[House Report 118-339]
[From the U.S. Government Publishing Office]


118th Congress }                                                {  Report
                        HOUSE OF REPRESENTATIVES
 2d Session    }                                                {118-339

======================================================================



 
                STOP SETTLEMENT SLUSH FUNDS ACT OF 2023

                                _______
                                

January 9, 2024.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

            Mr. Jordan, from the Committee on the Judiciary,
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 788]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 788) to limit donations made pursuant to settlement 
agreements to which the United States is a party, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     3
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     8
New Budget Authority and Tax Expenditures........................     8
Congressional Budget Office Cost Estimate........................     8
Committee Estimate of Budgetary Effects..........................     9
Duplication of Federal Programs..................................     9
Performance Goals and Objectives.................................    10
Advisory on Earmarks.............................................    10
Federal Mandates Statement.......................................    10
Advisory Committee Statement.....................................    10
Applicability to Legislative Branch..............................    10
Section-by-Section Analysis......................................    10
Dissenting Views.................................................    11

    The amendment is as follows:
  Strike all that follows after the enacting clause and insert 
the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Stop Settlement Slush Funds Act of 
2023''.

SEC. 2. LIMITATION ON DONATIONS MADE PURSUANT TO SETTLEMENT AGREEMENTS 
                    TO WHICH THE UNITED STATES IS A PARTY.

  (a) Limitation on Required Donations.--An official or agent of the 
Government may not enter into or enforce any settlement agreement on 
behalf of the United States directing or providing for a payment to any 
person or entity other than the United States, other than a payment 
that provides restitution for or otherwise directly remedies actual 
harm (including to the environment) directly and proximately caused by 
the party making the payment, or constitutes payment for services 
rendered in connection with the case.
  (b) Penalty.--Any official or agent of the Government who violates 
subsection (a) shall be subject to the same penalties that would apply 
in the case of a violation of section 3302 of title 31, United States 
Code.
  (c) Effective Date.--Subsections (a) and (b) apply only in the case 
of a settlement agreement entered on or after the date of enactment of 
this Act.
  (d) Definition.--The term ``settlement agreement'' means a settlement 
agreement resolving a civil action or potential civil action.
  (e) Reports on Settlement Agreements.--
          (1) In general.--Not later than at the end of the first 
        fiscal year that begins after the date of enactment of this 
        Act, and annually thereafter, the head of each Federal agency 
        shall submit electronically to the Congressional Budget Office 
        a report on each settlement agreement entered into by that 
        agency during that fiscal year that directs or provides for a 
        payment to a person or entity other than the United States that 
        is providing restitution for or otherwise directly remedies 
        actual harm (including to the environment) directly and 
        proximately caused by the party making the payment, or that 
        constitutes payment for services rendered in connection with 
        the case, which shall include the parties to each settlement 
        agreement, the source of the settlement funds, and where and 
        how such funds were and will be distributed.
          (2) Prohibition on additional funding.--No additional funds 
        are authorized to be appropriated to carry out this subsection.
          (3) Sunset.--This subsection shall cease to be effective on 
        the date that is 7 years after the date of enactment of this 
        Act.
  (f) Annual Audit Requirement.--
          (1) In general.--Not later than at the end of the first 
        fiscal year that begins after the date of enactment of this 
        Act, and annually thereafter, the Inspector General of each 
        Federal agency shall submit a report on any settlement 
        agreement entered into in violation of this section by that 
        agency to--
                  (A) the Committee on the Judiciary, the Committee on 
                the Budget, and the Committee on Appropriations of the 
                Senate; and
                  (B) the Committee on the Judiciary, the Committee on 
                the Budget, and the Committee on Appropriations of the 
                House of Representatives.
          (2) Prohibition on additional funding.--No additional funds 
        are authorized to be appropriated to carry out this subsection.

                          Purpose and Summary

    H.R. 788, the Stop Settlement Slush Funds Act of 2023, 
introduced by Rep. Lance Gooden (R-TX), eliminates the practice 
of slush fund settlements by prohibiting the federal government 
from entering into any settlement agreement that provides a 
payment to a person or entity other than the United States, 
with an exception for payments that are restitution, directly 
remedy actual harm, or constitute a payment for services 
rendered. The bill also improves transparency by requiring 
agencies to file annual reports with the Congressional Budget 
Office that describe how settlement funds are handled, and by 
requiring inspectors general to report to Congress on 
violations of the Act.

