Attorney General Jeff Sessions
Senator Jeff Sessions speaking at the Values Voter Summit in Washington, DC. Photo by Gage Skidmore, via Flickr. CC BY-SA 2.0

United States Attorney General Jeff Sessions issued a memo to all U.S. attorneys and heads of the Justice Department last week which effectively ends settlement donations to third parties in almost all cases.

Many, even most, lawsuits have clear winners and losers. One party caused injury or damage to the other party, and either a settlement is reached or a decision made by the court that seeks to make the injured party whole again through a civil penalty or punishment for a crime.

However, what happens when the wrongdoing affects more than just the parties involved in the suit, and even class action would be impractical? For example, Volkswagen’s emissions cheating scandal, where emissions control devices were active only when the cars were undergoing testing, meant that we had a half million Volkswagens on the road in the United States spewing filthy fumes everywhere. Chances are, you and I and every American breathed VW fumes that were in violation of the Clean Air Act.

How could penalties levied against Volkswagen bring justice for every person who breathed VW’s illicit nitrous oxide? It would be impossible, but that doesn’t mean we shouldn’t do anything about it. This is the kind of case where settlement donations are the most effective means of righting a wrong. If an offending party were to pay a monetary penalty that could be directed at a nonprofit organization whose work was to remedy harms like those caused by the offender, it would go a long way towards fixing the damage. Volkswagen ended up contributing to environmental remediation and supporting investments in electric vehicle technology.

Settlement donations also figured in suits against companies like Gibson Guitars, which paid wergild to the National Fish and Wildlife Foundation to answer for charges that it illegally imported exotic wood from which to fashion its instruments. Similarly, Bank of America and Citigroup paid settlement donations to community groups that provided housing counseling and prevented foreclosures in order to atone for the damage that their role in selling subprime mortgage-backed securities did to poor and middle class communities across the country. A recent settlement with Harley Davidson resulted in an agreement to stop selling illegal devices that increase fouling emissions, as well as a $3 million donation to a project that would reduce air pollution.

According to Paul J. Larkin, writing for the Federalist Society, the practice of requiring penalties to be paid to relevant third parties occurred through the Obama and George W. Bush administrations. Settlement donations seem like the perfect answer for those who think that government is inherently broken, inefficient, and wasteful with money. Working with nonprofits to make the world a better place is reminiscent of George H.W. Bush’s speech invoking a “thousand points of light,” where he suggests that government should cooperate with the “community organizations that are spread like stars throughout the nation, doing good.” Remember when this used to be a conservative position?

President George H.W. Bush – Points of Light, posted by MCamericanpresident

In an administration so enthusiastic about privatization, it’s mildly surprising that Jeff Sessions would reverse the status quo and demand instead that the vast majority of such penalties flow towards either the most direct victims (when they can be identified), or to the United States Treasury. Some critics of settlement donations claim that they were “Obama’s secret slush fund” set up to siphon funds away from the American people and instead into the pockets of “extreme left wing organizations” that were perhaps deliberately defunded by Congress for political reasons.

If protecting our health, building our communities, defending our fish and wildlife, cleaning the air we breathe, helping poor people keep their homes, investing in more efficient technology and generally making the world a more livable place are the functions of “extreme left wing organizations,” it makes me wonder what right-wing organizations are up to instead.

And if settlement donations are “tantamount to the theft of money that belonged to the public,” then what, exactly, are tax cuts and subsidies for businesses, privatization, and the near-giveaway of public resources like energy and grazing rights and Michigan’s water? Ponder these questions for a while. Take all the time you need.


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The Justice Department is ending an obscure settlement practice that conservatives hate
Sessions prohibits settlement agreements that donate money to outside groups
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The Justice Department’s Third-Party Payment Practice, the Antideficiency Act, and Legal Ethics
Prohibition on Settlement Payments to Third Parties (PDF)

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