Brother, Can You Spare a Million Dollars?': Resurrecting the Justice Department's 'Slush Fund

• Author: Paul Larkin and Zack Smith
• Position: John, Barbara & Victoria Rumpel Senior Legal Research Fellow, The Heritage Foundation/Legal Fellow, The Heritage Foundation; J.D. University of Florida, 2013; M.A. University of Florida, 2013
• Pages: 447-476

ARTICLE

“Brother, Can You Spare a Million Dollars?”

*

:

Resurrecting the Justice Department’s

“Slush Fund”

PAUL LARKIN, JR.** AND ZACK SMITH***

ABSTRACT

Attorney General Jeff Sessions put an end to the controversial Bush- and

Obama-era practice of allowing corporations to settle claims brought against

them by the federal government in exchange for making substantial “donations”

to the administration’s favored non-profits or allocating money to pursue that

administration’s favored policy goals. Unfortunately, the Biden Administration

has suggested that it will revive this practice, which violates both the

Constitution and several acts of Congress. It should not. In fact, doing so would

be criminal.

The Article I Appropriations Clause prohibits any Executive Branch official

from disbursing funds except as provided by an act of Congress, and no statute

authorizes this giveaway of the public’s money. In fact, the Miscellaneous

Receipts Act directs federal officers and employees to pay into the treasury any

money they receive in the course of their official duties. Finally, the practice

would also violate a statute known as the McDade Amendment, which subjects

Justice Department lawyers to the same ethical standards governing the con-

duct of other lawyers in the state in which an attorney is licensed. No private

lawyer may ethically give away a client’s money without the latter’s express

permission, so Justice Department lawyers also may not do so.

TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448

I. THE JUSTICE DEPARTMENT’S DIVERSION OF PUBLIC FUNDS . . . . . . 449

* Sung to the tune of “Brother, Can You Spare a Dime?” (1932).

** John, Barbara & Victoria Rumpel Senior Legal Research Fellow, The Heritage Foundation; M.P.

P. George Washington University, 2012; J.D. Stanford Law School, 1980; B.A. Washington & Lee

University, 1977.

*** Legal Fellow, The Heritage Foundation; J.D. University of Florida, 2013; M.A. University of

Florida, 2013; B.A. University of Florida, 2009. The views expressed in this article are our own and

should not be construed as representing any official position of The Heritage Foundation. We want to

thank Romina Boccia, Justin Bogie, John G. Malcolm, and David Rosenthal for invaluable comments on

an earlier draft of this Article. Any errors are ours. © 2021, Paul Larkin, Jr. & Zack Smith.

447

II. THE FEDERAL APPROPRIATIONS PROCESS . . . . . . . . . . . . . . . . . . . . 455

A. The Article I Appropriations Clause. . . . . . . . . . . . . . . . . . . . 455

B. Implementing Statutes and Procedures. . . . . . . . . . . . . . . . . . 458

III. THE ILLEGALITY OF DOJ’S DIVERSIONS . . . . . . . . . . . . . . . . . . . . . 461

IV. THE POTENTIAL DEFENSES TO DOJ’S DIVERSIONS . . . . . . . . . . . . . 470

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475

INTRODUCTION

Less than a month into office, President Joe Biden has signaled that his

Administration will readopt many of the policies advanced by the man whom he

served as Vice President, Barack Obama.

1

Among them is a settlement practice

used in the resolution of pending or threatened litigation against corporations.

2

Ordinarily, money due to the United States by virtue of a settlement is deposited

into the U.S. Treasury. During the George W. Bush and Barack Obama

Administrations, however, the Justice Department allowed a corporation to give

some portion of that money to third parties chosen or recommended by the gov-

ernment. The result was to create what the Wall Street Journal described as

“Justice’s Liberal Slush Fund.”

3

Persuaded by such criticisms, the Trump

Administration prohibited that practice in 2017.

4

Biden has suggested, however, that his Administration might resurrect the pol-

icy.

5

Doing so would be a serious mistake. The Constitution and several acts of

Congress forbid the practice followed in the Bush and Obama Administrations.

6

They even make it a crime to divert to private parties settlement funds that should

1. See, e.g., Exec. Order No. 13992, Revocation of Certain Executive Orders Concerning Federal

Regulation (Jan. 20, 2021), 86 Fed. Reg. 7049 (Jan. 25, 2021); White House, Paris Climate Agreement,

Jan. 2021 [https://perma.cc/C5AC-XAEY].

2. Daniel Huff, Biden Plan to Restore the Corrupt DOJ Slush Fund Should Stop Now, WASH.

EXAMINER (Feb. 1, 2021), https://www.washingtonexaminer.com/opinion/op-eds/biden-plan-to-restore-

the-corrupt-doj-slush-fund-should-stop-now [https://perma.cc/9M4Z-NUAD].

3. Kimberley Strassel, Justice’s Liberal Slush Fund, WALL ST. J., (Dec. 3, 2015), http://www.wsj.

com/articles/justices-liberal-slush-fund-1449188273 [https://perma.cc/ZF94-FW4J].

4. Memorandum for All Component Heads and United States Attorneys: Prohibition on Settlement

Payments to Third Parties, (June 5, 2017), https://www.justice.gov/opa/press-release/file/971826/

download [https://perma.cc/Y9US-AVZ5] [hereafter Sessions Memo].

5. See James R. Copland, Will Biden Restore ‘Charitable’ Shakedowns?, WALL ST. J., (Jan. 28,

2021), https://www.wsj.com/articles/will-biden-restore-charitable-shakedowns-11611857183 [https://

perma.cc/8QPF-YLU7] (“Buried in the Biden administration’s flurry of early executive orders is a

potential challenge to the core legislative function: the power to tax and spend. Under the proposal, the

Justice Department may revert to using its enforcement power to force companies under investigation to

give billions of dollars to outside interest groups—a common practice before June 2017. Implicitly, this

amounts to a federal appropriation unauthorized by Congress.”).

6. See infra Part III.

448 THE GEORGETOWN JOURNAL OF LAW & PUBLIC POLICY [Vol. 19:447