                Background and Need for the Legislation

    Popularized during the Obama-Biden Administration, the use 
of settlement slush funds divert funds that otherwise should be 
directed to injured parties or deposited in the U.S. Treasury 
to politically-favored third-party entities or programs, while 
avoiding Congressional oversight.\1\ In these cases, as part of 
a settlement, defendants are required to make payments to 
favored or politically-friendly third parties.\2\ Because these 
payments are from a defendant to a third party, and the money 
does not flow through the Treasury, it can be challenging to 
track these settlements and the funds involved.\3\ Many of 
these settlements also involve non-disclosure requirements, and 
therefore, other than public statements that may inform the 
defendant's shareholders of the settlement amount, there is 
little transparency into which entities receive the funds under 
the settlement.\4\ Such settlements effectively put some of 
Congress's power over the purse into the hands of agencies 
because the executive branch, not Congress, is determining the 
terms of these settlements.
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    \1\See Letter from Michael Buschbacher to Hon. Merrick B. Garland, 
Att'y Gen., U.S. Dep't of Just. (Jul. 12, 2022), at 17-18; see also, 
e.g., John Allison, et al., Improper Third-Party Payments in U.S. 
Government Litigation Settlements, Regulatory Transparency Project of 
the Federalist Society 1 (February 22, 2021) [hereinafter Improper 
Third-Party Payments].
    \2\See, e.g., Improper Third-Party Payments at 1.
    \3\Id. At 6-7.
    \4\Id.
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    One example of how settlement slush funds work relates to 
President Obama's unsuccessful request in 2011 that Congress 
fund electric vehicle innovation.\5\ After Congress did not act 
upon his request, the Environmental Protection Agency (EPA) 
reached a partial settlement with Volkswagen in a lawsuit 
related to pollution claims.\6\ The settlement required 
Volkswagen to invest $2.7 billion in ``projects across the 
country'' to reduce emissions, with billions of dollars 
directed toward ``improving infrastructure, access and 
education to support and advance zero emissions vehicles.''\7\ 
This settlement circumvented Congressional spending and 
policymaking authority, and was an unconstitutional 
governmental overreach.\8\ The Obama-Biden Administration also 
used settlements to direct funds to political allies such as 
the National Fish and Wildlife Foundation, the National 
Community Reinvestment Coalition, the National Urban League, 
and the National Council of La Raza in order to advance an 
agenda without Congressional oversight.\9\
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    \5\Glenn Kessler, Obama's 2011 State of the Union Address: An 
Accounting, Wash. Post (Jan. 23, 2012).
    \6\Press Release, U.S. Dep't of Just., Volkswagen to Spend Up to 
$14.7 Billion to Settle Allegations of Cheating Admissions Tests and 
Deceiving Customers on 2.0 Liter Diesel Vehicles (June 28, 2016).
    \7\Id.
    \8\William Yeatman, Justice Department Revives Slush Fund 
Settlements, Cato at Liberty (May 6, 2022).
    \9\See, e.g., Ian Tuttle, Good Riddance to the Obama DOJ's 
Scandalous Settlement `Slush Fund' Policy, Nat'l. Rev. (Sept 12, 2017).
---------------------------------------------------------------------------
    Unlike with federal outlays to third parties, where 
Congress has authorized an agency to exercise discretion in 
directing funds, there are few requirements as to how 
settlement funds must be spent and accounted for.\10\ For 
example, government contracting laws require clear disclosure 
and accounting of how third parties spend funds allocated 
through normal government channels.\11\ In contrast, settlement 
slush funds are not subject to such laws, and thus these 
