Justice Department giving away the public’s money to third-party interests

For the past decade, the U.S. Justice Department has engaged in the dubious practice of giving away the public’s money when it settles a case, by sometimes conditioning a settlement on a company’s agreement to donate money to a third party of the government’s (or the defendant’s) choosing.

For example, the Justice Department settled cases last year with Bank of America and Citigroup over unlawful mortgage lending practices. The settlements required the banks to pay money to outside organizations — such as legal aid societies — from a government-approved list. In another instance, the Gibson Guitar Corp. had to contribute to the National Fish and Wildlife Foundation to end a criminal investigation.

That practice is of questionable legality and clearly is bad public policy. Government attorneys are obligated to represent the interests of the public, not those of selected groups. Moreover, when federal agencies collect money, that money should be spent as Congress directs that it be spent, not according to the whim or the agencies.

The U.S. legal system rests on the principle that every lawyer owes a duty of loyalty to a client and cannot engage in self-dealing. For example, if John Doe’s attorney settles a case for Doe, the attorney cannot tell the opposing counsel to write a check for 95 percent of the settlement to Doe and to give the rest to someone else.

The attorney general occupies a similar position for the public — the attorney for the federal government, which means the responsibility of representing the public in court.

No law authorizes the attorney general to act like Bill Gates and dispense money to private organizations, but that is what sometimes happens when the federal government settles a case. That money is not the attorney general’s to give away. It belongs to the public and should be paid in full to the U.S. Treasury.

What is worse is that these giveaways violate federal law. Federal statutes, such as the Miscellaneous Receipts Act, require that all money received by the Justice Department be paid into the Treasury. It then becomes Congress‘ duty, under the Constitution’s appropriations clause, to decide how to spend it.

Those laws are not hypertechnical accounting requirements. They reflect a basic allocation of federal decision-making authority regarding the proper expenditure of the public’s money. The Justice Department’s third-party contribution requirements in settlement agreements enable the executive branch to perform an end run around Congress‘ paramount role in the appropriations process.

Justice’s practice also denies the public the opportunity to hold representatives and senators accountable for their spending choices. Executive branch officials cannot spend money without Congress‘ approval, which forces every member of Congress to vote for annual appropriations bills. That practice informs every voter what each member does with the public’s money, knowledge that voters can use every two or six years to decide whether to “throw the bums out.”

Third-party contribution requirements are also rife with opportunities for political cronyism. There are scores of organizations that benefit the public, but this practice permits Justice to disburse funds to particular favored groups that benefit the political party in power, clearly an unseemly and illegitimate practice. At a minimum, the practice creates an obvious appearance of impropriety.

The public’s money belongs to the public, not to whatever recipients an attorney general may decide to favor, and Congress is responsible for saying how it can be spent. Congress does not give the president a lump-sum allowance to spend as he sees fit. Instead, in the annual appropriations bills Congress specifies in detail exactly who can receive appropriated funds, how much money each one may be paid and for what purposes that money can be used. Congress should reclaim that responsibility by ending this Justice Department practice.

Congress has signaled that it is aware of this practice. The public would be well-served if Congress puts an end to it.

 - Paul J. Larkin Jr. is a senior research fellow in The Heritage Foundation’s Edwin Meese III Center for Legal and Judicial Studies.

About the Author

Paul Larkin Senior Legal Research Fellow
Edwin Meese III Center for Legal and Judicial Studies

Originally appeared in The Washington Times