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

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Week ending October 27, 2017

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

Brief

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

“This bill prohibits government officials from entering into or enforcing a settlement agreement on behalf of the United States (resolving a civil action, a plea agreement, a deferred prosecution agreement, or a non-prosecution agreement) that provides for a payment or a loan to any person or entity other than the United States. The bill provides exceptions to allow payments or loans that: (1) remedy actual harm (including to the environment) caused by the party making the payment or loan, or (2) constitute a payment for services rendered in connection with the case or a payment that a court may order for restitution to victims in certain criminal cases or other persons in plea agreements.” – crs

    “… In recent settlements with the United States, large corporations have been required to donate funds to charitable institutions as a part of their restitution; such donations typically constitute a very small fraction of overall settlement amounts.’ – cbo

Government officials or agents who violate this prohibition may be removed from office or required to forfeit to the government any money they hold for such purposes to which they may otherwise be entitled. Federal agencies must report annually for seven years to the Congressional Budget Office about the parties, funding sources, and distribution of funds for their settlement agreements permitted by the exceptions in this bill.

 

(Dissenting Views)

(Full text of H.R. 732 congress.gov)

Sponsor:  Rep. Goodlatte, Bob [R-VA-6] (Introduced 01/30/2017)

Status: Passed House /

VOTES and FLOOR ACTION

HOUSE

On Passage: On passage Passed by recorded vote: 238 – 183 (Roll no. 580).

House Amendments:

An amendment, offered by Mr. Goodlatte, numbered 1 printed in Part B of House Report 115-363 to prohibit Cy Pres distributions in cases where money is simply left over and the settlement contains no specific provision on its disposition. Amendment also clarifies that payments made must not only be remedial but must actually go to the victims who suffered the injury. On agreeing to the Goodlatte amendment; Agreed to by voice vote.

An amendment, offered by Mr. Cohen, numbered 2 printed in Part B of House Report 115-363 to exempt settlement agreements based on race, religion, national origin, or any other protected category. On agreeing to the Cohen amendment; Failed by recorded vote: 187 – 233 (Roll no. 575).

An amendment, offered by Mr. Johnson (GA), numbered 3 printed in Part B of House Report 115-363 to exempt a settlement agreement that directs funds to remediate the indirect harms caused by the manipulation of emission standards on automobiles. On agreeing to the Johnson (GA) amendment; Failed by recorded vote: 183 – 235, 1 Present (Roll no. 576).

An amendment, offered by Ms. Jackson Lee, numbered 4 printed in Part B of House Report 115-363 to exempt settlement agreements that pertain to providing restitution for a State. On agreeing to the Jackson Lee amendment; Failed by recorded vote: 185 – 234 (Roll no. 577)

An amendment, offered by Mr. Cicilline, numbered 5 printed in Part B of House Report 115-363 to exempt settlements in relation to the predatory or fraudulent conduct involving residential mortgage-backed securities. On agreeing to the Cicilline amendment; Failed by recorded vote: 189 – 231 (Roll no. 578).

An amendment, offered by Mr. Conyers, numbered 6 printed in Part B of House Report 115-363 to exempt settlements that direct funds to remedy the indirect harms of unlawful conduct resulting in an increase in the amount of lead in public drinking water. On agreeing to the Conyers amendment; Failed by recorded vote: 191 – 229 (Roll no. 579).

Motion to recommit:

Text of the motion:

SENATE

On Passage:

Procedural Actions:

Senate Amendments:

COST AND IMPACT

Cost to the taxpayers: CBO cannot determine whether enacting the legislation would lead to an increase or a decrease in the number of such settlements or to a change in the federal receipts and forfeitures stemming from future settlements.

Pay-as-you-go requirements:  Pay-as-you-go procedures apply because enacting H.R. 732 could affect direct spending and revenues; however, CBO cannot determine the magnitude or timing of those effects.

Regulatory and Other Impact: H.R. 732 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would not affect the budgets of state, local, or tribal governments.

Dynamic Scoring:   CBO also cannot determine the long-term effects of the bill on direct spending or on-budget deficits but such effects are very unlikely to increase net direct spending or on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2028.

Tax Complexity:  Not applicable to this bill.

Earmark Certification:  Data not available

Duplication of programs: Data not available

Direct Rule-Making:  Data not available

Advisory Committee Statement: Data not available

Budget Authority: Data not available

Constitutional Authority:   Assumed.

 

More Bill Information:

Dissenting Views

 

H.R. 732, the “Stop Settlement Slush Funds Act of 2017,” is a deeply flawed proposal that would undermine the ability of civil enforcement agencies to hold corporate wrongdoers accountable for unlawful conduct. Based on unsubstantiated allegations that ignore established law and agency practice, the bill would prohibit any official or agent from consummating or enforcing a settlement agreement that includes payments to parties who are not “directly and proximately” harmed by the unlawful conduct of the settling party. In doing so, H.R. 732 would prevent agencies from ensuring wrongdoers make complete restitution for violations of the law and from tailoring remedies to address systemic or diffuse harms to unidentifiable victims, the public health, or the environment. By forcing agencies into needless litigation, the bill would also delay the timely enforcement of the law and would waste agency time and resources.