settlements can be used by the executive branch to apply 
pressure on defendants and direct funds without the same 
Congressional oversight that would apply in other contexts.\12\ 
Accordingly, the details of where third-party payments go are 
often unknown. For example, one study found that only 1.4% of 
all settlement slush fund payments could be tracked--the 
remaining 98.6% of the relevant $668 million was directed in 
ways that were undisclosed.\13\
---------------------------------------------------------------------------
    \10\Id.
    \11\See, e.g., 2 C.F.R. Part 200, et seq.
    \12\Improper Third-Party Payments, supra. Note 1, at 9-10.
    \13\Id. At 15.
---------------------------------------------------------------------------
    The Trump Administration ended the practice of using 
settlement slush funds.\14\ In 2017, then-Attorney General Jeff 
Sessions issued a memorandum prohibiting Department of Justice 
(DOJ) staff from entering into these types of agreements except 
in limited circumstances.\15\ The Trump Administration further 
limited the practice in 2020.\16\ Specifically, the Trump DOJ 
expressly prohibited its attorneys from negotiating settlements 
in environmental cases that directed funding to third parties, 
and instead directed settlement funds to be placed in the U.S. 
Treasury.\17\
---------------------------------------------------------------------------
    \14\See Memorandum from the Hon. Jeffrey Sessions on the 
Prohibition on Settlement Payments to Third Parties, U.S. Dep't of 
Just. (June 5, 2017) [hereinafter Sessions Memo]; see also Memorandum 
from Jeffrey Clark, Assistant Attorney General, on Supplemental 
Environmental Projects (``SEPs'') in Settlements with Private 
Defendants, U.S. Dep't of Just. (March 12, 2020) [hereinafter Clark 
Memo].
    \15\Sessions Memo, supra. Note 14.
    \16\See generally Clark Memo, supra. Note 14.
    \17\See id.
---------------------------------------------------------------------------
    However, in 2022, Attorney General Merrick Garland 
rescinded the Trump Administration policies that banned third-
party settlement slush fund payments.\18\ In support of the 
rescission, Attorney General Garland noted that third-party 
payments have certain remedial purposes and should be 
permissible if they have a ``strong connection to the 
underlying violation or violations of federal law at issue in 
the enforcement action.''\19\ However, as one commentator 
suggested, the concept of a ``remedial'' third-party payment is 
misguided: the courts already provide a legitimate and unbiased 
avenue for remedial damages.\20\ Left unabated and subject to 
administrative discretion, this practice can lead to corruption 
in government.\21\
---------------------------------------------------------------------------
    \18\Memorandum from the Hon. Merrick Garland on Guidelines and 
Limitations for Settlement Agreements Involving Payments to Non-
Governmental Third Parties, U.S. Dep't of Just. (May 5, 2022).
    \19\Id. At 2.
    \20\See generally Letter from Michael Buschbacher, supra note 1, at 
3-4.
    \21\See id. at 17-18.
---------------------------------------------------------------------------
    On June 6, 2023, Mr. John Shu, an attorney and legal 
commentator, testified on the issue of settlement slush funds 
at a hearing before the Subcommittee on the Constitution and 
Limited Government. Mr. Shu testified that this tactic has been 
used by the executive branch across party lines, and he argued 
that reform should therefore receive bipartisan support.\22\
---------------------------------------------------------------------------
    \22\See Government Litigation and the Need for Reform: Hearing 
Before the Subcomm. On the Const. and Limited Gov't of the H. Comm. On 
the Judiciary, 118th Cong. (2023) (Testimony of John Shu).
---------------------------------------------------------------------------

