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STOP SETTLEMENT SLUSH FUNDS ACT OF 2016 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

ON

H.R. 5063 

APRIL 28, 2016 

Serial No. 114–69 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 
(II) 

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

MIMI WALTERS, California 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

TOM MARINO, Pennsylvania, Chairman 

BLAKE FARENTHOLD, Texas, Vice-Chairman 

DARRELL E. ISSA, California 

DOUG COLLINS, Georgia 

MIMI WALTERS, California 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

DANIEL FLORES, Chief Counsel 

SLADE BOND, Minority Counsel 
(III) 

C O N T E N T S 

APRIL 28, 2016 

Page 

TEXT OF THE BILL 

H.R. ____, the ‘‘Stop Settlement Slush Funds Act of 2016’’ ................................. 3 

OPENING STATEMENTS 

The Honorable Tom Marino, a Representative in Congress from the State 

of Pennsylvania, and Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law .................................................................................. 1 

The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress 

from the State of Georgia, and Ranking Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ................................................. 5 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciary ................................. 6 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 7 

WITNESSES 

The Honorable Daniel E. Lungren, Esq., Principal, Lungren Lopina LLC 

Oral Testimony ..................................................................................................... 10 

Prepared Statement ............................................................................................. 13 

Paul F. Figley, Esq., Professor, Associate Director of Legal Rhetoric, American 

University Washington College of Law 

Oral Testimony ..................................................................................................... 28 

Prepared Statement ............................................................................................. 30 

David M. Uhlmann, Esq., Director, Environmental Law and Policy Program, 

The University of Michigan Law SchooL 

Oral Testimony ..................................................................................................... 43 

Prepared Statement ............................................................................................. 45 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Material submitted by the Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress from the State of Georgia, and Ranking Member, 

Subcommittee on Regulatory Reform, Commercial and Antitrust Law .......... 72 

Response to Questions for the Record from David M. Uhlmann, Esq., Director, 

Environmental Law and Policy Program, The University of Michigan Law 

SchooL ................................................................................................................... 79 

H.R. 5063, the ‘‘Stop Settlement Slush Funds Act of 2016’’ ................................ 82 

(1) 

STOP SETTLEMENT SLUSH FUNDS ACT 

OF 2016 

THURSDAY, APRIL 28, 2016 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:07 a.m., in room 

2141, Rayburn House Office Building, the Honorable Tom Marino 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Marino, Goodlatte, Walters, Ratcliffe, 

Johnson, and Conyers. 

Staff Present: (Majority) Dan Huff, Counsel; Andrea Lindsey, 

Clerk; and (Minority) Slade Bond, Minority Counsel. 

Mr. MARINO. The Subcommittee on Regulatory Reform, Commercial and Antitrust Law will come to order. Good morning, everyone. 

Without objection, the Chair is authorized to declare a recess of 

the Committee at any time. 

We welcome everyone to today’s hearing on H.R. 5063, the ‘‘Stop 

Settlement Slush Funds Act of 2016.’’ 

And I now recognize myself for an opening statement. 

The bill’s title sums up the issue. A Judiciary Committee investigation has revealed that DOJ is requiring settling parties to donate money to third-party groups. At issue are large sums of 

money; close to $1 billion in just the last 2 years. Of that, over halfa-billion has already been disbursed or is committed to be disbursed. 

I purposely did not make this hearing about groups that received 

the money. I did not want to distract from the central issue, and 

I feel the central issue is the harm that these provisions do to Congress as an institution. The spending power is Congress’ most effective tool in reining in the executive branch. This is true no matter 

which party is in the White House. 

A Democrat-led Congress passed the Cooper-Church Amendment 

to end the Vietnam war. More recently, Congress used a funding 

restriction to prevent the transfer of Guantanamo Bay prisoners to 

the United States mainland. Bipartisan funding restrictions were 

passed to block lavish salary and conference spending by Federal 

agencies and grantees. This policy control is lost if the Executive 

gains authority over spending. 
2 

Serious people on both sides of the aisle understand this. Consider Todd Peterson, former Deputy Assistant Attorney General for 

the Office of Legal Counsel in the Clinton administration. He 

warned in 2009, that ‘‘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 2008, a 

top Republican DOJ official circulated a memo to Federal prosecutors restricting mandatory donation provisions, because they can 

‘‘create actual or perceived conflicts of interest and or other ethical 

issues.’’ 

So, again, serious people understand that this is fundamentally 

a bipartisan, institutional issue. Indeed, the language on which 

this bill is based passed the House last year, by a voice vote. 

The ‘‘Stop Settlement Slush Funds Act of 2016’’ prohibits settlement terms that require donations to third-parties. It states explicitly that payments to provide restitution for actual harm, directly 

caused, including harm to the environment, are not donations. 

As a former Federal prosecutor, I am acutely aware of the needs 

of DOJ in negotiating settlements. Now, as a Congressman, I am 

also aware that a line has to be drawn. This commonsense bill 

merely ensures that settlement money goes either to direct victims 

or to the U.S. Treasury so that the people’s elected Representatives 

can decide how best to spend it. 

I understand we could differ on the details, but today is not a 

markup. This is an opportunity to hear from expert witnesses to 

ensure that the legislation has the proper scope. Let’s work together from a common premise. So I call on my colleagues to join 

me in defending the fundamental principle: Elected, accountable 

Members of Congress should decide how Federal funds are spent. 

I am pleased that every Republican Subcommittee Member is already a cosponsor. I hope my Democratic colleagues will soon join 

this important effort. 

I thank our witnesses for appearing and look forward to the discussion. 

[The text of the bill, H.R. 5063, follows:] 
3 
4 
5 

Mr. MARINO. The Chair now recognizes the Ranking Member of 

the Subcommittee on Regulatory Reform, Commercial and Antitrust Law, Mr. Johnson of Georgia, for his opening statement. 

Sir. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

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

remove an important civil enforcement tool available to agencies to 

hold corporations accountable for the general harm caused by unlawful conduct and would create waves of uncertainty, delay, and 

needless litigation in the enforcement of civil law. 

H.R. 5063 would have potentially disastrous consequences on the 

remediation of generalized harms in civil enforcement actions. For 

unlawful conduct with systemic harms, such as environmental catastrophe—or an environmental catastrophe, settlements provide a 

mechanism to provide for the remediation of generalized harms 

through offsets and other indirect remedies. Similarly, parties seeking to regain public trust may also wish to include voluntary auditing requirements in settlement agreements that ensure that similar violations do not occur in the future. 

Joel Mintz, an expert in environmental law and enforcement, observes that these settlements ‘‘can create a win-win scenario for all 

parties involved, including regulators, regulated companies, and 

local communities,’’ by creating a flexible regulatory climate and repairing ‘‘corporate public images that would otherwise be further 

harmed by negative environmental publicity.’’ 

For example, in 2012, the Mitsui Oil Exploration Company settled its liability for violations of the Clean Water Act resulting from 

the Deepwater Horizon oil spill. In addition to civil penalties, 

Mitsui Oil agreed to facilitate land projects in several States, including Texas, Mississippi, Alabama, Louisiana, and Florida, to 

conserve critical habitat within the Gulf of Mexico. 

In this case and others like it, donations under settlement agreements serve as a critical tool to remedy a general harm and provide 

the settling party with an opportunity to re-earn the public’s trust. 

H.R. 5063 would eliminate these donations in both existing and future settlement agreements. This is true even in cases where the 

settling party seeks a donation to offset its unlawful conduct or 

where a party’s harmful conduct could not otherwise be remedied. 

This legislation is also an unwarranted encroachment on the 

prosecutorial discretion of civil enforcement agencies. The exercise 

of enforcement discretion is a traditional power of executive branch 

agencies. This authority provides broad prosecutorial flexibility to 

civil enforcement agencies when crafting settlement agreements 

within the scope of their statutory authority. 

It is little surprise that the Supreme Court has consistently held 

that the exercise of such discretion is a core function of the Executive’s power under the take-care clause, as it did in Heckler v. 

Chaney, where the Court observed that the characteristics of a decision of a prosecutor in the executive branch have long been regarded as the special province of the executive branch inasmuch as 

it is the executive branch who is charged by the Constitution to 

take care that the laws be faithfully executed. 

Under this constitutional norm, agencies’ prosecutorial discretion 

to settle potential civil actions extends to requiring donations in 
6 

settlement agreements. Additionally, settlement agreements may 

exceed the remedies identified in an agency’s underlying statute so 

as long as they relate to the agency’s statutorily authorized prosecutorial objectives, which generally requires that donations have 

a sufficient nexus between the underlying violation and the proposed remedy. H.R. 5063 represents a severe departure from these 

core principles, raising separation-of-powers concerns and threatening to curtail agency discretion in the enforcement of the law. 

In closing, I’d like to thank our witnesses for appearing today. I’d 

like to welcome our former colleague Dan Lungren back to the 

other side. 

And I yield back the balance of my time. 

Mr. MARINO. Thank you. 

The Chair now recognizes the Chairman of the full Judiciary 

Committee, Mr. Bob Goodlatte of Virginia, for his open statement. 

Mr. GOODLATTE. Well, thank you, Mr. Chairman. I appreciate 

your holding this hearing. 

Eighteen months ago, this Committee commenced a ‘‘pattern or 

practice’’ investigation into the Justice Department’s mortgage 

lending settlements. We found that the Department of Justice is 

systemically subverting Congress’ spending power by requiring settling parties to donate money to activist groups. 

In just the last 2 years, the Department of Justice has directed 

nearly a billion dollars to third-parties entirely outside of Congress’ 

spending and oversight authority. Of that, over half a billion has 

already been disbursed or is committed to be being disbursed. In 

some cases, these mandatory donation provisions reinstate funding 

Congress specifically cut. 

