The Obama administration funneled billions of dollars to activist organizations through a Department of Justice slush fund scheme, according to congressional investigators.
“It’s clear partisan politics played a role in the illicit actions that were made,” Rep. John Ratcliffe, R-Texas, told Fox News. “The DOJ is the last place this should have occurred.”
Findings spearheaded by the House Judiciary Committee point to a process shrouded in secrecy whereby monies were distributed to a labyrinth of nonprofit organizations involved with grass-roots activism.
“Advocates for big government and progressive power are using the Justice Department to extort money from corporations,” Judicial Watch’s Tom Fitton told Fox News. “It’s a shakedown. It’s corrupt, pure and simple.”
There is a recent effort by Republicans to eliminate the practice, which many believe was widely abused during the Obama administration.
When big banks are sued by the government for discrimination or mortgage abuse, they can settle the cases by donating to third-party non-victims. The settlements do not specify how these third-party groups could use the windfall.
So far, investigators have accounted for $3 billion paid to “non-victim entities.”
Critics say banks are incentivized to donate the funds to non-profits rather than giving it to consumers.
“The underlying problem with the slush funds is we don’t know exactly where the money is going,” Ted Frank, director of The Competitive Enterprise Institute Center for Class Action Fairness, told Fox News. “Using enforcement authority to go after corporate defendants, DOJ bureaucrats are taking billions away from taxpayers to fund their pet projects overriding congressional preferences.”
Frank said the money should go to the Treasury Department and the process subverts the legislative branch’s essential spending power. The Justice Department has argued that money is allowed to bypass Treasury because the banks’ donations to the groups are voluntary.
Both the Government Accountability Office and Congressional Research Service have concluded that the settlement agreements do not violate Congress’ power of the purse. But others disagree.
“This is real abuse of power,” adds Franks.
For example, in the FY16 Enacted Congressional Appropriation, Congress allotted $47 million for the HUD Housing Counseling, but the Citi and Bank of America settlements shipped in an additional $30 million in funding.
Even more settlement funds go to providers of legal services to the poor, even though Congress in 1974 set up independent nonprofit, the Legal Services Corporation, for that very purpose.
In fiscal 2016, The Legal Services Corporation was allocated $385 million from Congress to distribute to 133 providers of legal services across the country. But those same providers, as well as others, were also eligible to apply for funds from a $412 million settlement with Bank of America. Those funds were distributed through state organizations.
The recent Volkswagen settlement, which requires a $1.2 billion investment into zero emission technology, was not only twice denied by Congress but is now expected to receive four times the amount originally requested by the Obama administration.
A sample of the left-leaning organizations benefiting from the largesse include the National Council of La Raza, the National Community Reinvestment Coalition and the National Urban League.
The NCLR and NCR did not return phone calls seeking comment.
A Senate majority staff report, from the Committee on Homeland Security and Government Affairs, released last spring notes the NCRC’s “checkered history” of promoting “illegal immigration and advocating for benefits and driver’s licenses for undocumented immigrants.”
The group voiced strong opposition to the confirmation of Attorney General Jeff Sessions. The NCRC has photos of a Sessions protest on its homepage.
The Senate majority staff report also found the “DOJ bypassed Congress to use a portion of the settlements to finance the administration’s housing policy.”
While legislation sputtered last year, lawmakers have resurrected an effort to quash the practice with companion bills in the House and Senate.
“Democrats thought it was an attack on Obama,” said Sen. James Lankford, R-Okla., speaking to Fox News. “This is not a Republican or Democrat issue, but one of good government. Actions settled by the federal government should go back to the federal government, back to the taxpayer.”
Lankford has introduced the Stop Settlement Slush Fund Act of 2017 while House Judiciary Chairman Bob Goodlatte, R-Va., submitted similar legislation in the House.
“Congress must permanently end the abuses Obama’s Justice Department exploited to use settlements to funnel money to their liberal friends,” Goodlatte said in a statement.
As lawmakers face protests in their home districts, the issue of shadow subsidies underscores the foggy nature of taxpayer dollars used in partisan politics.
“The protests are as organic as a plastic cup,” says Fitton. “There is a massive left-wing infrastructure in place trying to protect the monstrous government created by the Obama administration.”
An earlier version of this story misstated the amount of funding Legal Services Corporation, a nonprofit set up by Congress to distribute funds to providers of legal services to low income Americans, received in fiscal 2016.