Proposed Bill Aims to Restrict Federal Settlement Payments
A new bill was introduced in the U.S. House of Representatives on Thursday that seeks to prevent federal authorities from enforcing settlement agreements that direct payments to third parties, unless these payments are intended to address actual damages or pay for necessary services related to the case.
Congressman Lance Gooden from Texas introduced the Stop Settlement Swindle Funds Act. This legislation is designed to stop federal officials from steering settlement payouts or certain services within a lawsuit to groups not directly impacted by the case. Payments, according to the bill, must be made as compensation for genuine harm inflicted by the defendant or for services directly associated with the incident.
Gooden expressed concerns about judicial settlements being used to fund what he termed “left-wing activist groups,” emphasizing the need for a system that restores transparency and integrity to federal payments. He said, “The Payment Funds Act will close this loophole once and for all.”
This law codifies a prohibition that was initially established by Attorney General Pam Bondi early in her tenure. Once enacted, it targets what supporters argue are misuses of executive authority. A significant aspect of the bill prevents government officials from entering or enforcing agreements that involve payments to third parties, with the exception of those that directly alleviate damages or compensate for services rendered. Violation of this provision would bring the same penalties applicable under section 3302 of title 31 of the United States Code.
The legislation also introduces new reporting and monitoring obligations. Federal agencies would be required to submit annual reports to the Congressional Budget Office for a period of seven years, detailing settlement agreements that meet the bill’s specific exceptions, particularly regarding reparations and service payments. These reports must include information on settling parties, the sources of funds, and how the funds will be allocated and used.
Moreover, the bill mandates annual audits by agency inspectors general, which must be publicly accessible. Any agreements breaking the law would need to be reported to the relevant committees in the House and Senate. Importantly, there wouldn’t be any new funds allocated to facilitate these reporting requirements.
A coalition of Republican representatives is backing the bill, including Claudia Tenney (NY-22), David Rouser (NC-07), Barry Moore (AL-01), Tom Tiffany (WI-07), Chip Roy (TX-21), Andy Ogles (TN-05), Gary Palmer (AL-06), Russell Frye (SC-07), and Addison McDowell (NC-06).
Supporters of the bill have cited previous instances where settlement agreements were leveraged for various purposes. After the 2008 financial crisis, Attorney General Eric Holder engaged in agreements with prominent banks that allowed them to gain additional credit for donations to specific groups deemed left-leaning. In one case from 2005, a pharmaceutical company ended up donating to a law school to establish an ethics chair as part of its settlement. Another arrangement required Gibson Guitar Corporation to contribute to the National Fish and Wildlife Foundation.
Alexander Ciccone, a representative of the group advocating for the bill, remarked that settlement agreements should either compensate affected parties or return funds to the U.S. Treasury, highlighting the need for congressional oversight. He maintained that this legislation would cease years of exploitation in payment authority that permitted the Department of Justice to bypass Congress.
The bill previously passed the House during the 118th Congress and was brought back by Gooden in the current session, aiming to rekindle legislative support.