                                Hearings

    For the purposes of clause 3(c)(6)(A) of House rule XIII, 
the following hearing was used to develop H.R. 788: 
``Government Litigation and the Need for Reform'' a hearing 
held on June 6, 2023, before the Subcommittee on the 
Constitution and Limited Government of the Committee on the 
Judiciary. The Subcommittee heard testimony from the following 
witnesses:
           Ms. Kirby West, Attorney, Institute for 
        Justice
           Mr. Andrew Grossman, Partner, Baker 
        Hostetler
           Mr. John Shu, Attorney and Legal Commentator
           Mr. Todd Phillips, Principal, Phillips 
        Policy Consulting, LLC
    The hearing addressed how different aspects of government 
litigation, including settlement slush funds, require reform.

                        Committee Consideration

    On June 14, 2023, the Committee met in open session and 
ordered the bill, H.R. 788, favorably reported with an 
amendment in the nature of a substitute, by a roll call vote of 
15 to 10, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of House rule XIII, the 
following roll call votes occurred during the Committee's 
consideration of H.R. 788:
    1. Vote on Amendment #1 to H.R. 788 ANS offered by Mr. 
Nadler--failed 8 ayes to 11 nays.
    2. Vote on favorably reporting H.R. 788, as amended--passed 
15 ayes to 10 nays.


                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of House rule XIII, the 
Committee advises that the findings and recommendations of the 
Committee, based on oversight activities under clause 2(b)(1) 
of rule X of the Rules of the House of Representatives, are 
incorporated in the descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to filing of the report 
and is included in the report. Such a cost estimate is included 
in this report.

               Congressional Budget Office Cost Estimate

    With respect to the requirement of clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives and section 
402 of the Congressional Budget Act of 1974, the Committee has 
received the enclosed cost estimate for H.R. 788 from the 
Director of the Congressional Budget Office:




    H.R. 788 would prohibit government agencies from entering 
or enforcing any civil settlement agreement that requires the 
other party to the settlement (such as a corporation) to make a 
donation to a third party. That prohibition would not include 
payments to provide restitution or other remedies associated 
with the harm caused by the responsible party. In recent 
settlements with federal agencies, large corporations have 
sometimes been required to donate funds to nonprofit 
institutions as a part of their restitution in lieu of paying 
those amounts to the government in the form of a penalty. The 
prohibition in H.R. 788 would sunset seven years after 
enactment.
    Based on conversations with officials from the Department 
of Justice, CBO expects that, by precluding any such donations 
in civil settlements, enactment of H.R. 788 would likely reduce 
the number of civil settlements reached in the future and 
result in more litigation by federal agencies. Such settlements 
are typically recorded as revenues to the government. While 
most revenues are deposited in the General Fund of the 
Treasury, some are deposited in specific funds, such as the 
Assets Forfeiture Fund, from which they can be spent without 
appropriations action.
    Accordingly, CBO expects that enacting H.R. 788 would 
affect both revenues and direct spending. However, CBO has no 
basis to estimate the direction or magnitude of those effects 
because we cannot predict the number or content of future 
settlements that would be precluded by the legislation, 
decisions made by federal agencies (including about whether and 
how to prosecute individual cases), or the outcome of future 
litigation. CBO expects that, under the bill, more cases would 
go to trial instead of being settled out of court, but we 
cannot determine whether the penalties awarded from a trial 
would be larger or smaller, on average, than the amounts that 
would be agreed to under the type of settlements the bill would 
preclude.
    The bill also would require federal agencies to submit an 
annual report to the Congress, as well as to the Congressional 
Budget Office, if certain settlement agreements were entered 
into during that year by the agency in violation of the 
prohibitions in H.R. 788. Based on the cost of similar 
activities, CBO estimates that preparing those reports would 
cost less than $500,000 annually; such spending would be 
subject to the availability of appropriated funds.
    In addition, enacting the bill could affect direct spending 
by some agencies that are allowed to use fees, receipts from 
the sale of goods, and other collections to cover operating 
costs. CBO estimates that any net changes in direct spending by 
those agencies would be negligible because most of them can 
adjust amounts collected to reflect changes in operating costs.
    The CBO staff contact for this estimate is Jon Sperl. The 
estimate was reviewed by H. Samuel Papenfuss, Deputy Director 
of Budget Analysis.
                                         Phillip L. Swagel,
                             Director, Congressional Budget Office.

                Committee Estimate of Budgetary Effects

    With respect to the requirements of clause 3(d)(1) of rule 
XIII of the Rules of the House of Representatives, the 
Committee adopts as its own the cost estimate prepared by the 
Director of the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of House rule XIII, no provision 
of H.R. 788 establishes or reauthorizes a program of the 
federal government known to be duplicative of another federal 
program.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
House rule XIII, H.R. 788 would eliminate the practice of slush 
fund settlements by prohibiting the federal government from 
entering into any settlement agreement that provides a payment 
to a person or entity other than the United States, with 
certain exceptions.

