 31 Additionally, two of these settlements, with 

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34Letter 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). 35 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. 36Memorandum 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). 37 Id. at 3, 6. 

party charitable organizations, including legal aid organizations, 

community development financial institutions, and housing counseling groups that have been 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 will 

‘‘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.’’ 34 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.35

II. OVERSIGHT OF THE JUSTICE DEPARTMENT’S INCLUSION OF

DONATIONS IN SETTLEMENT AGREEMENTS

The Majority is conducting an oversight investigation into the 

consumer relief provisions of the Justice Department’s settlements 

with Citigroup and Bank of America (‘‘RMBS settlements’’).36 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.37 They issued a joint letter to the Justice Department requesting production of ‘‘all communications relating to 

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38Letter from U.S. Rep. Bob Goodlatte, Chairman, H. Comm. on the Judiciary, & U.S. 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). 39 Id. at 3. 40Letter from U.S. 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). 41 Judiciary Oversight Hearing, supra note 2. 42 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-justicedepartment-s-controversial-mortgage-lending-settlements/. 43Letter from U.S. 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). 44Ongoing 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). 45 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?’’). 46Letter from Peter J. Kadzik, Assistant Attorney General, to U.S. 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). 

bilization’ provisions in the Citigroup and BoA settlements,’’ 38 explaining that the settlements ‘‘appear to serve as a vehicle for funding activist groups.’’ 39 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.40 On February 12, 2015, 

the RRCAL Subcommittee held an oversight hearing entitled ‘‘Consumers Short Changed? Oversight of the Justice Department’s 

Mortgage Lending Settlements,’’ 41 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.’’ 42 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.’’ 43 At a 

subsequent oversight hearing in the RRCAL Subcommittee on 

March 19, 2015,44 Chairman Goodlatte complained that the Justice 

Department’s production of 60 pages of emails did not include internal communications.45

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.46 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 


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47 Id. 48Letter from Peter J. Kadzik, Assistant Attorney General, to U.S. 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). 49 Id. 50Letter from Peter J. Kadzik, Assistant Attorney General, to U.S. 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). 51Memorandum 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 8 (Apr. 25, 2016) (on file with 

Democratic staff of the H. Comm. on the Judiciary). 52Memorandum 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). 53 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). 54Letter from Peter J. Kadzik, Assistant Attorney General, to U.S. 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). 

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

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.47

Following this production, the Justice Department supplemented 

its earlier responses through another transmission of documents on 

November 6, 2015.48 This production includes approximately 300 

additional pages of emails, internal Justice Department communications as well as references to communications with third parties.49 Thereafter, 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.50

Notwithstanding the Justice Department’s substantial cooperation with the Majority’s request, proponents of H.R. 5063 now 

argue that the Justice Department has ignored congressional concerns with settlement agreements and ‘‘doubled down’’ on ‘‘mandatory donation provisions’’ in settlements.51 The Majority now plans 

to interview a representative from HUD regarding these settlements. 

CONCERNS WITH H.R. 5063

I. H.R. 5063 IS A POORLY-DESIGNED SOLUTION TO AN

UNDOCUMENTED PROBLEM

Proponents of H.R. 5063 argue that the Justice Department has 

structured settlements to direct ‘‘slush funds’’ to ‘‘activist 

groups,’’ 52 even though they offer no proof in support of their contention.53 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,54 along with hundreds of pages of docuVerDate Sep 11 2014 23:33 Jul 18, 2016 Jkt 059006 PO 00000 Frm 00026 Fmt 6659 Sfmt 6601 E:\HR\OC\HR694.XXX HR694

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55See 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). 56See 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). 57 28 U.S.C. § 516 (2016); 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). 58 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). 59 U.S. CONST. art. II, § 3 (the President ‘‘shall take Care that the Laws be faithfully executed.’’). 60DAVID CARPENTER, CONG. RESEARCH SERV., LEGAL PRINCIPLES ASSOCIATED WITH MONETARY

RELIEF PROVIDED AS PART OF FINANCIAL-RELATED LEGAL SETTLEMENTS & ENFORCEMENT AC- TIONS 1 (2015). 61 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. 62 Id. at 59. 63 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.’’). 64 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. 65 Heckler v. Chaney, 470 U.S. 821, 831–32 (1985). 

ments produced by private parties—the Majority’s investigation of 

the Justice Department’s settlement agreements has produced no 

evidence that these settlements included unlawful or politically motivated terms.55