Whether the beneficiaries of these donations are worthy entities 

or not is entirely beside the point. The Constitution grants Congress the power to decide how money is spent, not the Department 

of Justice. This is not some esoteric point. It goes to the heart of 

the Separation of Powers theory and Congress’ ability to rein in the 

Executive in practice. 

Certainly, the Department of Justice’s authority to settle cases 

necessarily includes the ability to obtain redress for victims. However, Federal law understands victims to be those ‘‘directly and 

proximately harmed’’ by a defendant’s acts. Once those victims 

have been compensated, deciding what to do with additional funds 

extracted from defendants becomes a policy question properly decided by elected Representatives in Congress, not agency bureaucrats or prosecutors. It is not that Justice Department officials are 

necessarily funding bad projects. It is that, outside of compensating 

actual victims, it is not their decision to make. 

We have brought these reasonable concerns to the Department of 

Justice. But rather than suspend the practice of mandatory donations, DOJ has doubled down. Just 2 weeks ago, a major DOJ bank 

settlement required $240 million in ‘‘financing and/or donations’’ toward affordable housing. 

It is time for Congress to take action to end this abuse. 

The ‘‘Stop Settlement Slush Funds Act of 2016’’ bars mandatory 

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

It makes clear that payments to provide restitution for actual 

harm, directly caused, are not donations. It explicitly references the 
7 

environmental context where the injury to the environment may be 

diffuse and there may be no identifiable victims. The bill deals with 

this by explicitly permitting payments to remediate environmental 

damage. If direct remediation of the harm is impossible or impractical, the violator is not let off the hook. The full penalty is paid, 

but into the Treasury. 

The principle is clear, but the details need to be studied. I am 

pleased that we have an expert panel today to offer views. I am 

particularly interested to hear their thoughts on the scope of the 

bill. It covers civil settlements. Is that sufficient? What about the 

language permitting remediation of harm ‘‘directly and proximately’’ caused? Does this impose a sufficiently tight nexus between the payment and the offense to prevent further DOJ mischief? 

So I am eager to hear from our witnesses, and I thank them for 

coming. And I also want to thank all of the bill’s cosponsors, particularly Chairman Marino, Representative Peterson, Chairman 

Culberson, and every Republican Member of this Subcommittee. 

And it’s also a pleasure to welcome back to the Judiciary Committee my longtime friend and former colleague, Dan Lungren, who 

I’m sure has a keen interest and insight into this issue. And I welcome the other witnesses today as well. 

Thank you, Mr. Chairman. I yield back. 

Mr. MARINO. Thank you. 

The Chair recognizes the full Judiciary Committee Ranking 

Member, Mr. Conyers of Michigan, for his opening statement. 

Mr. CONYERS. Thank you, Chairman Marino. 

And I join all of us in welcoming back Dan Lungren in his newer 

capacity. He was an outstanding Member of the Judiciary Committee, and we look forward to his testimony. 

Today’s hearing concerns legislation that would prohibit the enforcement or negotiation of any settlement agreement requiring donations to remediate harms that are not directly and proximately 

caused by a party’s unlawful conduct. 

The proponents of this bill assert that the Justice Department 

and civil enforcement agencies used such settlement agreements to 

unlawfully augment their own budgets as an end-run around the 

congressional appropriation process. 

I believe that this bill is a seriously misguided effort for a number of reasons. 

To begin with, these settlement agreements have been successfully used, for example, to facilitate an effective response to the 

predatory and fraudulent mortgage lending activities that nearly 

caused the economic collapse of our Nation. Settlement agreements 

with two of these culpable financial institutions, Bank of America 

and Citigroup, require a donation of less than 1 percent of the overall settlement amount to help affected consumers. 

The majority initially claimed, however, that the Justice Department used these settlement agreements as a vehicle for funding activist groups. Notwithstanding the production of hundreds of pages 

of documents by the Justice Department, along with hundreds of 

pages of documents produced by private parties, the majority’s investigation has not produced any evidence that the government included unlawful or politically motivated terms in its settlement 
8 

agreement with Bank of America or Citigroup, let alone slush 

funds. 

In the absence of any facts to support their initial claim, the majority now asserts that the Justice Department and other agencies 

have augmented their appropriations through civil enforcement. 

But existing law already prevents agencies from augmenting their 

own funds through civil enforcement. These laws require that donations in settlement agreements have a clear nexus to the prosecutorial objectives of the enforcement agency. And both the Government Accountability Office and the Congressional Research 

Service conclude that the settlement agreements providing for secondary remediation do not violate Congress’ constitutional power of 

the purse. 

And, finally, I’m also very concerned that this measure will have 

potentially disastrous consequences on the remediation of systemic 

harms in civil enforcement actions. Settlement agreements allow 

parties to resolve their civil liability by voluntarily remediating the 

harms caused by their conduct. In the context of environmental enforcement actions, for example, parties may voluntarily agree to 

undertake restoration projects to protect local ecosystems in order 

to offset environmental damage. 

Moreover, for some unlawful conduct, such as, for example, employment discrimination, secondary remediation of harms may be 

the only remedy available for systemic violations of the law. Employment discrimination lawsuits typically affect the interests of 

employees who are not parties to an action. Secondary remediation 

in these cases serves as an important tool to protect victims of 

workplace harassment and establish lawful workplace norms 

through voluntary compliance and training programs. 

So you can see I have some serious concerns about this legislation, but I thank our witnesses for being with us today, and I look 

forward to hearing their testimony. 

Mr. Chairman, I yield back. 

Mr. MARINO. Thank you. 

Without objection, other Members’ opening statements will be 

made part of the record. 

I will begin by swearing in our witnesses before I introduce 

them. 

Would you please stand and raise your right hand? 

Thank you. 

Do you swear that the testimony you are about to give before 

this Committee is the truth, the truth, and nothing else but the 

truth, so help you God? 

Please be seated. 

Let the record reflect that all the witnesses have responded in 

the affirmative. 

And I’m going to just take several minutes to introduce all three 

of you at once, and then we’ll start with Congressman Lungren, but 

I like to refer to you as ‘‘General,’’ because you know how we prosecutors are. As a matter of fact, all of you as along those lines. 

But Daniel Lungren is a principal at Lungren Lopina LLC. Mr. 

Lungren has served nine terms as a Member of the U.S. House of 

Representatives from California, as well as two terms as attorney 

general of California. In Congress, he was a Member of the House 
9 

Judiciary Committee, House Intelligence Committee, and was a 

senior Member of the House Committee on Homeland Security, 

where he worked on a number of important legislative reforms. 

As attorney general, Mr. Lungren led an office of nearly 1,000 

lawyers with an annual criminal and civil caseload of approximately 50,000 cases. In that capacity, Mr. Lungren achieved record 

settlements under California’s environmental laws, including the 

largest environmental settlement up to that time in California in 

a toxic spill case. He also won two of the largest settlements ever 

under the Federal Clean Water Act and the Federal Superfund 

law. 

Mr. Lungren earned his bachelor’s degree from the University of 

Notre Dame and his law degree from Georgetown University Law 

Center. 

Welcome, Congressman. 

Professor Paul Figley is the associate director of the legal writing 

and rhetoric program and professor of law at the American University Washington College of Law. 

Prior to joining the faculty at Washington College of Law, Professor Figley served as a U.S. Department of Justice litigator for 

three decades, with the last 15 years as Deputy Director in the 

Torts Branch of the Civil Law Division. At Justice, Professor Figley 

represented the United States and its agencies involving tort, national security, and informational law. 

Professor Figley earned his bachelor’s degree from the Franklin 

and Marshall College and his law degree from the Southern Methodist University School of Law. 

Welcome, Professor. 

Professor David Uhlmann—am I pronouncing that correctly, sir? 

Mr. UHLMANN. You are, sir. 

Mr. MARINO [continuing]. Is the director of the environmental 

law and policy program at the University of Michigan Law School 

and is the Jeffrey F. Liss Professor from Practice. 

Prior to joining the Michigan faculty, Professor Uhlmann served 

for 17 years at the United States Department of Justice and the 

last 7 as Chief of the Environmental Crime Section, where he 

chaired the Justice Department’s Environmental Crimes Policy 

Committee. 

Professor Uhlmann has published in various national publications and leading law journals and has testified before Congress. 

Professor Uhlmann graduated with a bachelor’s degree in history, 

with high honors, from Swarthmore College, and a law degree from 

Yale Law School. 

Professor, welcome. 

Mr. UHLMANN. Thank you, sir. 

Mr. MARINO. Each of the witnesses’ written statements will be 

entered into the record in its entirety. 

I ask that each witness summarize his testimony in 5 minutes 

or less. And to help you state within that 5 minutes, there are light 

in front of you. But as I do on occasion when I’m out there making 

a statement, I pay no attention to the lights. So what I will do is 

very diplomatically sort of pick up the hammer here and just give 

a little tap and ask—by doing that, asking you to wrap up. 
10 

So I will now recognize the former attorney general of California, 

former Congressman, the Honorable Dan Lungren, for his opening 

statement. 

TESTIMONY OF THE HONORABLE DANIEL E. LUNGREN, ESQ., 

PRINCIPAL, LUNGREN LOPINA LLC 

Mr. LUNGREN. Thank you, Mr. Chairman. And thank all Members of the Subcommittee, particularly the Chairman of the full 

Committee, the Ranking Member of this Committee, the Ranking 

Member of the full Committee, who I refer to as Chairman emeritus from time to time. 

Like many—well, first of all, let me just say I’m going to try and 

give a perspective of both a former Member of Congress and attorney general in this matter. And like many of you, I have observed 

with concern the American public, who appears to have lost some 

considerable faith with the present state of our politics and governance. 

In other words, a healthy skepticism of government, which I believe is enshrined in our opening documents—founding documents, 

has been replaced in some cases with outright cynicism, and that 

is in fact harmful to our democracy. There are many reasons for 

this corrosive development, but they are too numerous to mention 

here, but I do believe they establish a context for a discussion 

today. 

