[Congressional Record Volume 161, Number 62 (Tuesday, April 28, 2015)]
[Senate]
[Pages S2476-S2477]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. WARREN (for herself and Mr. Lankford):
  S. 1109. A bill to require adequate information regarding the tax 
treatment of payments under settlement agreements entered into by 
Federal agencies, and for other purposes; to the Committee on Homeland 
Security and Governmental Affairs.
  Ms. WARREN. Mr. President, I rise in support of the Truth in 
Settlements Act. This bipartisan legislation, which I introduced 
earlier today with my colleague from Oklahoma Senator Lankford, the 
Presiding Officer, will help the public hold Federal agencies 
accountable for settlements they make with corporate wrongdoers.
  When companies break the law, Federal enforcement agencies are 
responsible for holding them accountable. In nearly every instance, 
agencies choose to resolve cases through settlements rather than a 
public trial. They defend this practice by arguing that settlements are 
in the best interest of the American people. That sounds good, but 
their actions paint a very different picture.
  If agencies were truly confident that these settlements were good 
deals for the public, they would be willing to publicly disclose all of 
the key details of those agreements. Instead, time after time, agencies 
do the opposite, hiding critical details about their settlements in the 
fine print--or worse, hiding them entirely from public view.
  Consider that copies of these agreements or even basic facts about 
them are not easily accessible online. Many agencies regularly deem 
agreements confidential without any public explanation of why the 
public cannot see what has been done in their name. When agencies do 
make public statements about these agreements, they often trumpet large 
dollar amounts of money recovered for taxpayers while failing to 
disclose that this sticker price isn't what the companies will actually 
pay, since the number that is listed includes credits for engaging in 
routine activities and doesn't reflect massive tax deductions that many 
of these companies get.
  Add all of these tricks, and you will end with a predictable result. 
Too often the American people learn only what the agencies want them to 
learn about these agreements. That is not good enough.
  These hidden details can make a huge difference. Below the surface, 
settlements that seem tough and fair don't always look so impressive.
  For example, 2 years ago, Federal regulators entered into a 
settlement with 10 mortgage servicers accused of illegal foreclosure 
practices. The sticker price on the settlement was $8.5 billion. Now, 
that is a big number. But $5.2 billion was in the form of credits, or 
what the agencies described in their press release as ``loan 
modifications and forgiveness of deficiency judgments.''
  That vague public statement left out a key detail: Servicers could 
rack up those credits by forgiving mere fractions of large, unpaid 
loans. For example, a servicer that wrote down $15,000 of a $500,000 
unpaid loan balance would get a credit for $500,000--not the $15,000 
that was actually written down. That

[[Page S2477]]

undisclosed method of calculating credits could end up cutting the 
overall value of the $8.5 billion settlement by billions and billions 
of dollars.
  Failure to disclose possible tax deductions is another way agencies 
can hide the ball. Two years ago, a Federal court found that a company 
that allegedly defrauded Medicare and other Federal health programs--
for years--was entitled to a $50 million tax deduction for government 
settlements that it had made. That deduction came on top of earlier tax 
deductions the company had already taken in their settlement payment.
  The end result? A $385 million settlement that was touted at the time 
as the largest civil recovery to date in a health care fraud case was, 
in fact, $100 million smaller once taxpayers had picked up part of the 
settlement.
  At least in these two cases, the text of the settlements was public, 
allowing the American people the chance to dig into the fine print and 
uncover these unflattering details. But for settlements that are kept 
confidential, the public is kept entirely in this the dark.
  Recently, Wells Fargo agreed to pay the Federal Housing Finance 
Agency $335 million for allegedly fraudulent sales of mortgage-backed 
securities to Fannie Mae and Freddie Mac. That is about 6 percent of 
what JPMorgan Chase paid in a public settlement with FHFA to address 
very similar claims. Now, in what ways did the actions of Wells Fargo 
differ from those of JPMorgan? We will never know, because while the 
JPMorgan settlement is public, the much smaller Wells Fargo settlement 
is held confidential.
  The American people deserve better. These enforcement agencies don't 
work for the companies they investigate; they work for us. Agencies 
should not be able to cut bad deals and then hide the embarrassing 
details. The public deserves transparency.
  The Truth in Settlements Act requires that transparency. It requires 
agencies making public statements about their settlements to include 
explanations of how those settlements are categorized for tax purposes 
and what specific conduct will generate credits that apply toward the 
sticker price. The bill also requires agencies to post text and basic 
information about their settlements online. And while the legislation 
does not prohibit agencies from deeming settlements confidential, it 
requires agencies to disclose additional information about how 
frequently they are invoking confidentiality and their reasons for 
doing so.
  If we expect agencies to hold companies accountable for breaking the 
law, then we should be able to hold agencies accountable for enforcing 
the law. We cannot do that if we are being held in the dark. The Truth 
in Settlements Act shines a light on these agency decisions and gives 
the American people a chance to hold agencies accountable for enforcing 
our laws.
  I introduced this bill in the last Congress with Senator Lankford's 
predecessor, Senator Coburn. The bill advanced through the Senate's 
Homeland Security and Governmental Affairs Committee by voice vote but 
was blocked on the Senate floor.
  I hope that in this Congress we can finally make this commonsense 
legislation law.
                                 ______