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June 09, 2017

Swampy Puddle Drained

Good news from DC.

Tuesday Attorney General Sessions sent an order ending the practice of using settlement money from corporate wrongdoers for political slush funds. His statement accompanying the order says:

“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— not to bankroll third-party special interest groups or the political friends of whoever is in power. Unfortunately, in recent years the Department of Justice has sometimes required or encouraged defendants to make these payments to third parties as a condition of settlement.  With this directive, we are ending this practice and ensuring that settlement funds are only used to compensate victims, redress harm, and punish and deter unlawful conduct.”

According to a UPI story, the Justice Department previously forced Bank America and Citicorp to make payments to groups which Congress had deliberately defunded including National Council of La Raza, the National Urban League, the National Community Reinvestment Coalition, and NeigborWorks America. You may or may not agree with these groups. You may or may not choose to contribute to them yourself. You may even lobby your Congresspeople to have money appropriated to these groups. None of that justifies Justice (or any other department) having the ability to appropriate what would have been funds paid to victims or the government; appropriations need to be made by Congress even if Congress doesn’t always do what you want.

Note that none of this is an argument for reducing the penalties that corporations pay for breaking the law; the question is just who decides where the money goes. There shouldn’t be any question. If there are identified victims, they should be compensated. If there is a fine, the money goes to the Treasury and should be spent per Congressional appropriation.

Allowing a corporation to pay part of its penalty with contributions reduces the punishment and makes the deterrence less effective. Fines aren’t tax deductible; contributions can be. Moreover, a contribution can be used for positive PR.

From a good government PoV, the party which appoints the federal attorneys should not be able to use settlements to reward its supporters. Do you want Trump appointees deciding which interest groups should be funded? Neither do I. I didn’t like Obama appointees making these decisions either. This may not be illegal but its corrupt.

One more example of such a settlement is Volkswagen and its cheating diesels. I have one; I was very proud of my 40+ MPG until I found out this was at the cost of heightened nitrous oxide emissions. Nitrous oxide is not only a more potent greenhouse gas than carbon dioxide; it also has a direct negative effect on human health. Part of what VW is paying is $2.7B to fund “environmental remediation” projects and $2B for charging infrastructure for electric vehicles. Victims (including me) also get their cars fixed and some other money.

Superficially this sounds good; VW harmed the environment; they should pay to fix it. But no one knows how these mitigation funds will be spent. Part goes to a trust fund administered by the states. The Vermont Agency of Natural Resources is asking for public input on how it should spend our share. In other words, the federal attorneys who settled this case with VW (subject to court approval) get to create slush funds in each of the states which will be spent without appropriation by the state legislatures.

If Sessions’ order had been in effect when this settlement was reached, the $4.7B would have gone into the US Treasury. If Congress felt that it was best spent on some sport of environmental projects, they could have appropriated it for that purpose. If they felt it was better used for healthcare or defense or addiction-prevention, they could have so appropriated it. It could even be a drop in the tax relief bucket.

Sessions order is a welcome small step back to good (and constitutionally correct) government.

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