I fear the growing trend in law enforcement is contributing to the 

erosion of the public’s trust that it will receive impartial and fair 

justice. And I think also, particularly in the case that we are talking about here today, it is intruding on the core prerogatives of the 

Congress as well. 

There are about four points that I make in my written presentation. The first deals with the specific subject matter we’re talking 

about here, where executive branch agencies now use settlements 

of enforcement actions to fund private parties whose activities further the policy and, I believe, in some cases, the personal goals of 

the agency officials. 

Secondly, law enforcement officials and their offices increasingly 

have a direct financial stake in the outcome of prosecutions. At the 

Federal level, we talk about asset forfeiture and equitable sharing 

programs which allow law enforcement agencies to retain a share 

of their forfeiture proceedings. 

Let me be clear. I was present at the creation of the 1984 

iteration of that law and proudly claim some share of authorship. 

But I think abuses have arisen, and they must be dealt with, and 

I think this Congress must review them in some detail. 

Third, such practices have not been limited to the Federal Government. State enforcement officials, including State attorneys general, have used settlements to fund their own operations and create 

new grant programs outside their State legislative processes and 

sometimes in conjunction with the Federal Government. 

Fourthly, there is a modern 24 news—24-day news cycle that’s 

transformed the public information domain and how public officials 

act. The pressure is even greater on public officials, particularly 

those who are law enforcement. How do we help them make sure 
11 

that they are doing justice? How do we help them make sure that 

they are making their decisions without fear or favor? 

I think there are at least three things we ought to look at: clear 

rules of the road; secondly, defendants given a fair chance to defend themselves rather than being subjected to multiple overlapping enforcement actions that leave no choice in some cases but an 

unfair and unjust settlement; and punishments should fit the offense. And Congress—it ought to be looked as to whether or not we 

have excessive demands that are coercing settlements from the innocent. 

Let me go back to my first point and the subject of specific legislation before this Committee. Does anyone believe that these donations are freely given, voluntary expressions of support for these organizations? No, they’re coerced—coerced payments to the entities 

mandated by the officials acting with the full power and majesty 

of the government. 

Let me just give a few examples of these grant phenomenas. 

In 2012, the Department of Justice forced Gibson Guitars to pay a $50,000 community service payment to the National Fish and 

Wildlife Foundation even though the foundation was not a victim 

of the alleged crime and had no direct connection with the case. It 

was simply a nongovernmental organization that DOJ employees 

liked. 

In 2006, the DOJ forced a wastewater plant that had been accused of violating the Clean Water Act to give a million dollars to 

the United States Coast Guard Alumni Association. Looking at the 

case, I can find that the association had absolutely no connection 

and had suffered no harm, direct or indirect. 

This Committee, I think, is to be commended for your investigation into the contours of DOJ settlements with our country’s largest 

banks. Look, we could go through detail after detail on this, but the 

Bank of America settlement is most curious to me. The bank was 

to set aside $490 million to pay any potential tax liability to be incurred by their customers occasioned by loan modification or forgiveness. In other words, if there is a forgiveness, the net result of 

the forgiveness is viewed as an income to the individual who held 

the loan, and the government comes after them for taxes. 

So I can understand why that was done. However, Congress, in 

its infinite wisdom—I always thought we were going to do this— 

extended the non-tax liability in those cases. So what happened to 

the $490 million? Well, they were donated to the NeighborWorks 

America and Interest on Lawyers Trust Accounts groups. 

Look, some of us here, those on the Committee and I, might 

agree with the worthiness of these organizations. However, is that 

the Department of Justice’s decision to make? I would argue that 

under the Constitution it is not. I would argue that in my years 

in Congress I saw some of the core prerogatives of the Congress 

ceded either by omission or comission to the executive branch. 

And, thirdly, I would just say that, as the American people are 

looking at their institutions of governance on all levels, Congress 

ought to at least follow the Constitution. And as Senator Byrd said, 

appropriations go to the legislative branch because it is the most 

open and responsive or representative branch of our government. 

So we’re talking about accountability and transparency. 
12 

Thank you for your consideration. 

[The prepared statement of Mr. Lungren follows:] 
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22 
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25 
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28 

Mr. MARINO. Thank you. 

Professor Figley, please. 

TESTIMONY OF PAUL F. FIGLEY, ESQ., PROFESSOR, ASSOCIATE DIRECTOR OF LEGAL RHETORIC, AMERICAN UNIVERSITY WASHINGTON COLLEGE OF LAW 

Mr. FIGLEY. Thank you, Mr. Chairman and Members of the Committee. 

Congress’ power of the purse and its authority under the appropriations clause to direct where government money will be spent is 

a key component of our constitutional system of checks and balances. 

The authority has roots in the Magna Carta, and it was a substantial factor in the development of constitutional democracy in 

England. The colonial legislatures leveraged their taxation power 

into the power of appropriation, laying the groundwork for American independence. 

The authors of the Constitution vested the right of appropriation 

in the legislative branch. They did so, as James Madison explained 

in the Federalist No. 58, to ensure that government is directly accountable to the people and to provide Congress ‘‘a key check on 

the power of the other branches.’’ 

The current practice of allowing government attorneys to negotiate settlements that require other parties to make payments to 

individuals or entities who are not involved in the underlying dispute or damaged by the defendant’s action circumvents the appropriations process and undermines Congress’ power of the purse. 

The practice allows those government lawyers to provide payments 

to persons or entities without congressional authorization to do so. 

The practice creates numerous difficulties. As a practical matter, 

Federal attorneys are poorly suited to choose which persons or entities should receive a financial windfall. The system is unfair to 

other potential beneficiaries who did not collect the handout. 

The system lacks transparency. What factors determine which 

group will receive a payment? Who makes that decision? Are political considerations weighed? As the U.S. Attorneys’ Manual recognizes, the practice creates ‘‘actual or perceived conflicts of interest 

and other ethical issues.’’ One such issue is the potential for settlement payments to be directed to political allies or to further the political or personal ends of the government attorney. 

A second ethical issue is the risk that payments to unrelated 

third-parties will be strong-armed from defendants who seek to 

avoid publicity or debarment. 

The fallacy of tolerating this practice is reflected in settlement 

decisions like those requiring private entities to provide a $1 million endowment to the U.S. Coast Guard Academy, a $5 million endowment to the Seton Hall Law School, and a $2.4 billion payment 

to the National Fish and Wildlife Foundation. Such windfalls 

should not be bestowed by executive branch attorneys negotiating 

settlements with anxious defendants. Congress, acting with its 

power of the purse, has the right to determine which payments 

should be made. 

For these reasons, I support enactment of the Stop Settlement 

Slush Funds Act of 2016. I encourage the Committee to consider 
29 

clarifying the act that the act would apply to settlements in both 

civil and criminal matters that require private defendants to make 

donations or payments to persons or entities not involved in the 

dispute or injured by the defendant’s actions. 

Thank you. 

[The prepared statement of Mr. Figley follows:] 
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Mr. MARINO. Thank you, sir. 

Professor Uhlmann? 

TESTIMONY OF DAVID M. UHLMANN, ESQ., DIRECTOR, ENVIRONMENTAL LAW AND POLICY PROGRAM, THE UNIVERSITY 

OF MICHIGAN LAW SCHOOL 

Mr. UHLMANN. Thank you, Chairman Marino, Congressman 

Johnson, and Members of the Subcommittee, for inviting me to testify today. 

A case I prosecuted at the Justice Department, where I served 

for 17 years before becoming a law professor, highlights why thirdparty payments often are needed to address the harm caused by 

regulatory violations. The case involved John Morrell & Company, 

which until the mid-1990’s was the largest employer in the State 

of South Dakota. Morrell operated a slaughterhouse in Sioux Falls 

that discharged waste into the Big Sioux River. 

Under the terms of its Clean Water Act permit, Morrell was required to treat its waste to limit the concentration of ammonia nitrogen, and other pollutants that could harm the river. The permit 

also required Morrell to test its waste at least three times each 

week and to report all sampling to EPA and the State of South Dakota. Instead, over a period of more than a decade, Morrell officials 

engaged in a conspiracy to violate the Clean Water Act, discharging 

ammonia at levels nearly 40 times those allowed under the law and 

lying to conceal those violations. 

I provide additional details about the case in my written testimony, but suffice it to say that the illegal scheme was so wellknown within the company that the senior vice president in charge 

of the Sioux Falls facility repeatedly asked, ‘‘Who’s going to jail this 

month?’’ when he signed the falsified discharge monitoring reports. 

The Justice Department prosecuted Morrell under the Clean 

Water Act but could not prove the extent of the harm to the river 

because Morrell had concealed its violations for years. 

With the approval of the Federal district court, the Morrell plea 

agreement created the Big Sioux River Environmental Trust Fund 

to support cleanup efforts on the river and to restore recreational 

opportunities for communities harmed by the company’s misconduct. Morrell paid a $2 million criminal fine and $1 million in 

restitution and community service to the Big Sioux River Environmental Trust Fund. 

While Morrell was a criminal case, it is instructive about the 

shortcomings of the proposed legislation. Environmental violations 

cause significant harm to our communities. In some cases, the 

harm can be addressed by restitution to individuals, which the proposed legislation would not disturb. In the overwhelming majority 

of cases, however, the harm is generalized. Air is polluted; water 

is contaminated. Everyone in the community suffers, and thirdparty payments are the only remedies. These are not minor violations but serious breaches of the rule of law that cause real harm 

and have real consequences. 

I have three concerns about the Stop Settlement Slush Funds Act 

of 2016. 

First, the bill would undermine the Justice Department’s ability 

to hold corporations responsible for the harm caused by violations 
44 

*Note: Supplemental material submitted with this statement is not printed in this record but 

is on file with the Committee, and can also be accessed at: http://docs.house.gov/meetings/JU/ 

JU05/20160428/104872/HHRG-114-JU05-Wstate-UhlmannD-20160428-SD001.pdf. 

of our environmental laws but also our civil rights laws, our consumer protection laws, food and drug laws, and antitrust laws. The 

bill prohibits only donations but it never defines that term, which 

could be construed by courts to apply to all third-party payments. 

