[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.
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