Although proponents of H.R. 5063 claim that the Justice Department’s RMBS settlements are unlawful,56 the Justice Department 

has broad enforcement discretion when settling litigation involving 

the Federal Government,57 a traditional power of the Executive 

Branch.58 Under the Take Care Clause of the Constitution,59 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.60 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.61 The authority to 

compromise and settle litigation is inherent within this broad grant 

of plenary authority over government litigation,62 and extends beyond mere litigation strategy to include the ‘‘national policies espoused by the Executive.’’ 63 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.’’ 64 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.’’ 65 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 


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66See 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). 67Financial 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:// 

financialservices.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). 68 31 U.S.C. § 3302(b) (2016); 19 U.S.C. § 527 (2016) (requiring deposit of customs fines, penalties, and forfeitures to the Treasury). 69 31 U.S.C. § 1301(a) (2016) (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). 70 U.S. GOV’T ACCOUNTABILITY OFFICE, NUCLEAR REGULATORY COMMISSION’S AUTH. TO MITIGATE CIVIL PENALTIES 17, 19 (1990). 71 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.’’). 72 31 U.S.C. § 3302(b) (2016). 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) (2016). 73See, 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). 74 U.S. GOV’T ACCOUNTABILITY OFFICE, B–210210, MATTER OF: COMMODITY FUTURES TRADING

COMM’N—DONATIONS UNDER SETTLEMENT AGREEMENTS (1983). 75 Id. 76 U.S. ENVTL. PROT. AGENCY, B–247155.2, 1993 WL 798227 (Comp. Gen. Mar. 1, 1993), http:// 

www.gao.gov/assets/200/195921.pdf 

terms, which ‘‘involve numerous complicated technical issues as 

well as important judgments respecting the use of limited prosecutorial resources,’’ and are ‘‘best left in the hands of expert agencies 

and prosecutors, rather than dictated by Congress or the Federal 

courts.’’ 66

Furthermore, donations under settlement agreements (‘‘settlement donations’’) are a lawful exercise of Justice Department’s enforcement discretion.67 The Miscellaneous Receipts Act (MRA)68

and other appropriations laws 69 establish a general prohibition 

against augmentation of agency appropriations through enforcement policy.70 These laws effectuate Congress’ role in appropriating 

funds and ensuring that Congress retains control of the public 

purse.71 Importantly, however, this prohibition is clearly inapplicable to funds that are not received by the Government.72

The non-partisan and independent Government Accountability 

Office (GAO) has issued several opinions clarifying settlement donations are not ‘‘for the Government’’ within the meaning of the 

MRA.73 The GAO explains that an agency’s enforcement discretion 

includes the use of settlement donations as long as the remedies 

have a nexus to the correction of an underlying violation and the 

agency’s prosecutorial objectives. 74 Indeed, GAO has stated that 

‘‘settlements may contain terms and undertakings that go beyond 

the [agency’s] remedies,’’ 75 and that an enforcement agency ‘‘may 

adjust penalties to reflect the special circumstances of the violation 

or concessions exacted from the violator.’’ 76 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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77Financial 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:// 

financialservices.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 78 Andrew Brady Spalding, Restorative Justice for Multinational Corporations, 76 OHIO ST. 

L.J. 357, 394–95 (2015). 79DAVID CARPENTER & EDWARD LIEU, CONG. RESEARCH SERV., MONETARY RELIEF TO THIRD

PARTIES AS PART OF FEDERAL LEGAL SETTLEMENTS 1 (2016). 80 Id. at 1–2. 81DAVID CARPENTER, CONG. RESEARCH SERV., LEGAL PRINCIPLES ASSOCIATED WITH MONETARY

RELIEF PROVIDED AS PART OF FINANCIAL-RELATED LEGAL SETTLEMENTS & ENFORCEMENT ACTIONS 6 (2015). 82 Id. 83See, 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.’’). 84Local 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.’’). 85Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 49, 53 (1987). 86 Id. at 521. 87See, 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.’ ’’ 77 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.’’ 78

The non-partisan Congressional Research Service (CRS) likewise 

agrees that settlement donations are a lawful exercise of agency 

enforcement discretion.79 Noting that enforcement agencies have 

‘‘tremendous flexibility to craft the terms of legal settlements with 

entities for alleged misbehavior,’’ CRS has observed 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.’’ 80 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.81 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.’ ’’ 82