                          Advisory on Earmarks

    In accordance with clause 9 of House rule XXI, H.R. 788 
does not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits as defined in clauses 
9(d), 9(e), or 9(f) of House rule XXI.

                       Federal Mandates Statement

    Pursuant to section 423 of the Unfunded Mandates Reform 
Act, the Committee has determined that the bill does not 
contain federal mandates on the private sector. The Committee 
has determined that the bill does not impose a federal 
intergovernmental mandate on state, local, or tribal 
governments.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Pub. L. 104-
1).

                      Section-by-Section Analysis


Section 1. Short title

    This section sets forth the short title of the bill as the 
``Stop Settlement Slush Funds Act of 2023.''

Section 2. Limitation on donations made pursuant to settlement 
        agreements to which the United States is a party

    This section includes the following reforms:
            Subsection (a), Limitation on required donations
     Prohibits officials or agents of the United States 
from entering into or enforcing settlement agreements that 
direct payment to any person or entity other than the United 
States, except for payments that directly remedy actual harm, 
or constitute payment for services rendered in the case.
            Subsection (b), Penalty
     Applies the same penalties for violations of this 
Act that apply to a violation 31 U.S.C. Sec. 3302.
            Subsection (c), Effective date
     Specifies that (a) and (b) apply only to 
settlement agreements entered on or after the date of 
enactment.
            Subsection (d), Definition
     The term ``settlement agreement'' means a 
settlement agreement resolving a civil action or potential 
civil action.
            Subsection (e), Reports on settlement agreements
     Requires the head of each Federal agency to submit 
an annual report to the Congressional Budget Office detailing 
certain settlement agreements entered into by the agency; 
provides that no additional funds are authorized to carry out 
the subsection; and sunsets the subsection seven years after 
the date of enactment.
            Subsection (f), Annual audit requirement
     Requires the Inspector General of each Federal 
agency to submit an annual report to the House and Senate 
Judiciary, Budget, and Appropriations committees detailing any 
settlement agreement that violates this section; provides that 
no additional funds are authorized to carry out the subsection.

                            Dissenting Views

    H.R. 788, the ``Stop Settlement Slush Funds Act of 2023'' 
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 law and agency practice, the 
legislation prohibits settlement agreements that authorize 
payments to parties not ``directly and proximately'' harmed by 
the unlawful conduct of the settling defendant. This would 
undermine the ability of federal agencies to provide civil 
relief to victims of systemic misconduct and would prevent such 
agencies from tailoring remedies to address generalized 
societal injuries related to public health and safety, the 
environment, and financial fraud, among areas.
    For these reasons and others discussed below, I strongly 
oppose H.R. 788 and respectfully dissent from the Committee's 
views on this legislation.\1\
---------------------------------------------------------------------------
    \1\I incorporate by reference into my views the extensive 
dissenting views to the Committee report for H.R. 5063 from the 114th 
Congress, a bill that is substantially identical to H.R. 788. See H.R. 
Rep. No. 114-694 at 19-43 (2016) (dissenting views of Democratic 
Members of the House Committee on the Judiciary to the Committee report 
for H.R. 5063 from the 114th Congress).
---------------------------------------------------------------------------