Although proponents of this legislation argue that settlement payments to third parties are effectively “slush funds” paid to “activist groups,”\1\ there is no evidence to substantiate such concerns. For example, for several years the Majority has conducted an extensive investigation into certain settlement agreements structured by the Department of Justice.

To date, however, no credible facts have been discovered that would suggest that these settlements included so-called slush funds otherwise subject to appropriations. Proponents also ignore well-established law and agency practice governing the propriety of settlement payments to third parties, as recognized by the non-partisan and independent Government Accountability Office (GAO) and Congressional Research Service (CRS),\2\ and which the Majority itself admits is lawful.\3\

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\1\Memorandum from U.S. Rep. Bob Goodlatte (R-VA) for Markup of

H.R. 5063, the “Stop Settlement Slush Funds Act of 2016,” to Members

of the H. Comm. on the Judiciary 9 (May 9, 2016) (on file with

Democratic staff of the H. Comm. on the Judiciary); Consumers Short

Changed? Oversight of the Justice Department’s Mortgage Lending

Settlements: Hearing Before the Subcomm. on Regulatory Reform,

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

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

Comm. on the Judiciary) [hereinafter “Judiciary Oversight Hearing”].

\2\See, e.g., David Carpenter, Cong. Research Serv., Legal

Principles Associated with monetary Relief Provided as Part of

Financial-Related Legal Settlements & Enforcement Actions 1 (2015);

David Carpenter & Edward Lieu, Cong. Research Serv., Monetary Relief to

Third Parties as Part of Federal Legal Settlements 3 (2016); U.S. Gov’t

Accountability Office, B-210210, Matter of: Commodity Futures Trading

Comm’n–Donations Under Settlement Agreements (1983) (donations must be

reasonably related to prosecutorial authority under statutory goals);

U.S. Gov’t Accountability Office, B-238419, Matter of: Nuclear

Regulatory Commission’s Auth. to Mitigate Civil Penalties (1990)

(settlements may not impose punishments unrelated to prosecutorial

objectives).

\3\Memorandum from U.S. Rep. Bob Goodlatte (R-VA) for Markup of

H.R. 5063, the “Stop Settlement Slush Funds Act of 2016,” to Members

of the H. Comm. on the Judiciary 1 (May 9, 2016) (“Since the

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

is echoed in a 2006 DOJ Office of Legal Counsel memo.”) (on file with

Democratic staff of the H. Comm. on the Judiciary).

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Not surprisingly, the Justice Department, in its strenuous opposition to a substantively identical version of the legislation considered last Congress, stated that the bill would “unwisely constrain the government’s settlement authority and preclude many permissible settlements that would advance the public interest,” while interfering with the Department’s ability to address, remedy, and deter systemic harm caused by unlawful conduct.\4\ Several leading environmental and banking law experts similarly opposed that legislation because it would undermine the restitution of generalized harm in various cases.\5\ In the context of a veto threat of that bill, the Obama Administration stated that the “legislation seeks to address a problem that does not exist” and “would interfere with the just and fair settlement of cases.”\6\ Not surprisingly, a coalition of public interest organizations–including the National Urban League, Public Citizen, and Americans for Financial Reform, and The Leadership Conference on Civil and Human Rights–opposes H.R. 732.\7\

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\4\Comments from the Dep’t of Justice on H.R. 5063, the “Stop

Settlement Slush Funds Act of 2016,” to Members of the H. Comm. on the

Judiciary 1, 3 (May 17, 2016) (on file with Democratic staff of the H.

Comm. on the Judiciary).

\5\Stop Settlement Slush Funds Act of 2016: Hearing on H.R. 5063

Before the Subcomm. on Regulatory Reform, Commercial and Antitrust Law

of the H. Comm. on the Judiciary, 114th Cong. 3 (2016) [hereinafter

“H.R. 5063 Hearing”] (written statement of Joel Mintz, Professor,

Nova Southeastern University College of Law) (on file with Democratic

staff of the H. Comm. on the Judiciary); Id. (statement of David

Uhlmann, Director, Environmental Law and Policy Program, University of

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

Section of the Justice Department), https://judiciary.house.gov/wp

content/uploads/2016/04/Uhlmann-Testimony.pdf; Settling the Question:

Did Bank Settlement Agreements Subvert Congressional Appropriations

Powers?: Hearing Before the Subcomm. on Oversight and Investigations of

the H. Comm. on Financial Services, 114th Cong. (2016) [hereinafter

“Financial Services Oversight Hearing”] (statement of David K. Min,

Assistant Professor of Law, University of California Irvine School of

Law), http://financialservices.house.gov/uploadedfiles/hhrg-114-ba09-

wstate-dmin-20160519.pdf.

\6\Exec. Office of the President, Office of Mgm’t & Budget,

Statement of Administration Policy: H.R. 5063, Stop Settlement Slush

Funds Act of 2016 (2016).

\7\Letter from Public Citizen to H. Comm. on the Judiciary (Feb. 1,

2017) (on file with Democratic staff of the H. Comm. on the Judiciary);

Letter from Marc H. Morial, President, the National Urban League, to

Chairman Goodlatte & Ranking Member Conyers, H. Comm. of the Judiciary

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

Judiciary); Letter from Americans for Financial Reform, et al. (Sept.

7, 2016) (on file with Democratic staff of the H. Comm. on the

Judiciary).

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

 

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