Courts have also broadly upheld the use of settlement donations.83 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 an objective upon which the law is 

based, and do not violate the underlying statute.84 Unlike civil penalties imposed by a court, which must be paid to the U.S. Treasury,85 the Court characterized settlements as contracts because the 

‘‘voluntary nature of a consent decree is its most fundamental characteristic.’’ 86

Lower courts have similarly held that settlement donations are 

in the public interest.87 In 1990, the Ninth Circuit construed Firefighters v. City of Cleveland to allow lawful payments to third parVerDate Sep 11 2014 23:33 Jul 18, 2016 Jkt 059006 PO 00000 Frm 00029 Fmt 6659 Sfmt 6601 E:\HR\OC\HR694.XXX HR694

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88Sierra Club, Inc. v. Elec. Controls Design, Inc., 909 F.2d 1350, 1356 (9th Cir. 1990). 89 Id. 90 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). 91 Id. 

ties under a settlement.88 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.89

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.90 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.91


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92Financial 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:// 

financialservices.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 93 Effect of 31 U.S.C. § 484 on the Settlement Authority of the Attorney General, 4B Op. O.L.C. 

684, 688 (1980). 94 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). 95 31 U.S.C. § 3302(b) (2016); 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). 96Letter 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). 97FIRREA 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 

(2016); United States v. Bank of New York Mellon, No. 11 Civ. 6969 LAK 2 (S.D.N.Y. Apr. 24, 

2013). 

Settlement donations are also valid under longstanding Justice 

Department policy so long as the agency does not actually or constructively receive funds through a settlement.92 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.’’ 93 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.94

Settlements meeting these conditions do not violate the Miscellaneous Receipts Act because the government does not actually or 

constructively ‘‘receive money for the Government.’’ 95

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 settlements.96

The terms of these agreements arise from the Justice Department’s 

statutory enforcement authority under FIRREA 97 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 David Min of the University of California Irvine 

School of Law 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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98Financial 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:// 

financialservices.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 99 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). 100See, 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) (2016); DAVID CARPENTER & EDWARD LIEU, 

CONG. RESEARCH SERV., MONETARY RELIEF TO THIRD PARTIES AS PART OF FEDERAL LEGAL SETTLEMENTS 3 (2016). 101Memorandum 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.’’). 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:// 

financialservices.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 103 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. 104See 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. 105Letter 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). 106 Id. 

terms of these agreements. They appear to be clearly permissible under current law.98

In sum, funds paid under the RMBS settlements are not ‘‘drawn 

from the Treasury,’’ nor are they actually or constructively received 

‘‘for the Government.’’ 99 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.’’ 100 Indeed, by the Majority’s own 

admission, settlements donations that the government never receives do not trigger the MRA.101 Further, the Majority ‘‘has implicitly acknowledged the legality of charitable payment terms by 

passing H.R. 5063 out of Committee,’’ as Professor Min notes.102

In addition to clearly satisfying the existing legal framework for 

settlement donations, 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.103 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.104 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.105 Housing intermediaries also ensure that banks comply with the terms of settlements, which Ms. Gordon adds, ‘‘is not always a given.’’ 106

While H.R. 5063’s proponents have claimed, without evidence, 

that the recipients of RMBS settlement donations are ‘‘activist 

groups,’’ the Majority has overlooked the fact that conservative 


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107Financial 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:// 

financialservices.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 108 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. 109 Id. 

groups may also receive funds through the RMBS settlements.107

Furthermore, numerous mechanisms within the settlement terms 

prevent the misuse of settlement funds.108 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.109

Lastly, even if it were desirable to change existing law in response to the RMBS settlements, H.R. 5063 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. 5063 as these provide restitution for actual 

harm (i.e., home foreclosures) caused by the settling banks’ allegedly unlawful conduct. 

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. 5063 

simply addresses a non-existent problem. 