In addition, while the bill exempts payments for actual harm, it 

does not state that actual harm includes generalized harm like 

what occurred in Morrell. 

Second, the bill’s focus on civil settlements rests on a faulty 

premise, namely that generalized harm occurs in criminal cases 

but not in civil cases. There’s no principled reason why corporations should be required to remediate the harm they cause in 

criminal cases but not required to do so in civil cases. If harm only 

could be addressed in criminal cases, it would encourage law enforcement personnel to pursue criminal prosecution in matters that 

might otherwise be resolved by civil settlements, which would risk 

overcriminalization of regulatory violations. 

Third, Congress is simply not able to legislate to address all 

harm that occurs in our communities every time a regulatory violation occurs. No one disputes that Congress has the power of the 

purse. And for that reason, the Miscellaneous Receipts Act and the 

Antideficiency Act impose significant limits on third-party payments in both plea agreements and civil settlements. But corporations who engage in wrongdoing, not the general public, should be 

responsible for addressing the harm caused by their violations. 

I share the Subcommittee’s desire to ensure that all third-party 

payments serve the public interest and law enforcement objectives. 

Law enforcement is a sacred trust, and officials who have the 

honor of representing the people of the United States must serve 

the common good and not their personal interests. 

In my view, third-party payments must be negotiated separately 

from criminal or civil penalties, must address the harm caused by 

violations, and cannot augment Federal agency programs. I also 

might impose a limit on the percentage of funds that could be devoted to these payments. But those terms are nowhere to be found 

in the proposed legislation. 

Thank you again for inviting me to testify, and I’d be pleased to 

answer your questions. 

[The prepared statement of Mr. Uhlmann follows:*] 
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54 

Mr. MARINO. Thank you. 

I will now recognize myself for my 5 minutes of questioning. 

First of all, it’s a pleasure to be talking with brother prosecutors. 

I do want to make clear that we kept the bill as narrow or simple 

as possible because we wanted to hear what you had to say as far 

as, perhaps, expanding on issues. And just through your opening 

statements, I can see areas where we need to expand civil, criminal—do we say ‘‘funds,’’ you know, instead of ‘‘donations’’ and explanations. 

But, as a prosecutor, I would like to first ask, there’s been some 

concern about this curtailing prosecutorial authority. And, as a 

prosecutor, as far as discretion is concerned, we all know that there 

are multiple ways to resolve a case. So how would this not resolve 

a case? Why do you think it would prevent—if you do—why do you 

think it would prevent a prosecutor’s discretion in moving forward 

with a case? 

And I’d ask Congressman Lungren if you could address that, and 

each one of you, please. 

Mr. LUNGREN. Well, in answer, I would say I don’t think it unnecessarily restricts prosecutors. As I understand the way the bill 

stands now, it prohibits mandatory donations but not redress to individuals as affected. 

One of the arguments I see that has been made is that in criminal cases this has been allowed. But certain criminal statutes have 

very specific authorities to do this, and you have to say, why would 

the Congress give them specific authority if in fact they have general authority? I think it’s because Congress looked at those specific cases to say, in these matters, we can allow a more generalized redress. 

And the third point I would make is this. If, in fact, the harm 

has been done to the public and is so diffuse that you can’t identify 

those who are the proximate sufferers of it, if you can prove in 

court, as a legal matter, that damage has been done but it is diffuse, then the money ought to go to the Federal Government, and 

the Federal Government ought to decide through the regular appropriation process how those funds ought to be expended. 

Look, it’s a natural thing. As attorney general, I liked the great 

flexibility I had, but I remember the largest case we did, I think, 

was the famous tobacco case. California got the largest amount of 

money from that, but, as I recall, I was not able to direct those 

funds under the California constitution. They went into the general 

fund. I would’ve liked to have. I thought I had a superior idea as 

to where they should go. Unfortunately, the California constitution 

said otherwise. 

I think, similarly, the U.S. Constitution, as Senator Byrd explained in his statement that I have in my statement, it is the 

most representative and the most open of our branches. 

Mr. MARINO. Okay. Thank you. 

Professor Figley? 

Mr. FIGLEY. I think Congressman Lungren’s last point is exactly 

right. If there has been general harm, money can go into the general Treasury, and Congress can decide the best places to spend it, 

as opposed to having any government—any Department of Justice 

official make that determination. 
55 

Mr. MARINO. Thank you. 

Professor Uhlmann? 

Mr. UHLMANN. So Congress has already determined that criminal penalties go to the Crime Victims Fund, civil penalties go to 

the civil Judgment Fund. So the idea that additional moneys that 

might be paid as part of either plea agreements or civil settlements 

is somehow going to revert back to the Federal Treasury for Congress to then reappropriate is a complete misnomer. It would require changing how all criminal penalties are directed by Congress. 

It would require changing how all civil settlements are directed. 

But it also misses a broader point, which is Congress has also 

has said that restitution to victims takes priority over all penalties 

in the criminal system. And as I’ve already discussed and as we 

can certainly discuss at greater length, it is simply not always possible to identify individual victims to meet the requirements of Federal law. The environmental example is the easiest one, but the 

same concerns arise in other regulatory schemes. 

And so, to your question, Mr. Chairman, we would deprive prosecutors and civil enforcement attorneys of their ability to address 

the generalized harm that occurs in these cases. So we’d get half 

a loaf in every case. We’d get criminal penalties or civil fines. We’d 

get individualized restitution. We couldn’t address the harm to our 

communities. 

And there are hundreds, if not thousands, of these violations 

every year. Congress is not going to be able to legislate for each 

one of them. And so this is, I think, the best way—you know, clear 

rules about what is allowed and what isn’t allowed in these thirdparty payments is the best way to proceed, not by prohibiting 

them, as this legislation would do. 

Mr. MARINO. Okay. I’m going to take some liberties here, if my 

colleagues don’t mind. We don’t have a full panel here. 

You do understand that if a specific victim can be identified that 

prosecutors have the authority to address that issue and recoup 

funds for those specific individuals. But if a specific entity cannot 

be identified or if there is collateral damage, I still have an issue 

with an agency—and, thinking as a prosecutor, as we do, that discretion or that authority is very powerful and good in 99.9 percent 

of the cases. But Congress does appropriate. And I err on the side 

of the Constitution, the fact that, okay, those funds must go to the 

Treasury, but I don’t have a problem with discussing and expanding on the ability of Justice or EPA requesting from Congress additional funds because of X, Y, and Z. We still have to appropriate, 

and the appropriation process for the last 20 or 30 years is not 

what it was designed to be in the Constitution under all Administrations. 

So that’s my problem with that, Professor. And you look like you 

want to respond to something, so please go ahead. 

Mr. UHLMANN. Yeah, no, I mean, I think it’s a great question. 

And I appreciate the Chairman’s concern here. Two thoughts. 

One, you know, a great example of a case that’s sort of happening right now is Volkswagen. Everybody’s familiar with the 

Volkswagen debacle. Volkswagen had defeat devices on its—a lot of 

its cars that allowed them to evade the requirements in the United 

States under the Clean Air Act. 
56 

There are a lot of victims, and there are a lot of consumers who 

were defrauded. And I don’t see anything in the proposed legislation that would prevent those individual victims from being compensated by Volkswagen. 

Mr. MARINO. Please bear in mind, this is just exactly why we’re 

having this hearing. 

Mr. UHLMANN. Right. Right. Absolutely. 

Mr. MARINO. Okay. 

Mr. UHLMANN. But I think that even the skeletal, sort of 

trimmed-down version of the bill that we had before, that we’ve 

started with, preserves the restitution for those individual car owners. 

Mr. MARINO. Yeah. 

Mr. UHLMANN. But what about the rest of us? I mean, Volkswagen’s conduct—you know, some news reports have suggested 

that hundreds of people will die because of the nitrogen oxide that 

Volkswagen cars emitted into the environment. How do we address 

that harm? 

Mr. MARINO. I don’t dispute that with you. But I believe that’s 

Congress’ responsibility. 

Mr. UHLMANN. Well, but is Congress going to—so for each of 

these cases? Are we going to have the Volkswagen Harm Act? Are 

we going to have the Exxon Harm Act? The BP Harm Act? I mean, 

you see—— 

Mr. MARINO. No. We’re going to go through the appropriation 

process by which any department or agency requests money for its 

original budget. 

Mr. UHLMANN. Of course. And EPA—I’m not sure how well their 

budgets are faring in this Congress, but EPA does have—you know, 

makes a budget request every year to address air pollution. 

Mr. MARINO. Sure. 

Mr. UHLMANN. But my point is, you know, how do we address 

the air pollution caused by Volkswagen, or the harm to the Gulf 

of Mexico ecosystem caused by BP. The whole idea of these payments is they allow, not the taxpayer, but the company involved to 

pay for the harm that they did in cases where harm is not identifiable to individuals. 

Mr. MARINO. And this isn’t the time or place to discuss the extent of the damage. I mean, that’s for another hearing. But I have 

used way over my time. I—— 

Mr. LUNGREN. Mr. Chairman, could I just respond a little bit? 

Mr. MARINO. As long as my colleagues agree. 

Go ahead. 

Mr. LUNGREN. And the answer—I think we’ve given an answer 

to the question. The question is, how do we remediate that damage 

that was done? As trained lawyers, we prove it. 

It seems to me the agency or the Justice Department makes the 

allegation that this amount of extra pollution has been crated, that 

would seem to me to be an evidence of the damages to be paid or 

additional damages to be paid. Whoever is the appropriate executive branch agency comes to the Congress, makes the case that this 

additional impact on the environment has occurred, this amount of 

money has been extracted from the perpetrator, and we believe 
57 

that using this amount of money or a portion of it to respond to 

it is appropriate. And then Congress makes the decision. 

