Do the Feds Need to Stop Requiring Companies to Give “Donations” to Outside Groups When Settling Lawsuits? (H.R. 732)

What is H.R. 732?

(Updated May 24, 2018)

This bill would prohibit officials from settling lawsuits filed against the federal government in a way that would require a defendant to make a “donation” of money to outside groups as part of the settlement agreement with the federal government. The Dept. of Justice (DOJ) has been requiring banks and insurance companies to “donate” some of the imposed penalty to selected nonprofits, which in some cases are political activist groups like the National Council of La Raza.

Government officials who violate this prohibition could be removed from office or required to forfeit to the government any money that they hold for the settlement or may be entitled to.

The definition of “donation” under this legislation would exclude a payment by a party to the lawsuit for restitution or otherwise fixing the harm caused by whatever conduct led to the settlement agreement.

Argument in favor

When corporations settle lawsuits with the federal government that money should go to the actual victims or into the Treasury, not to political activist groups.

Argument opposed

It makes sense that federal agencies settling lawsuits mandate that some of the penalties paid by corporations go to nonprofit groups on an approved list.

Impact

Federal employees and agencies that settle lawsuits; nonprofit groups that otherwise would’ve received “donations”; and the DOJ.

Cost of H.R. 732

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Rep. Bob Goodlatte (R-VA) cited a lack of Congressional oversight regarding how the funds from these settlements are allocated to nonprofit groups as a primary reason for introducing this bill:

“This bill is oversight and action. Congress must not tolerate Justice Department political appointees using settlements to funnel money to their liberal friends. 

This is also an institutional issue. Once direct victims have been compensated, deciding what to do with additional funds recovered from defendants becomes a policy question properly decided by elected representatives in Congress, no agency bureaucrats or prosecutors.”

This legislation has the support of 30 cosponsors in the House, including 29 Republicans and one Democrat.

Of Note: The Wall Street Journal reported that the DOJ’s use of mandatory donation terms actually reduces the total penalty to be paid by a corporation. In the case of Bank of America, a $500,000 donation to La Raza would reduce its total penalty by at least $1 million, whereas providing direct relief to victims would only be counted dollar-for-dollar.

Media:

• Sponsoring Rep. Bob Goodlatte (R-VA) Press Release
• Daily Caller
• Townhall
• Wall Street Journal