                       DESCRIPTION AND BACKGROUND

    H.R. 788, the ``Stop Settlement Slush Funds Act of 2023,'' 
prohibits an ``officer or agent of the Government'' from 
entering or enforcing a settlement agreement on behalf of the 
United States that requires a donation to a third party who is 
not ``directly and proximately'' harmed by the unlawful conduct 
of the settling defendant. A violation of this legislation 
would constitute a violation of the Miscellaneous Receipts Act, 
which prohibits the augmentation of agency appropriations 
through enforcement policy.\1\ The bill's proponents claim that 
it is necessary to stop the practice of the Department of 
Justice (DOJ) and other civil enforcement agencies of entering 
settlement agreements that direct funds to non government 
organizations, which, these proponents claim, circumvents 
Congress's appropriations power under article I, section 9, 
clause 7 of the U.S. Constitution.\3\
    Although proponents of this legislation argue that 
settlement payments to third parties are effectively ``slush 
funds'' paid to ``activist groups,''\2\ there is no evidence to 
substantiate such concerns. For example, for several years 
beginning in 2014, Republicans conducted an extensive 
investigation into settlement agreements that the DOJ entered 
with major banks, including Bank of America and Citigroup, 
concerning their mortgage lending practices. The Bank of 
America and Citigroup settlements required donations to third-
party charitable organizations, including legal aid 
organizations, community development financial institutions, 
and housing counseling groups.\3\ The Republicans' 
investigation of these settlements ultimately failed to 
establish any credible facts showing that these settlements 
included so-called ``slush funds'' otherwise subject to 
appropriations, despite voluminous document production by these 
federal agencies and private parties. The bill's 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),\4\ and which the Republicans themselves admit is 
lawful.\5\
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    \2\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); 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''].
    \3\H.R. Rep. No. 114-694, at 23-24 (2016).
    \4\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).
    \5\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.'').
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    Not surprisingly, the DOJ, in its strenuous opposition to a 
substantively identical version of the legislation considered 
in the 114th 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.\6\ Several leading environmental and banking law 
experts similarly opposed that legislation because it would 
undermine the restitution of generalized harm in various 
cases.\7\ 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.''\8\
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    \6\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).
    \7\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.
    \8\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).
---------------------------------------------------------------------------
    Despite the complete lack of evidence for the settlement 
practices alleged by Republicans, in 2017, during the Trump 
Administration, then-Attorney General Jeff Sessions issued a 
memorandum prohibiting settlement payments to third parties, 
with three exceptions like those proposed in H.R. 788, and 
ordering the Justice Manual to be revised accordingly.\9\ 
Notably the memo makes no assertion that the settlements that 
included such payments violated federal law or the U.S. 
Constitution.\10\
---------------------------------------------------------------------------
    \9\See Memorandum from Jeff Sessions, U.S. Att'y General, Dep't of 
Justice, Prohibition on Settlement Payments to Third Parties (Jun. 5, 
2017).
    \10\Id.
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    On May 5, 2022, Attorney General Merrick Garland issued a 
memo revising the current Justice Manual provisions, observing 
that ``it has been the consistent view of the Office of Legal 
Counsel, including in 2020 when the Justice Department's 
current regulation was promulgated [at the direction of the 
2017 Sessions Memo], that settlements involving payments to 
non-governmental third parties, if properly structured, do not 
violate the Miscellaneous Receipts Act.''\11\ Nonetheless, 
Attorney General Garland's memorandum instructed that some 
limitations on settlement agreements should remain, stating 
that the ``current policy is more restrictive and less tailored 
than necessary to address concerns that these agreements could 
be used to inappropriately fund projects unrelated to the harm 
involved in the matter.''\12\ The limitations and guidelines 
outlined in the 2022 Garland Memo include:
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    \11\See Memorandum from Merrick Garland, U.S. Att'y General, Dep't 
of Justice, Guidelines and Limitations For Settlement Agreements 
Involving Payments to Non-Governmental Third Parties (May 5, 2022).
    \12\Id.
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           Any such settlement agreement shall define 
        with particularity the nature and scope of the specific 
        project or projects that the defendant has agreed to 
        fund.
           All such projects must have a strong 
        connection to the underlying violation or violations of 
        federal law at issue in the enforcement action.
           The Justice Department and its client 
        agencies shall not propose the selection of any 
        particular third party to receive payments to implement 
        any project carried out under any such settlement nor 
        propose a specific entity to be the beneficiary of any 
        projects carried out (but may specify the type of 
        entity and reject any implementer or beneficiary 
        proposed by the defendant so long as disapproval is 
        based upon objective criteria for assessing 
        qualifications and fitness outlined in the settlement 
        agreement).
           Prohibiting such settlements to require 
        payments to non-governmental third parties solely for 
        general public education or awareness projects; solely 
        in the form of contributions to generalized research; 
        or in the form of unrestricted cash donations.
    The Subcommittee on the Constitution and Limited Government 
held a hearing on June 6, 2023, entitled ``Government 
Litigation and the Need for Reform.'' At the hearing, 
Democratic witness Todd Phillips testified that H.R. 788 
``would place arbitrary limits on how the federal agencies may 
enter into settlement agreements that arise from enforcement 
actions brought against companies that have violated federal 
laws'' and that ``[i]ts cumulative effect would be to deter 
agencies from the efficient resolution of civil complaints 
through settlement agreements.''\13\
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    \13\Government Litigation and the Need for Reform: Hearing before 
the Subcomm. on the Constitution and Limited Government of the H. Comm. 
on the Judiciary, 118th Cong. 4 (2023) (statement of Todd Phillips, 
Principal, Phillips Policy Consulting).
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    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--have opposed this legislation in the past.\14\
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    \14\Letter from Public Citizen to H. Comm. on the Judiciary (Feb. 
1, 2017); Letter from Marc H. Morial, President, the National Urban 
League, to Chairman Goodlatte & Ranking Member Conyers, H. Comm. of the 
Judiciary (Feb. 1, 2017); Letter from Americans for Financial Reform, 
et al. (Sept. 7, 2016)
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                         CONCERNS WITH H.R. 788

