Gowdy signs on to bill targeting federal settlement ‘slush funds’

Rep. Trey Gowdy  

U.S. Rep. Trey Gowdy (R-S.C.) added his name to 32 other co-sponsors of a bill aimed at stopping the Department of Justice (DOJ) from “funneling” settlement money to third parties.

“The Obama administration is not allowed to circumvent Congress to reward groups, simply because they share an agenda with the White House,” Gowdy said in an email to Palmetto Business Daily.

The bill, H.R. 5063, the Stop Settlement Slush Funds Act of 2016, targets a loophole that allows settlement agreements reached with the Department of Justice to include payments to groups unaffected by the action being settled. Gowdy said this includes agreements the president made with major banks in a mortgage settlement crisis that included money for La Raza and Neighborworks. Proponents argued that settlement funds should be disbursed directly to the U.S. Treasury, and Congress should be tasked with deciding how the money is spent.

The legislation was introduced by U.S. Rep. Bob Goodlatte (R-VA), chair of the U.S. House Judiciary Committee. The legislation passed the House Judiciary Committee in May 2016.

In early June, the Washington Examiner reported that Bank of America was able to get $2 off of its multi-billion-dollar settlement for every dollar it voluntarily donated to certain categories of non-profit groups. The wording of the deal potentially allows groups favoring Democrats to receive funding in exchange for a break on the overall settlement. When approved in August 2015, the settlement with Bank of America was hailed by the Department of Justice as “historic.”

“Today’s resolution with Bank of America is the largest the department has ever reached with a single entity in American history,” Associate Attorney General Tony West wrote in a statement at the time.

The text of the amended bill submitted to the House Judiciary Committee July 18 said that the DOJ has allowed more than $880 million to be sent to third parties from settlements over the last two years. 

Gowdy said his support is not a partisan move, with similar efforts approved for last year’s Commerce, Justice and Science appropriations bill, but pulled from the final omnibus bill passed for the overall budget. He said the House has signaled that this is a priority, despite the looming presidential election, by bringing the provision forward again.

“Passage of this bill signals the Obama administration is not allowed to play appropriator and decide which groups should receive money recovered from settlements from major financial institutions,” Gowdy said. “This should also be true if there is a Republican president.”

Though the bill comes in response to settlement agreements that appear to have benefited Democrat-friendly organizations, the law includes language that would ensure groups directly affected by the decision would still be eligible to receive restitution under a settlement agreement.

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U.S. Representative Bob Goodlatte (VA-6) U.S. Representative Trey Gowdy (SC-4)

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