House passes Gowdy-supported bill to end federal ‘settlement slush funds’

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


U.S. Rep. Trey Gowdy (R-SC)  

The U.S. House of Representatives today passed legislation co-sponsored by Rep. Trey Gowdy (R-SC) that would prevent the U.S. Department of Justice (DOJ), and all other government agencies, from requiring defendants to donate money to outside groups as part of their settlement agreements with the federal government.

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

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.

“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.”

The bill’s primary sponsor, House Judiciary Chairman Bob Goodlatte (R-VA), praised passage of the bill.

According to a press release issued by Goodlatte’s office an investigation by the House Judiciary Committee “found that DOJ had engaged in a ‘pattern or practice’ of systematically subverting Congress’s spending power by using settlements from financial institutions to funnel money to left-wing activist groups.”

“Whether you are a Republican or a Democrat, the Constitution is clear: Congress shall have the power to appropriate,” said Goodlatte. “The practices discovered within the DOJ must be stopped. The passage of this bill by the House ensures the recovered funds are used to benefit direct victims and not special interests, and brings accountability to the Executive Branch as a whole.” 

Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform, also praised House passage of the legislation. 

“Enforcement officials should pursue justice in a manner consistent with the Constitution and the public interest, and not by how much money they can generate for third party allies,” said Rickard. “The Constitution gives Congress alone the power of the purse, but the DOJ and other government agencies have thwarted this through their use of settlement slush funds to funnel money to third party political allies.”

The House passed the bill by a vote of 241-174.

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Organizations in this Story

U.S. Chamber Institute for Legal Reform (ILR) U.S. Representative Bob Goodlatte (VA-6) U.S. Representative Trey Gowdy (SC-4)

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