I. H.R. 788 Is a Dangerous Solution to a Non-Existent Problem

    H.R. 788 is yet another Republican solution in search of a 
problem that is rife with unintended consequences. Longstanding 
appropriations law and agency policy--as the GAO and CRS 
recognized--prevent civil enforcement agencies from directing 
funds to politically- favored groups or circumventing 
Congress's appropriations role. The DOJ has broad enforcement 
discretion when settling litigation, including substantial 
flexibility in crafting settlement agreements within its 
statutory enforcement authority.\15\ Donations under settlement 
agreements are a lawful exercise of the DOJ's enforcement 
discretion. GAO has issued several opinions clarifying that 
settlement donations are not ``for the Government'' within the 
meaning of the MRA, which prohibits augmentation of agency 
appropriations through enforcement policy.\16\ Rather, 
according to GAO, an agency's enforcement discretion includes 
the use of settlement donations as long as the remedies have a 
nexus to the correction of an underlying violation and the 
agency's prosecutorial objectives. There is absolutely no 
evidence that any settlement included so-called slush funds, 
despite voluminous document production by these federal 
agencies and private parties.
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    \15\H.R. Rep. 114-694, at 27-28 (2016).
    \16\Id. at 28.
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    The cumulative effect of H.R. 788's provisions would be to 
deter agencies from the efficient resolution of civil 
complaints through settlement agreements. By forcing agencies 
into needless litigation, the bill would waste agency time and 
resources as well as taxpayer dollars and delay the timely 
enforcement of the law and the provision of full relief for 
victims. In the context of a veto threat, the Obama 
Administration stated that a substantively identical version of 
the bill considered in the 114th Congress was ``unnecessary and 
would harm the public interest.''
    As with other anti-regulatory bills, a broad coalition of 
public-interest organizations, including Alliance for Justice, 
Americans for Financial Reform, EarthJustice, Sierra Club, and 
Public Citizen.\17\ In their letter opposing substantially the 
same bill as H.R. 788 the House passed on largely partisan 
lines during the 115th Congress, the coalition wrote:
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    \17\Letter from Alliance for Justice et al., to Members of the 
United States House of Representatives (Oct. 23, 2017).

          This bill would be a gift to lawbreakers at the 
        expense of families and communities suffering from 
        injuries that cannot be addressed by direct restitution 
        because the bill would prevent federal law enforcement 
        agencies from negotiating forms of relief that would 
        address injuries to the public that may be either non-
        quantifiable or indeterminate. These forms of relief 
        are crucial when harm is difficult to monetize, such as 
        damage to the environment, the collateral consequences 
        to communities resulting from predatory lending by 
        financial institutions, or unknown health outcomes to 
        individuals resulting from chemical exposures in the 
        workplace.
          Under current law, the legitimacy and utility of 
        federal enforcement settlements that include payments 
        to third parties is clear, as long as such payments 
        bear a nexus to the prosecutorial objectives of the 
        agency. This bill would supplant the wisdom of federal 
        law enforcement official to craft appropriate remedies.
          [This legislation] is unnecessary because the 
        practice of providing relief to the public through 
        payments to non-profits and other community 
        organizations was discontinued by the current 
        Department of Justice. Thus, the bill is just another 
        example of Congressional overreach into executive 
        branch decision-making. Not only does it disregard the 
        needs of future Administrations, but the bill is 
        sloppily crafted, failing to provide even a basic 
        definition of the ``donations'' or payments in 
        question.\18\
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    \18\Id.