Mr. MARINO. Yeah. 

Mr. LUNGREN. The other thing is, as I understand, in the bill, 

you allow specifically remediation of environmental damage—— 

Mr. MARINO. Yes. 

Mr. LUNGREN [continuing]. But it has to be proven. It has to be 

proven. Let’s not forget that. We’re talking about proving it. 

And, again, if the impact is so diffuse but you can still get a sum 

of money for it, run it through the appropriation process, where 

Congress, if it does its job properly, ought to be able to respond in 

appropriate fashion. 

Mr. MARINO. All right. 

Professor, do you—— 

Mr. FIGLEY. Very briefly. 

The complexity of the problem—somebody has caused a general, 

diffuse difficulty for the American people—can’t be resolved by deciding that this particular university or environmental organization 

should receive money as opposed to this one. 

Mr. MARINO. Yeah. 

Mr. FIGLEY. If that decision is going to be made, it is much better 

that it be made through the appropriations process than by a Department of Justice official. 

Mr. MARINO. Good point. 

I now beg forgiveness from my colleagues and recognize the 

Ranking Member of the Subcommittee, my friend, Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

I can’t resist asking Professor Uhlmann to offer the response that 

I see he’s burning to make. 

Mr. UHLMANN. I have such a good poker face. 

No, I agree with Professor Figley. I mean, this notion of direct— 

you know, it’s a famous case now. It involves the current Governor 

of New Jersey. I won’t name him, but, you know, when he was U.S. 

attorney, funds were directed to his law school. And that shouldn’t 

happen. And I think everybody agrees that have shouldn’t happened. I don’t know, I even think the Governor of New Jersey 

might agree that was a mistake, in hindsight. 

But it’s not the case, as Professor Figley suggests, that environmental prosecutors, my former colleagues, are handing out money 

to their favorite environmental charities. The practice at the Justice Department, codified now—I mean, made clear in two separate 

policy documents—first, one that was issued over my signature in 

December of 2000 and then another that was issued in the Bush 

administration by Assistant Attorney General Ron Tenpas—require 

that the funds only go to organization that Congress has already 

identified as organizations that can receive this type of funding. 

So I think it’s important to sort of describe what’s really going 

on here and recognize that the funds that we’re talking about—the 

funds in the Gibson Guitar case that Congressman Lungren has 

talked about went to an organization so it could address the harm 

caused by illegal logging operations. Congress had designated that 

organization, established that organization, to receive this type of 

funding. 
58 

It’s not going to everybody’s favorite environmental groups; it is 

not going to law schools. But I agree with both of my colleagues 

on the panel that it shouldn’t be going to those organizations, and 

I’d have no objection to Congress saying that can’t happen. 

Mr. JOHNSON. Well, tell me now, if relief must be a direct, pointto-point remediation of harms, how do you directly remedy the 

damage of an oil spill wherein the damage—or whereby the damage is to all of the birds along the shore? So, in other words, a 

bunch of oily birds, how do you directly remedy the harm done to 

those birds? 

Yes? 

Mr. LUNGREN. I think you do what we’ve done in the past, which 

is require the companies responsible to pay for the remediation. 

Mr. JOHNSON. Well—— 

Mr. LUNGREN. It doesn’t stop them from hiring—— 

Mr. JOHNSON. How would—— 

Mr. LUNGREN. It doesn’t stop them from hiring organizations—— 

Mr. JOHNSON. How would you do that? 

Mr. LUNGREN [continuing]. Who know how to do that. 

Mr. JOHNSON. How would the company actually remediate the 

harm to all of the birds? 

Mr. LUNGREN. Well, as they’ve done in the past. They hire 

groups that actually go out and do it. I don’t see any problem with 

that. I will say this, though. 

Mr. JOHNSON. Well, isn’t that a donation? 

Mr. LUNGREN. There’s no problem with that, as long as it’s specifically to—no. If it—if you look at the language of the bill, that 

is not a donation. It is a service that is rendered as—— 

Mr. JOHNSON. Well, you would make—— 

Mr. LUNGREN [continuing]. A result of the remediation. So in 

that sense, that is not a donation, as I understand the terms of the 

bill as written. 

Mr. JOHNSON. But the order, pursuant to the litigation, would direct a—would be to an entity to actually remediate—— 

Mr. LUNGREN. Right. 

Mr. JOHNSON [continuing]. The harm. 

Mr. LUNGREN. That would be a service. As I understand the language of the bill, that would be allowed. That would not be considered a donation. That’s made an exception to the definition of donation. I do know this. 

Mr. JOHNSON. What’s the difference? 

Mr. LUNGREN. The difference is, that’s the way the law was written. 

Mr. JOHNSON. Well—— 

Mr. LUNGREN. Secondly, I would say this. I have not been able 

to see any improvement in the wastewater, anywhere that I have 

been, as a result of a million dollar donation to the U.S. Coast 

Guard Alumni Association. 

Mr. JOHNSON. Well, now, I mean, you take one particular example and try to make it the norm. And I would—I would suggest 

that that’s not the norm. Same way the Governor of New Jersey 

directing funding to his alma mater, it’s an anomaly, and we don’t 

want to throw the baby out with the bathwater here. 

What do you say to that, Professor Uhlmann? 
59 

Mr. UHLMANN. Well, that expression, I think, captures the whole 

problem here. I mean, there is no question that there is—there are 

circumstances where this authority could be abused, and we’ve 

come up with some isolated examples of where it might have been 

in the past. 

I mean, I don’t want to be on record saying that, you know, the 

payment to the Coast Guard, which I’m not familiar with all the 

details about, or even the Seton Hall donation was an abuse of authority, but they could be. And I think limits on the authority in 

that way could be helpful. I do think they are already provided by 

existing policy, so I’m not sure that there’s something to add here 

for Congress. 

But look, I think clear rules of the road, which is one of the suggestions that Congressman Lungren made, are always helpful. I 

think clarifying what is and is not acceptable about third-party 

payments could be helpful. But this misnomer that somehow thirdparty payments are a way that people are self-dealing, are pursuing partisan agendas, are engaging in conflict—you know, creating conflicts of interest, I mean, it’s not the Justice Department 

I served in. And I served there for 17 years in both Democratic and 

Republican administrations. And I think it’s unfair to describe the 

government in that way or suggest that that’s what’s happening in 

these cases. 

These are real harms that don’t have identifiable victims that 

the government is trying to address, as it is obligated to do so, to 

do justice in its cases. 

Mr. JOHNSON. Thank you, Professor. In your written testimony, 

you observe that the practical effect of H.R. 5063 may be to generate more criminal enforcement of environmental cases. 

Could the Justice Department have brought the Morrell case you 

cite in your written testimony as a civil case, and what other types 

of cases might also be brought in criminal instead of civil actions 

as a result of H.R. 5063? 

Mr. UHLMANN. Well, Morrell, very definitely, could have been either a criminal or civil case. I think the evidence that we were able 

to amass about statements like who’s going to jail this month, 

there was another—there was a document that actually said the 

detailed violations, and the cover memo said this—this document 

has been destroyed at the plant and should be destroyed by you 

after reading it. So my fellow former prosecutors will understand 

why we got pretty excited about that as a criminal case. 

But the reality, under the environmental laws and under most 

of our public health and safety laws, is that prosecutors enjoy enormous discretion about whether any particular violation is going to 

be criminal or civil. And so, you know, I’ve written about a lot and 

focused a lot about the need to exercise that discretion in an appropriate way to limit criminal enforcement to the most egregious violations. 

But look, in the close calls, and there are a lot of close calls that 

we ask the Justice Department to make and that we trust them 

to make properly, you know, if they feel like they can redress the 

harm to the communities if they bring a criminal case but can’t do 

so in a civil case, it’s going to tip the balance toward criminal en-
60 

forcement. At least in some cases it otherwise might be left for civil 

enforcement, and that’s the concern I was raising. 

Mr. JOHNSON. Thank you. 

And with that, I’ll yield back, Mr. Chairman. 

Mr. MARINO. You know, this—we are all attorneys up here. I 

don’t know if that’s a good thing or a bad thing, but this is just 

actually one of the most interesting discussions that I have had the 

privilege of chairing since I’ve been here. 

And the Chair now recognizes another prosecutor from the State 

of Texas, a former U.S. Attorney, Congressman Ratcliffe. 

Mr. RATCLIFFE. Thank you, Mr. Chairman. 

I thank the witnesses for being here today. 

You know, I’ve been grateful over the last several months to have 

the opportunity to participate in something called the ‘‘Article I 

Project.’’ It’s a network of House and Senate Members focused on 

reclaiming, as unnecessary as that may seem, reclaiming the Article I powers of Congress and limiting the ever-expanding executive 

branch. 

And I think this hearing, I agree with you, Mr. Chairman, very 

interesting, and it really underscores the critical need for Congress 

to reassert the separation of powers. In this case, it seems to me 

especially so in response to what appears to be really an outrageous overreach by the Administration and disregard for Congress’ constitutional power of the purse. 

This Department of Justice scheme of funneling money to activist 

groups, some of those groups where Congress has specifically denied funding, Federal funding, is especially troubling, as a former 

prosecutor and someone that’s worked closely with the Department 

of Justice. And, you know, equally troubling is the fact that the Department of Justice, not only have they been less than forthcoming, 

it seems, in response to this Committee’s investigation, but essentially have doubled down on a practice that would appear to ignore 

the Constitution and lacks transparency with regard to the appropriations process that allows the American people to hold their government accountable, and instead, here we see money that should 

go to the U.S. Treasury going to DOJ selected winners and losers. 

In fact, DOJ picking winners and losers from groups that stand to 

gain from these settlements, and in some cases, who have actually 

lobbied DOJ to receive them. 

