On Jan. 11, the House of Representatives voted to pass H.R. 788, Stop Settlement Slush Funds Act of 2023. H.R. 788 prohibits the federal executive branch from creating enforcement “slush funds,” which involves diverting funds from settlement agreements with the government to third party groups instead of going to the public purse. Government enforcement actions exist to punish and deter misconduct and compensate victims and taxpayers, not to fund pet projects and organizations favored by unelected officials.
These types of slush funds are not a new idea. For years, the U.S. Department of Justice (DOJ) allowed its attorneys to redirect funds from settlements with businesses to advocacy groups and organizations with no connection to the investigations, effectively bypassing Congressional oversight of the Department’s spending. From 2015-2017, DOJ officials distributed nearly $1 billion in settlement money to politically favored groups without congressional approval or oversight. The DOJ stopped this practice in 2017. And ILR submitted comments in 2022 opposing the current Administration’s plans—since finalized—to bring these sorts of settlements back.
Supporters of these types of funding arrangements argue that providing redress to those harmed by misconduct can be challenging. Therefore, they contend that directing settlement money to third party groups is the only option. This is incorrect. The appropriate solution is to follow the law by depositing the funds in the U.S. Treasury for Congress to appropriate according to its spending priorities or to pass the savings to the taxpayer as it chooses. A basic principle of our government is that Congress decides federal spending. Allowing unelected federal officials to support special interest groups and fund their pet projects with settlement slush funds raises a variety of constitutional issues.
We applaud the House for passing H.R. 788 and putting a stop to unelected officials requiring defendants to fund third party groups of the officials’ choice as a condition for settling an enforcement matter with the government.