    As these organizations noted, this legislation is 
completely unnecessary. Worse yet, if enacted, it threatens to 
inflict harm on society by hamstringing agencies' ability to 
enforce public health and safety protections.

II. H.R. 788 Eliminates Critical Public Interest Protections

    H.R. 788 applies to all civil enforcement settlements, 
thereby potentially affecting the enforcement of a broad range 
of civil rights, environmental, consumer protection, and 
servicemember relief laws. In 2016, DOJ stated in its strenuous 
opposition to a substantively identical version of the bill 
that it 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. Civil enforcement functions as 
a means of providing general compensation to society, 
particularly where a party's unlawful conduct involves diffuse 
or systemic harms, or injures an unidentifiable victim, the 
public health, or the environment.
    Because H.R. 788 undermines the government's ability to 
engage in this critical enforcement function, I offered an 
amendment that would exempt from the legislation settlements 
related to the enforcement of the Clean Air Act and the 
regulation of hazardous air pollutants, which include 
greenhouse gases. The Committee, however, rejected the 
amendment by a party-line vote of 8 to 11.

III. Ambiguous Drafting Will Create Needless Litigation and Impose 
        Draconian Penalties on Any Federal Official, Including Federal 
        Judges

    As ordered reported by the Committee, H.R. 788 is 
inherently ambiguous and will invite legal challenges to 
proposed settlements, deter agencies from pursuing settlements, 
and ultimately force courts to define key areas of the bill's 
provisions. For example, the bill does not define what 
constitutes a ``payment.'' As Professor David Uhlmann of the 
University of Michigan Law School explained in testimony before 
the Subcommittee on Regulatory Reform, Commercial, and 
Antitrust Law, ``courts interpreting the legislation could 
conclude that it precludes third-party payments as part of 
civil settlement agreements, other than restitution, even in 
cases of generalized harm to the environment or 
consumers.''\19\ Moreover, the legislation fails to define 
``official or agent of the Government,'' meaning that even a 
Federal judge could hesitate to enforce clearly valid 
settlements in actions involving the government to avoid the 
bill's prohibition. As a result of the bill's wide-ranging 
punitive provisions, the bill would have a chilling effect on 
the efficient resolution of civil cases through settlement 
agreements.
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    \19\H.R. 5063 Hearing (statement of David Uhlmann, Professor, 
University of Michigan Law School, at 4).
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                               CONCLUSION

    Similar to the multitude of anti-regulatory bills that our 
Committee has considered during this and prior Republican-
controlled Congresses, H.R. 788 is a solution in search of a 
problem that will result in unintended consequences detrimental 
to the public welfare. It has been well over a decade since 
this legislation was first introduced, yet Republicans have 
still produced no credible evidence substantiating the 
underlying premise of this bill, namely, that settlement 
payments are an unconstitutional subversion of congressional 
spending authority or that agencies have included unlawful 
terms in settlement agreements.
    Contrary to this tired argument, longstanding 
appropriations law and agency policy clearly contemplate these 
concerns and prevent civil enforcement agencies from directing 
funds to politically favored groups or circumventing Congress 
to augment their own appropriations. Nevertheless, Republicans 
continue to advance this legislation, which would establish 
sweeping changes to the enforcement of Federal statutes and 
severely undermine the ability of agencies to respond to 
unlawful conduct through the provision of general compensation 
for indirect harm. Further, H.R. 788's ambiguously drafted 
provisions and draconian penalties will generate needless 
litigation and dissuade the timely resolution of civil 
complaints through settlement.
    Accordingly, I strongly oppose H.R. 788 and urge my 
colleagues to join me in opposition.
                                            Jerrold Nadler,
                                                    Ranking Member.