II. H.R. 5063 WOULD UNDERMINE PUBLIC HEALTH AND SAFETY BY

ELIMINATING THE GENERAL ENFORCEMENT AND REMEDIATION OF

UNLAWFUL CONDUCT IN ALL CIVIL ENFORCEMENT CASES

A. Settlement Donations 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 sociVerDate Sep 11 2014 23:33 Jul 18, 2016 Jkt 059006 PO 00000 Frm 00033 Fmt 6659 Sfmt 6601 E:\HR\OC\HR694.XXX HR694

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110Financial 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:// 

financialservices.house.gov/uploadedfiles/hhrg-114-ba09-wstate-dmin-20160519.pdf. 111 Colin S. Diver, The Assessment and Mitigation of Civil Money Penalties by Federal Administrative Agencies, 79 COLUM. L. REV. 1435, 1456 (1979). 112 Charlie Garlow, Environmental Recompense, 1 APPALACHIAN J.L. 1, 5–6 (2002). 113See, 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. 114 Id. at 7. 115See 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). 116 ENVTL. PROTECTION AGENCY, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, 

ISSUANCE OF THE 2015 UPDATE TO THE 1998 U.S. ENVIRONMENTAL PROTECTION AGENCY SUPPLEety.110 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.111

This form of ‘‘general compensation’’ is particularly appropriate 

in cases where a party’s unlawful conduct involves diffuse or systemic harms, or injures an unidentifiable 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.112

To provide for complete restitution to generalized harms, environmental settlements sometimes include ‘‘offset projects.’’ For example, the EPA may include Supplemental Environmental Projects 

(SEPs) in settlement 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.’’ 113 As with other settlement donations, these projects 

must have a sufficient nexus to the underlying conduct of the defendant.114 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.’’ 115 The EPA has also clarified that 

they cannot include cash donations to community groups, environmental organizations, or other third parties.116 As courts have obVerDate Sep 11 2014 23:33 Jul 18, 2016 Jkt 059006 PO 00000 Frm 00034 Fmt 6659 Sfmt 6601 E:\HR\OC\HR694.XXX HR694

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MENTAL ENVIRONMENTAL PROJECTS POLICY 17 (2015), https://www.epa.gov/sites/production/files/ 

2015-04/documents/sepupdatedpolicy15.pdf. 117 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). 118 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). 119See, e.g., id. (written statement of David Uhlmann, Professor, University of Michigan Law 

School). 120 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-olc-v006-p0047.pdf. 121 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). 

served, these forms of settlement donations better serve the purposes of the underlying statute than merely directing funds to the 

Treasury.117

In addition to serving the public interest, settlement donations 

may also be in the interest of private parties. Professor Joel Mintz 

of Nova Southeastern University College of Law, a former chief attorney with the EPA, notes in his written statement on H.R. 5063 

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.118

B. H.R. 5063 Would Prohibit Civil Enforcement Agencies from 

Fully Protecting the Public Interest 

H.R. 5063 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 

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.119 It is therefore unsurprising that the Justice Department, 

which has plenary authority to enforce the law and defend the interests of the United States, 120 strongly opposes the bill.121 In comments on H.R. 5063, the Justice Department has expressed concerns that ‘‘this bill would unwisely constrain the government’s setVerDate Sep 11 2014 23:33 Jul 18, 2016 Jkt 059006 PO 00000 Frm 00035 Fmt 6659 Sfmt 6601 E:\HR\OC\HR694.XXX HR694

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122 Id. at 2. 123 Id. 124Tr. of Markup of H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ by the H. 

Comm. on the Judiciary, 114th Cong. 58 (May 11, 2016). 125 Id. at 59. 126See H.R. 5063 Hearing, supra note 5, at 3 (written statement of Joel Mintz, Professor, 

Nova Southeastern University College of Law) (‘‘[T]he proposed Stop Settlement Sludge Funds 

Act appears likely to prohibit many of the important benefits now provided by EPA’s SEPs program.’’) (on file with Democratic staff of the H. Comm. on the Judiciary). 127Tr. of Markup of H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ by the H. 

Comm. on the Judiciary, 114th Cong. 64 (May 11, 2016). 128 Id. at 65. 

tlement authority and preclude many permissible settlements that 

would advance the public interest.’’ 122 The Department explains: 

