One of former Attorney General Jeff Sessions’s most important acts in office was his genuinely swamp-clearing 2017 reversal of a corrupt Obama administration practice at the Department of Justice. Sessions forbade the department from reaching settlements with deep-pocketed defendants that involved cash payments, not to taxpayers or victims, but to third parties — in practice, often to left-wing social justice organizations.
“When the federal government settles a case against a corporate wrongdoer, any settlement funds should go first to the victims and then to the American people,” Sessions said, “not to bankroll third-party special interest groups or the political friends of whoever is in power.”
Unfortunately, one of President Biden’s first acts in office was to initiate the reinstatement of this corrupt practice. Not only does it allow presidents to circumvent Congress’s constitutional authority over all government spending, but it also allows them to enrich political allies unjustly with money they have no business collecting. It looks, walks, and talks like a graft in a fancy suit.
The Obama-era Justice Department had been using this underhanded technique to transfer nearly $1 billion to leftists in lawsuits against large companies such as Bank of America and Citigroup. Republicans in Congress documented the arrangement, deriding it as a “slush fund,” and attempted unsuccessfully to ban it permanently with a statute.
Among the activist beneficiaries of the practice during the Obama era were the National Council of La Raza, the National Urban League, and the National Community Reinvestment Coalition.
Left-wing organizations actively lobbied to become the beneficiaries of such payouts in a March 2014 meeting. Bank of America was actually able to reduce its overall obligation due to settlement terms that permitted it to count each dollar donated to nonprofit organizations as $2 toward their settlement.
Nor were Justice Department officials even-handed about what sort of groups could receive the funds. Documents unearthed by the House Judiciary Committee in October 2017 show that Obama administration officials had been deliberately going out of their way to prevent companies from making their settlement donations to conservative nonprofit organizations. One official specifically mentioned the need to prevent money from going to the Pacific Legal Foundation, which provides pro bono legal help on certain issues such as property rights.
Biden, newly installed in the White House, understands that he has debts to repay. Many of the same groups that helped Democrats’ get-out-the-vote efforts in 2020 are now standing at his door with hat in hand, demanding a piece of the pie. But whatever policy favors he intends to do for them, and whatever norms he destroys in order to placate them, he should not be giving them money that rightly belongs to taxpayers and to the victims of corporate wrongdoing.