So beyond the constitutional concern, I’m troubled by a lack of 

transparency and a host of ethical issues that this scheme would 

present. And the idea that a Department of Justice official can direct immense sums of money to a pet organization or political allies 

with zero accountability is something that I would think would 

trouble all of us, Republicans and Democrats. 

So let me start out, Congressman Lungren, great to see you 

again back here on the Hill. You talked about this grant phenomenon in your testimony at both the State and Federal level. I 

know you’ve seen it as the attorney general in California, these 

grants being these, to quote you, coerced payments to entities that 

are mandated by officials acting with the full power and majesty 

of the government. 

Let me ask you this. First of all, do you think that this scheme 

that the Department of Justice, my words, has doubled down on, 
61 

do you think it violates the Constitution, number one? And secondly, would you—depending on your answer, would you elaborate 

on why you think the allocation to Congress of the power to spend 

Federal funds is critical to the separation of powers that I talked 

about? 

Mr. LUNGREN. Well, first of all, thank you very much, a fellow 

Notre Dame Domer. I appreciate that. 

I have been concerned, over the years I was in Congress, at the 

failure of Congress to assert itself appropriately. And when you 

study the Constitution, the Constitutional Convention, and the arguments made in the Federalist Papers, it is very clear that they 

felt that the power to extract funds and to spend funds on the part 

of the government was one of the potentials for tyranny. And I’m 

not suggesting we’re involved in tyranny, but it is an essential bedrock principle that the Founding Fathers talked about. 

They made a conscious decision, I think, to make Congress Article I. The first thing they thought about when setting up the government was the most representative branch of the government. 

Then they also felt that it was important, between the Senate and 

the House, that the House be given primary responsibilities in 

these matters, even though I think we forfeit that right in some of 

the legislative legerdemain that takes place where we send a bill 

over to the other side, they take everything out except the title, 

and then they send it back so that the revenue bill didn’t start in 

the House, essentially. 

But they did that because they knew that the Members of the 

House had to go before the people more often than anybody else, 

and that, therefore, if the average citizen—if the citizenry felt that 

there was a violation of that trust in that most important area, 

they could respond. To the extent that gets placed in a gray area, 

and I think this is—look, if you’re talking about a couple of dollars 

here and there, all right. But Senator Everett Dirksen once said a 

billion dollars here, a billion dollars there, pretty soon you’re talking about real money. 

Now, as I understand it, we’re talking about a billion dollars in 

just the time that the Congress had the temerity to ask the Justice 

Department what they were doing. That doesn’t sound to me like 

an olive branch to the House of Representatives. 

And the last point I would make is this. I happen to applaud 

what Professor Uhlmann did at the Justice Department. I think 

you were moving in the right direction. But despite his best efforts, 

you still had, in 2006, that million dollars going to the Coast Guard 

Alumni Association on a matter of the environment. 

Madison said it best. He talked about if—if men were angels, we 

wouldn’t need government. But men are not angels, so we need 

government. But then he said: Once you decide those who are in 

the government—in the government, you have to figure out how to 

govern the govern. And the answer he gave, as I mention in my 

paper is, you pit ambition against ambition. 

In one sense you pit one branch of government against another. 

That’s what we do. And one of the ways you do that is you give 

primacy to the House of Representatives for spending matters. It 

is not neat. It is not pretty. It is not the most efficient way of doing 

things, but that is the genius of our Founding Fathers that they 
62 

thought, as Justice Scalia said many times: The greatest protection 

for our civil liberties and against their invasion was the construct 

of government that we set up. 

And I think that’s lost in today’s debate, and Congress has got 

to be one of those branches of government that understands their 

responsibility, understands their role, and understands the limits 

of all branches of government. 

I’m sorry it was a long-winded answer. It gave me a chance 

to—— 

Mr. RATCLIFFE. No, I enjoyed your answer. Thanks, Congressman. 

And my time has expired, but if the Chairman would beg my indulgence. I have one quick question I really want to ask Professor 

Figley because we were both at the Department of Justice. I’m not 

sure if we were there at the same time. 

But I’m curious about your experience with respect to the mandatory payments to nonvictim third-parties. More importantly, how 

has this practice evolved in recent years, and most particularly, in 

your opinion, what do you think is the driving force behind this? 

Mr. FIGLEY. I never had anything to do with it when I was at 

Justice. I mainly defended tort cases, big ones, but tort cases. 

My concern here is that we saw, as our mission in life, protecting 

the Judgment Fund and protecting the people’s money. Here, I 

think the practice gets away from that. 

Professor Uhlmann talked about the Gulf Oil spill and the money there. There’s a $2.4 billion grant to one particular environmental 

organization, and it may be a perfectly good one, but I think it 

would have been much better to have had all of the environmental 

organizations interested in receiving a $2.4 billion grant, apply for 

it and go through procedures where there would be transparency 

and clarity about where the money was going and why it was going 

to that particular entity. 

Mr. RATCLIFFE. I appreciate your response. 

And I appreciate the Chairman’s indulgence. With that, I yield 

back. 

Mr. MARINO. The Chair now recognizes the Ranking Member of 

the full Judiciary Committee, another attorney, Congressman Conyers. 

Mr. CONYERS. Thank you, Chairman Marino. 

I welcome all the witnesses, of course. 

Our former colleague witness here today argued that enforcement—agency enforcement decisions must be motivated by the 

public interest and not politically motivated self-interest. 

And so, Professor Uhlmann, what guidance, what laws currently 

exist to promote the public interest in settlement agreements, in 

your view? 

Mr. UHLMANN. Well, I absolutely agree with former Congressman Lungren that that is the role of law enforcement. And, of 

course, all the laws that are within the purview of this Committee 

are laws that are designed to promote the public interest, protect 

the public from the—from a whole host of potential harms. 

Congress already passed the Miscellaneous Receipts Act, which 

ensures that funds that are—have been directed by Congress can’t 

be redirected by agencies. Congress already passed the 
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Antideficiency Act, which ensures that these sort of third-party 

payments that we’re talking about can’t be used to augment agency 

budgets. The agencies can’t have a role in administering the funds. 

Congress already designated certain organizations to receive payments like those we’re talking about. In fact, like the payment in 

the Gulf Oil spill that Professor Figley is talking about, this notion 

that somehow all the environmental groups should have lined up 

and petitioned the Justice Department for funding, I mean, respectfully, you know, that would give me far more concern than 

what the Justice Department did. 

They made sure that the money went to an organization that 

Congress already established in the public interest. And I happen 

to share the concern about the size of that payment, but it went, 

as it should have, to an organization that Congress determined 

should receive these funds. And then, as I indicate in my testimony, there are a number of policy statements that the Justice Department and the various regulatory agencies have developed to do 

just what you’re talking about, Congressman Conyers. 

You know, I suppose those could be codified by Congress, but 

they do exist in each of the various—at the Justice Department in 

each of the various regulatory agencies. 

Mr. CONYERS. Did anyone want to add to this question? 

Mr. FIGLEY. If I might, Congressman. 

Mr. CONYERS. Yes, Mr. Figley. 

Mr. FIGLEY. I think that presents a false choice. We have $2.4 

billion. Is it for Justice to decide to give it to this organization or 

to set up a way for different organizations to apply to the Department of Justice for the $2.4 billion? Neither of those is the answer. 

The answer is, put the money back in the Treasury, let Congress 

decide how the money will be utilized, and if there is to be a grant 

program, it should be administered through the appropriations 

process. 

Mr. CONYERS. Uh-huh. Mr. Chairman Emeritus. 

Mr. LUNGREN. See, I’m bothered by the example of the Housing 

and Urban Development’s Housing Counseling Assistance Program. 

My last year here—last term here in Congress, we voted on some 

very tough budgets, as you know. We had to eliminate that, we 

thought, that 1 year, $88 million. The next year we came back, my 

very last year in the Congress, we came back with a budget that 

granted, I think it was 55 percent of that total, and then we maintained it at that level. That’s what we thought in terms of our 

budget priorities. And yet if you look at the Citibank settlement as 

well as provisions in the Bank of America settlement, $150 million 

worth of mandated donations went to those housing nonprofits, 

which essentially reversed the decision of Congress. 

Now, you might say, and we might agree, that Housing Counseling Assistance is an appropriate program, but it seems to me if 

Congress, looking at all the priorities out there, made the decision 

that it could only be funded at half of what it had been before, then 

that money should be—— 

Mr. CONYERS. Okay. 

Mr. LUNGREN [continuing]. That additional money ought to be 

determined by Congress, not by HUD. 
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Mr. CONYERS. All right. Let me close with this final question 

about Mr. Figley’s recommendation that H.R. 5063 apply to criminal settlement agreements. 

Professor Uhlmann, what would—affect would that have on 

criminal enforcement cases? 

Mr. UHLMANN. You know, if this type of language also applied 

in criminal cases, it would just shut down the Justice Department’s 

ability to address a lot of the harm that’s caused by criminal violations of our public health and safety laws. And it would give corporations a free pass for the harm they caused. 

Now, Congressman Lungren suggested, you know, go prove it in 

court. But so much of the kind of harm to communities, harm to 

society that we’re talking about is not possible to prove, certainly 

not beyond a reasonable doubt, and even—even by clear and convincing evidence, where it is not possible to monetize. And it’s 

those companies, not the American taxpayers, who should be addressing that harm. 

And so it’s particularly important to have this authority in criminal cases because if our criminal authorities are being exercised 

properly, those are the worst violations that cause the most harm. 

And the companies who engage in that misconduct should be held 

accountable. 

And I worry if the Committee were to accept Professor Figley’s 

recommendation, it would just make a potentially bad bill worse. 

Mr. CONYERS. I think you’re probably right. 

I know we could continue this discussion, but my time has expired, and I thank you all for this very important hearing. 