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.123

To illustrate this concern, Representative David Cicilline (D-RI) 

offered an amendment to exempt from the bill any settlement 

agreement concerning privacy protections. He explained that his 

amendment would preserve ‘‘the ability of civil enforcement agencies to compel large corporations to adopt programs to protect consumer data,’’ which would be undermined by H.R. 5063’s prohibition of settlement donations.124 He also noted that in cases of diffuse or systemic privacy violations, ‘‘the most appropriate remedy 

may involve prescribing steps that effectively prevent future misconduct.’’ 125 H.R. 5063 would expressly prohibit the inclusion of 

these types of projects in settlements by making unlawful payments that do not remedy a harm directly caused by the alleged 

conduct of a settling party.126

Speaking in opposition to this amendment, Chairman Bob Goodlatte (R-VA) argued that the bill’s exception for ‘‘services rendered 

in connection with the case’’ would apply to the settlement donations contemplated by the amendment.127 In response, Representative Cicilline observed that the bill’s language is specific to ‘‘costs 

associated with the litigation, not the settlement.’’ 128 Indeed, while 

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129The Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A) (2016). 130See id. at (d)(2) (defining ‘‘fees and other expenses’’); see, e.g., Conrad, Rubin & Lesser v. 

Pender, 289 U.S. 472, 475–76 (1933) (attorney’s fees in bankruptcy proceedings). 131See, e.g., Dell v. Bowen, No. CIV–83–480E, 1986 WL 12482, at *1 (W.D.N.Y. Nov. 5, 1986) 

(attorney’s fees under the Equal Access to Justice Act (28 U.S.C. § 2412(d)(1)(A)). 132Tr. of Markup of H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ by the H. 

Comm. on the Judiciary, 114th Cong. 70 (May 11, 2016). 133 42 U.S.C. §§ 2000e et seq. (2016). 134Griggs v. Duke Power Co., 401 U.S. 424, 429 (1971) 135Texas Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 

2507, 2525 (2015). 136Mark E. Recktenwald, Collateral Attacks on Employment Discrimination Consent Decrees, 

53 U. Chi. L. Rev. 147 (1986). 137 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). 

ment in connection with litigation,129 these statutes commonly 

specify the appropriate recipient of funds and the intended scope 

of services to be covered by the statute.130 Moreover, we are unaware of any statute containing the bill’s exact language. Furthermore, cases construing similar language contemplate attorney’s 

fees or other litigation expenses,131 but not payments for monitoring, compliance programs, workplace training, or other forms of 

relief currently available under settlements. It is therefore unclear 

whether courts would broadly construe this exception to include 

settlement donations designed to prevent future misconduct. Notwithstanding ample bipartisan support for protecting Americans’ 

privacy rights, however, the amendment was defeated by a vote of 

6 to15.132

C. H.R. 5063 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 133 to remove discriminatory barriers and to promote 

equality of employment opportunities.134 As the Supreme Court recently noted, however, ‘‘[m]uch progress remains to be made in our 

Nation’s continuing struggle against racial isolation’’ and toward 

‘‘our historic commitment to creating an integrated society.’’ 135

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., unidentifiable victims such as former and future employees).136 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.137 Without the ability to include these forms of relief in 

settlements, H.R. 5063, the Department argues, 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 


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138 Id. 139Tr. of Markup of H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ by the H. 

Comm. on the Judiciary, 114th Cong. 19 (May 11, 2016). 140 Id. at 26. 141 Id. at 31. 142 Id. at 44. 143 42 U.S.C. § 7604 (2016). 

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.138

To highlight this concern, Ranking Member John Conyers, Jr. (DMI) offered an amendment that would have exempted from the bill 

any settlement agreement that pertains to the enforcement of civil 

rights laws. He explained that his amendment was necessary because ‘‘the bill’s broad and ill-defined prohibition would effectively 

deter civil enforcement agencies from providing general relief in 

discrimination cases, discourage courts from enforcing these settlements, and invite costly and needless litigation concerning these 

provisions.’’ 139 Unfortunately, this amendment failed by a vote of 

9 to 15.140

To further underscore these concerns, Representative Sheila 

Jackson Lee (D-TX) offered an amendment that would have exempted from H.R. 5063 settlement agreements that pertain to payments to indirectly remediate and prevent sexual harassment, violence, or discrimination in the workplace. She explained H.R. 5063 

would prevent settlement donations for workplace monitoring and 

other payments to remedy generalized harm, including remedies 

designed to prevent the recurrence of sexual violence or discrimination.141 This amendment also failed by a vote of 7 to 16.142

D. H.R. 5063 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 

public health or the environment,’’ 143 which require that a settling 

party remedies, reduces, or offsets the harm caused by its alleged 


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144 ENVTL. PROTECTION AGENCY, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, SE- CURING MITIGATION AS INJUNCTIVE RELIEF IN CERTAIN CIVIL ENFORCEMENT SUITS 2 (2012). 145 42 U.S.C. § 7604 (g)(2) (2016). 146See 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). 147 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. 148 Id. 149Memorandum 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). 150 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). 