Mr. MARINO. I do have one more question I’d like to throw out 

to all three of you gentlemen, but I’m starting to get flashes back 

of law school when we talk about the proximate cause in Cardozo 

and Palsgraf, and the whole nine yards. I mean, when—that can 

go forever. 

But, Professor Uhlmann, there’s no question that I support the 

fact that Justice, the agency, can see that those that are directly 

injured receive the funds to compensate and to even go further 

than compensating. But let’s talk a second about the banking settlements, which trouble me. 

Mandatory donations that did not conform to EPA guidelines 

that you cite with respect to the amount of credit given for donations. There’s credit given. Lack of oversight. There’s lack of oversight in all this. That’s probably in addition to the issue concerning 

Congress controlling the purse strings. That’s the next thing that 

really bothers me, lack of oversight, where is it going and why. 

Augmenting agency funds by reinstating funding, Congress specifically cut. So what say you? 

Mr. UHLMANN. You know, I think the Chairman’s concerns are 

reasonable. I mean, I understand where you’re coming from. 

Mr. MARINO. Thank you. 

Mr. UHLMANN. And I think, you know, in the area where I work, 

which wasn’t banking, there are pretty clear rules of the road that 

are governing how the Justice Department and EPA exercise its 

authority. 

If that needs to be done across the government to ensure that 

other sectors have similar rules, then that should be done. Whether 
65 

the best way to do it is legislation or whether the best way to do 

it is policy statements, I’d, you know, defer to the Committee 

about, but—or the Subcommittee about. 

But I would say this. If the Subcommittee were to legislate—I 

mean, I think it’s far better to legislate through positive rules that 

say these are the things you’re allowed to do, and certainly then 

to add, and these are the things you’re not allowed to do. 

If there are things that we think are good—and I think there’s 

actually a lot that we would agree is good. I think we—we don’t 

want—in fact, I think your opening statement, or perhaps it was 

the full Committee’s Chairman’s opening statement, recognized 

that there can be generalized harm, and companies should be on 

the hook for that if they break the law. 

You know, we should be—you know, we shouldn’t lose sight of 

the fact that companies that break the law get a significant advantage, competitive advantage against other companies who follow 

the law. And so, you know, they’re properly punished when they 

break the law, and if they cause harm, they should compensate the 

communities that have been harmed for doing so. 

And so, you know, I—I mean, I certainly felt as we—this sort of 

all grew up when I was at Justice, and I did feel at times like we 

were kind of in an open—open field where there was the potential 

for the kinds of things that the Chairman’s described happening. 

And so I really wanted rules. And I even might have thought at 

some—at some point that maybe Congress should write those rules. 

But Congress wasn’t writing them, so wewrote them. 

And we tried to be—wetried to be principled, notwithstanding 

the fact that that one case happened on my watch. Although it was 

a case brought—I now know which case Congressman Lungren was 

talking about. It was brought by the U.S. attorney in Connecticut. 

Mr. LUNGREN. Oh. 

Mr. UHLMANN. My office was not involved. I think it was a deferred prosecution agreement. We didn’t do those. But, you know, 

the bottom line is there’s so much good here and so much—well, 

there’s so much bad that happens that we need to address, and I 

think it’s good to address that. We want the government to address 

that. 

We’re not taking money away from the taxpayers. We’re not taking away the money that this Congress—and every Congress has 

the Article I authority to appropriate. We are saying corporations 

should pay for the harm they cause. And we don’t want—and I 

would—I think it would be a shame if there was legislation that 

let companies off the hook and prevented the government from 

being able to address those harms. 

Mr. FIGLEY. Mr. Chairman. 

Mr. MARINO. Processor Figley, would you like to respond? You 

don’t have to, but if you’d like to. 

Mr. FIGLEY. Well, very briefly. Nobody’s saying let corporations 

off the hook. The question is, when you get money from them, who 

should decide where that money goes? And that’s something that 

I don’t think the Department of Justice should be in the business 

of doing. 

And I—I have the highest opinion of the Department of Justice 

and the attorneys that work there. It is a bulwark of inertia in the 
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very best direction. Throughout the Department, people do what 

they think is right. They don’t try to serve their own purposes. But 

it shouldn’t be the business of the Department of Justice to dole 

out money, particularly grants of billions of dollars. 

Mr. MARINO. Okay. 

Mr. LUNGREN. Mr. Chairman, I—— 

Mr. MARINO. Professor. 

Mr. LUNGREN. I have the greatest respect for Professor Uhlmann. 

I really do think he did very good things in the Department leading 

in the right direction. Two of his responses cause me pause, however. 

In the one case, he said if this bill were to pass, there would be 

a tendency, perhaps, for officials of the Justice Department to move 

cases from civil side to criminal side. But then in response now to 

if it applied to the criminal side, it would be, we couldn’t go forward because you have to prove guilt beyond a reasonable doubt. 

I think the dilemma lies in what do we believe about proving 

cases? As prosecutors, we all know—and in California, I was responsible for the ultimate cases, the death penalty cases. We all 

know, in our gut, people that were guilty that were never successfully prosecuted. Why? Because we couldn’t prove beyond a reasonable doubt. 

Mr. MARINO. Sure. 

Mr. LUNGREN. That’s the way the system works. 

And for some reason, to be hung up on the fact that, man, if you 

have to go to court, you’ve got to prove these cases and we’ve got 

to prove what the dimensions of the harm are bother me. That’s 

what we do. That’s part of the requirement in our system, and we 

don’t catch all the malefactors that way, and we don’t punish all 

the harm that has been done because the system is set up that to 

protect the innocent, we accept those things. 

So I would like us to have more proof regarding these things. 

And then with respect to the money, the only reason these monies 

are given is because of the power and the majesty of the government. I used to remind my prosecutors, you know, always keep in 

the back of your mind you could be wrong. Because if, in fact, you 

have someone who is guilty, you should bring the power and the 

majesty of the government against him, but if you haven’t, think 

how unfair that is to an individual. 

And so there’s a certain sense of humility that we have to maintain in all this. And I do believe, and I firmly believe this, with the 

people that work with me at the California Department of Justice 

and with those that I know at the U.S. Department of Justice, they 

are good people. They are trying to do the right thing, but sometimes even good people have to have guidelines that—of restraint, 

and the Constitution gives us that, and maybe we ought to look at 

the Constitution occasionally. 

Mr. MARINO. Well, gentlemen, this has been an incredible discussion. I have the utmost confidence and faith in the frontline prosecutors. It’s just if we learn to keep the politics, not pointing the 

finger at anybody, out of this, might just sleep better at night 

knowing that with the amount of prosecutors that we have, not 

only at Justice but at the State and local levels. And I certainly appreciate what you’ve contributed today. 
67 

Yielding now to the gentleman for further questions. 

Mr. JOHNSON. Thank you, Mr. Chairman. And I associate myself 

with the remarks that you are in the process of making about our 

dear friends here. 

But I would like to ask Professor Figley, since you served in the 

civil division of the Justice Department, have you had any experience showing that unlawful conduct was the direct and proximate 

cause of an injury, direct and proximate cause? I mean, that’s a 

standard that does not currently exist in civil enforcement actions. 

Is that correct? 

Mr. FIGLEY. I fought against that in a number of cases brought 

against the government. Occasionally, we would bring big suits, 

and I had million dollar settlements in a case where a corporate 

officer parked a car in high, dry grass in a national park and 

caused a huge forest fire, and another case where there was a government-owned irradiation facility where a capsule holding radioactivity cracked and it contaminated the whole facility, and it was 

worth millions of dollars. And there, we’d have to prove it up or 

show—— 

Mr. JOHNSON. Have to prove proximate cause. 

Mr. FIGLEY. Yes. Did the defendant’s act cause in fact what happened, and was it connected close enough in time and space—and 

you talk about Palsgraf—and what seems reasonable to people 

making hard political choices, that it’s close enough to establish liability? 

And in those two cases, we were able to convince the defense attorneys that we had the goods. Your car starts a forest fire because 

of the catalytic converter, there’s not much question. And there 

wasn’t much question with the cracked capsule. So we were able 

to prove our cases and accomplish a settlement. 

Mr. JOHNSON. With direct and proximate cause being a new 

standard that is proposed by this legislation, what—I mean, so 

proximate cause is not the same as direct proximate—direct proximate cause, is it? That’s kind of like a heightened standard. There 

is just absolutely no deviation between points, causation. 

Mr. FIGLEY. When we talk about causation and negligence, 

there’s two parts. First is cause in fact. 

Mr. JOHNSON. Right. 

Mr. FIGLEY. Did what you do, if you hadn’t done it, it wouldn’t 

have happened. So if you were speeding down the New Jersey 

Turnpike going 40 miles over the speed limit, and when you got to 

Maryland, you drove cautiously, and you hit a little old lady walking across the street, your action of speeding through New Jersey 

for 2 hours was a cause in fact of your hitting the little old lady, 

because she wouldn’t have been in the street if you’d gotten there 

later. 

Now, the question about liability then turns on, is there proximate cause? Is this close enough in time and space that the law 

will say, yes, there should be liability? Or is it too far removed? 

And most courts would say speeding in New Jersey 4 hours ago is 

too far removed to impose liability. But both—to establish liability, 

you have to prove both parts. And I don’t see a difference between 

direct cause and cause in fact, which is what I was talking about. 
68 

Mr. JOHNSON. Well, yeah, I mean, if that same person speeding 

hit—ran into a—ran up on a curb and hit a ladder upon which 

someone was washing windows, and then that person fell off the 

ladder and went through the windshield of a car, I guess—I mean, 

a direct and proximate cause—— 

Mr. FIGLEY. There’s clearly direct cause. Now, whether you’re 

going to have proximate cause and liability is the harder question. 

Mr. JOHNSON. I guess I’m trying to—I’m trying to come up with 

a scenario where you may not have a direct cause, but you do have 

causation from—that was proximately caused. You do have a damage that was proximately caused as opposed to directly caused. And 

I’m just curious as to why the language ‘‘direct and proximate 

cause’’ appears in this legislation, and I wonder what effect the requirement of having to prove direct and proximate cause would 

have on secondary remediation of unlawful conduct. 

Mr. FIGLEY. I would see the proximate cause part being a limitation so that if there’s a direct cause, there also has to be a proximate cause. But the direct cause is the easy one. It wouldn’t have 

happened but for this thing going on, there would not be a direct 

cause. 

Mr. JOHNSON. It’s definitely a heightened requirement of proof. 

Is that correct, Professor Uhlmann? 

Mr. UHLMANN. Of course, I teach criminal law and not tort law, 

but the—I mean, I think Professor Figley is right that there are 

two separate causation concepts that govern both criminal law and 

tort law. I mean, causation is an issue in the criminal law as well, 

and so there has to be actual cause in fact. There has to be proximate cause. 

This term ‘‘direct’’ does come out of—I’m not sure where it comes 

from. So, you know, we’re not—the Chair said we’re not in markup. 

If we were, I would suggest that a better term would be ‘‘actual’’ 

rather than ‘‘direct,’’ which is, I think, the correct term from tort 

law. 

Although, frankly, and I think this is what Professor Figley was 

suggesting, something—proximate cause by itself would be sufficient because you can’t—something can’t be the proximate cause 

without also being a cause in fact. Something could be a cause in 

fact without being the proximate cause. So we tend to focus on 

proximate cause, although it does need to be linked in the chain 

of causation to be proximate—to proximately cause something. 

Mr. FIGLEY. In some States, the elements of negligence are listed 

as duty, breach of duty, proximate cause, and damages. In other 

States, they’re listed as duty, breach of duty, cause in fact, proximate cause, and damages. So as with so many things, it varies 

with State law. 

Mr. JOHNSON. Well, thank you. And I will conclude by saying 

that, Professor Lungren, you’ve missed your calling. I think you 

should be on the academic side also. But thank you all. 

Mr. MARINO. Thank you. I think, in closing, I can shed some 

light on direct and proximate cause that’s referred—that’s specifically delineated in the Crime Victims’ Act, Title 18, USC section 

3771(c) and—in general, the term ‘‘crime victim’’ means a person 

directly and proximately harmed as a result of the commission of 

a Federal offense or an offense in the District of Columbia. 
69 

So I mean, we make a lot of—I tell you, what you folks did for 

me today, tonight I’m going to have nightmares about law school 

exams, okay, with proximately and related and direct and how far 

do we go from, as my friend’s example of the speeding car hits a 

ladder, the guy falls off the ladder through the windshield, the guy 

in the car hits somebody else, destroys this. 

Mr. UHLMANN. Kind of like a law school hypothetical, isn’t it? 

Mr. MARINO. I don’t even want to even think about it. 

Mr. LUNDGREN. That was in Mad, Mad, Mad World. 

Mr. MARINO. Yeah. Thank you so very much. This concludes today’s hearing. 

I can’t tell you how much that we have enjoyed this discussion. 

Please do not hesitate, if you care to, to send us recommendations, 

additions, deletions. This is how good law is made. We congressmen, as soon as we get elected, we think we’re taller, smarter, and 

better looking, but this is how good law is made when we reach out 

to everyone who has a dog in the hunt and the expertise of people 

like you so we don’t have to go back. And we can’t anticipate everything, but I think my colleague will agree with me, having discussions like this just is the right thing to do. 

So without objection, all Members will have 5 legislative days to 

submit additional written questions for the witnesses or additional 

materials for the record. This hearing is now adjourned, and thank 

you very much. 

[Whereupon, at 11:40 a.m., the Subcommittee was adjourned.] 

(71) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD
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Material submitted by the Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress from the State of Georgia, and Ranking Member, 

Subcommittee on Regulatory Reform, Commercial and Antitrust Law 
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Prepared Statement of Joel A. Mintz, Professor of Law, 

Nova Southeastern University College of Law 

My name is Joel A. Mintz. I am a Professor of Law at Nova Southeastern University College of Law, where I have taught Environmental Law and related subjects 

since 1982. Prior to that, for six years, I was an attorney and chief attorney with 

the U.S. Environmental Protection Agency (EPA) in Chicago and Washington, D.C. 

I have written or co-written three books and numerous law review articles regarding 

environmental enforcement, which is the major focus of my academic research. 

I am submitting this statement in respectful opposition to the bill titled ‘‘Stop Settlement Slush Funds Act of 2016.’’ I believe that this bill, if enacted will severely 

undercut an immensely valuable environmental and public health protection program, EPA’s Supplemental Environmental Program (SEP). It will also interfere unduly with the discretion presently afforded to (and needed by) federal agencies and 

prosecutors. 

A Supplemental Environmental Program (SEP) is defined in EPA’s March, 2015 

policy on the subject as ‘‘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.’’ According to the Agency, ‘‘SEPs are projects or activities 

that go beyond what could be legally required in order for the defendant to return 

to compliance, and secure environmental benefits in addition to those achieved by 

compliance with applicable laws.’’ Their primary purpose is to encourage and obtain 

environmental and public health benefits that may not otherwise have occurred in 

the settlement of an enforcement action. They advance worthy and important goals, 

including (among others) protecting children’s health, preventing pollution, securing 

the development of innovative pollution control technologies, and ensuring environmental justice. 

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. Instead they are limited and 

prudent exercises of enforcement discretion that benefit the Agency, regulated parties, and local communities alike. 

To be acceptable to EPA, all proponents of SEPs projects must establish a ‘‘substantial nexus,’’ i.e. a relationship between the alleged violation and the project proposed. For that reason, SEPs 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. Moreover, to ensure that SEP funds are not used improperly, EPA has established—and enforced—strict limitations on how those funds may 

be spent. 

Thus, for example, SEP monies may not be used in support of general public educational or public environmental awareness projects; as contributions to environmental research at a college or university; as cash donations to community groups, 

environmental organizations, state local or federal governmental entities or any 

third parties; to support beneficial projects unrelated to environmental protection; 

and in conjunction with projects to be undertaken with federal financial assistance. 

Similarly, SEPs may not provide additional resources to support any specific activities performed by EPA employees or contractors, or for any activity for which EPA 

receives a specific appropriation. SEPs may also not provide funds to perform work 

done on any federal property, or for any project performed by a federal agency other 

than EPA. 

To the best of my knowledge, these limitations are taken seriously by EPA when 

they assess the acceptability of SEP proposals. They establish appropriate, realistic, 

and effective prohibitions of illicit or corrupt implementation of SEPs in individual 

case settlements. 

At the same time, EPA’s judicious approach to SEPs prevents the possibility that 

violators will be permitted to benefit too greatly from the performance of a SEP. 

Thus, the Agency’s SEPs Policy does not alter the obligation of an environmental 

violator to remedy its violations expeditiously. Nor does it excuse violators from 

their obligation to pay penalties that recoup the economic benefit that a violator has 

gained from noncompliance with the law, along with ‘‘gravity-based’’ penalties reflecting the environmental harm caused by the violation. The money from both types 

of financial penalties must be remitted directly to the United States Treasury. 

Notably, SEPs can create ‘‘win-win’’ scenarios for all parties involved, including 

regulators, regulated companies, and local communities. 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 re-
78 

pair 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. 

Regrettably, the proposed Stop Settlement Sludge Funds Act appears likely to 

prohibit many of the important benefits now provided by EPA’s SEPs program. The 

bill’s definition of the term ‘‘donation’’ specifically excludes ‘‘any payment by a party 

to provide restitution for or otherwise remedy the actual harm (including to the environment), directly and proximately caused by the alleged conduct of the party that 

is the basis for the settlement agreement.’’ This exception is too narrowly drawn to 

allow for numerous beneficial uses of SEP monies. Thus, for example, the bill would 

appear to ban the following entirely legitimate, appropriate uses of SEP funds that 

are currently permitted by EPA: 

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; 

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. 

Each of these types of programs provide important protections of human health 

and the environment in communities that have been harmed by environmental violations. However, because they are unlikely to be construed as redressing ‘‘actual 

(environmental) harm, directly and proximately caused’’ by the alleged violator, the 

bill before this committee would prohibit every one of them. 

My other objection to the proposed Stop Settlement Slush Funds Act is more 

broad. In my view, this bill inappropriately reduces the discretion that federal agencies and prosecutors need to do their jobs in a fair and effective fashion. In its decision in the landmark case of Heckler v. Chaney, 470 U.S. 821 (1985), the U.S. Supreme Court took note of the importance of leaving decisions to prosecute or not 

prosecute in the hands of administrative agency personnel and prosecutors. The 

Court noted that ‘‘an agency decision not to enforce involves a complicated balancing 

of a number of factors that are peculiarly within its expertise. . . .The agency is 

far better equipped than the courts to deal with the many variables involved in the 

proper ordering of its priorities.’’ Id. at 831–832. 

This same rationale clearly applies to the terms of the settlement agreements that 

a federal agency or prosecutor chooses to enter into. Such settlements involve numerous complicated technical issues as well as important judgments respecting the 

use of limited prosecutorial resources. Their terms are best left in the hands of expert agencies and prosecutors, rather than dictated by Congress or the federal 

courts. 

In sum, the bill before you will harm the interests of Americans who have been 

the victims of unlawful pollution by arbitrarily and unreasonably limiting many of 

the benefits those people may now receive through SEP settlement agreements. This 

bill will discourage settlement of environmental enforcement cases and place greater 

burdens on regulated firms and regulators alike. It will inhibit the advancement of 

technology and the restoration of damaged natural resources. It will also unwisely 

intrude on the discretion of federal agencies and prosecutors. For these reasons, 

with respect, I recommend that you vote against this bill. 

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Response to Questions for the Record from David M. Uhlmann, Esq., Director, Environmental Law and Policy Program, The University of Michigan 

Law School 
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