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.144 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,145 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.146

H.R. 5063, 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 at the hearing on 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.147 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.148 H.R. 5063 would eliminate these forms of remedies to 

major environmental misconduct. 

Proponents of the bill argue that H.R. 5063 allows agencies to redress direct environmental injuries, 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.149 This argument, however, is 

wrong for several reasons. 

First, H.R. 5063’s exception for environmental remediation is 

drafted too narrowly to allow for environmental projects.150 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; 

2) Environmental restoration projects including activities 

that protect local ecosystems from actual or potential 

harm resulting from the violation; 


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151 Id. 152 Id. 153 ENVTL. PROTECTION AGENCY, MOEX Offshore 2007 LLC Settlement (Feb. 17, 2012), https:// 

www.epa.gov/enforcement/moex-offshore-2007-llc-settlement#sep. 154 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). 

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.151

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. 

5063, notwithstanding the beneficial nature of such settlement donations.152

Secondly, H.R. 5063 would foreclose settlement donations 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 a 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.153 As the Justice Department notes, 

this common feature of settlements in environmental enforcement 

actions would likely be barred by H.R. 5063: 

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.154

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 doVerDate Sep 11 2014 23:33 Jul 18, 2016 Jkt 059006 PO 00000 Frm 00040 Fmt 6659 Sfmt 6601 E:\HR\OC\HR694.XXX HR694

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155 42 U.S.C. § 7604 (2016). 156 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). 157 Charlie Garlow, Environmental Recompense, 1 APPALACHIAN J.L. 1, 5–6 (2002). 158See 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). 159 Id. 160Tr. of Markup of H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016,’’ by the H. 

Comm. on the Judiciary, 114th Cong. 31 (May 11, 2016). 161 Id. at 44. 

nations.155 As courts have noted, the purposes of these laws are ‘‘to 

improve water quality, not endow the Treasury.’’ 156 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.157

Lastly, Congress lacks the time, expertise, and resources to properly review and make these enforcement decisions on behalf of Federal agencies.158 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.159 The cost of delays associated with this scheme would have 

devastating consequences for the public health, environment, and 

local communities. 

In response to these concerns, Representative Sheila Jackson Lee 

(D-TX) offered an amendment that would have exempted from H.R. 

5063 settlement agreements that provide restitution to states that 

are not parties to litigation.160 This amendment failed by a vote of 

7 to 16.161

III. H.R. 5063’S VAGUE PROVISIONS WILL RESULT IN NEEDLESS

LITIGATION AND DELAY

As drafted, H.R. 5063 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 explains that ‘‘courts interpreting the legislation could 

conclude that it precludes third-party payments as part of civil setVerDate Sep 11 2014 23:33 Jul 18, 2016 Jkt 059006 PO 00000 Frm 00041 Fmt 6659 Sfmt 6601 E:\HR\OC\HR694.XXX HR694

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162 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. 163 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). 164 U.S.C. § 4205(d)(1) (2016); 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). 165 31 U.S.C. § 3302(d) (2016). 

tlement agreements, other than restitution, even in cases of generalized harm to the environment or consumers.’’ 162 He is concerned 

that, even as ordered reported by the Committee in its amended 

form, H.R. 5063 continues to raise a ‘‘host of questions about what 

payments are covered,’’ while failing to meaningfully define terms 

or address the bill’s underlying problems.163

H.R. 5063 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 the 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.164

SECTION-BY-SECTION EXPLANATION OF H.R. 5063

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 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.165

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. 

Section 2(d) defines ‘‘settlement agreement’’ to include a resolution of a civil action or potential civil action through settlement 

agreement. 


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CONCLUSION

Similar to the multitude of the Majority’s anti-regulatory bills 

that our Committee has considered over this and the last two Congresses, H.R. 5063 is yet another 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 donations 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. 

5063 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. 5063’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. 5063 and we urge our colleagues to join us in opposition. 

MR. CONYERS, JR. MS. LOFGREN. MS. JACKSON LEE. MR. COHEN. MR. JOHNSON, JR. MR. DEUTCH. MR. JEFFRIES. MR. CICILLINE. 

Æ 


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