What Can Be Done About President Trump’s Slush Fund?

Robert A. Levy

On May 18, federal judge Kathleen Williams dismissed two of President Trump’s legal claims: (1) his $10 billion lawsuit against the IRS for failing to stop a former contractor from illegally disclosing Trump’s tax returns to the New York Times and ProPublica; and (2) his $230 million claim for legal fees related to the 2022 search of Mar-a-Lago and the investigation of his alleged ties to Russia. In exchange, the government agreed to create an Anti-Weaponization Fund—$1.8 billion to compensate persons who can show they were wrongly targeted victims of “lawfare.” The fund will reportedly be administered by a five-member commission, appointed by the attorney general and removable by the president. Among the possible beneficiaries are the 1,600 participants in the January 6 Capitol riots. Additionally, in a one-page supplemental agreement signed only by Acting Attorney General Todd Blanche, but announced after Judge Williams had dismissed the lawsuit, the IRS agreed to forgo certain audits and claims against Trump, his family, and related businesses. 

Many of the details and criticisms of the so-called slush fund have been examined in earlier blog posts by Mike Fox, Walter Olson, Dan Greenberg, and Tad DeHaven & Molly Nixon. Here, I focus on legal issues and remedies.

Trump’s deal is supposedly modeled after Keepseagle v. Vilsack (2011), in which a $760 million Obama-era Judgment Fund repaid Native Americans for alleged discrimination in connection with the Department of Agriculture’s farm loans. The Judgment Fund was authorized by statute (31 U.S.C. 1304) and still exists as a means by which to bypass separate appropriations every time the government is ordered to pay litigation damages. But some legal experts question whether the Judgment Fund is available to finance Trump’s anti-weaponization scheme. 

First, the Judgment Fund itself may be unconstitutional. It effectuates a permanent delegation of Congress’s appropriations power, without adequate guidelines or guardrails. Second, Trump’s suit against the IRS was quite different from the Keepseagle case: Trump’s suit involved a plaintiff (the president) who exercised effective control over the agency he was suing (the IRS). And yet, federal courts are authorized to hear only cases or controversies, which require, among other things, adversarial parties. Moreover, Keepseagle ended with a class action settlement, which was approved by the court. Judge Williams, by contrast, agreed to dismiss Trump v. IRS, expressly noting that there was “no settlement of record.”

The creation of Trump’s Anti-Weaponization Fund raises numerous ancillary questions. Among them: (1) Was Trump’s IRS claim barred by the statute of limitations; (2) Could the suit be “settled” if there was no legitimate controversy; (3) Can the purported settlement essentially expand the president’s pardon power to cover civil tax claims; (4) Did creation of the slush fund comply with the Administrative Procedures Act; (5) Are the five members of the fund’s administrative commission “Officers of the United States,” who must be confirmed by the Senate; (6) Was Todd Blanche authorized to bar IRS audits and waive pending claims against Trump and related parties; and (7) Did the separate Blanche document—not formally signed by the parties—go beyond what the underlying lawsuit could legally settle? 

If the slush fund were to become operational, that would raise still more questions: Would disbursements comply with 26 U.S.C. 7431, a federal statute that addresses compensation for unlawful disclosure of tax information? And would some disbursements be barred by the 14th Amendment, which provides that the government may not “assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States”?

Of course, anyone attempting to litigate those concerns would have to establish standing by meeting three criteria: (1) particularized injury; (2) causation (i.e., the injury is the result of the asserted misconduct); and (3) redressability (i.e., the requested relief is within the court’s power and would fix the injury). Two victims of the January 6 violence have filed suit against the slush fund, but they will almost certainly not have standing. Even if they demonstrate injury, they’d have difficulty showing that their injury was caused by the fund or that invalidation of the fund would fix or compensate for their injury. 

How about a person denied compensation from the fund (e.g., James Comey, if he were to apply)? He might have standing to question the process by which applicants are screened, but the most likely remedy would be to change the qualification rules, not enjoin the operation of the fund or the disbursement of money to other applicants. Maybe the denied party could seek injunctive relief by arguing that the fund would otherwise be depleted before he could assert his rights. Such relief would be temporary, lasting only until the litigant resolved his qualification status. That appears to be the posture of litigation in Virginia, where a federal judge on May 29 temporarily enjoined disbursements at the request of plaintiffs who assert that they should be, but are not, entitled to compensation. On June 1, the president said he would comply with the court order. A hearing is set for June 12. Meanwhile, some observers have suggested that Trump may now be willing to rein in or even abandon the fund. Until then, the controversy continues. 

Persons claiming an affiliation with the president may seek immunity under Blanche’s no-audit document, which applies to an undefined class of “related or affiliated individuals.” If a claimant were nonetheless audited, he would have standing to protest the terms of that document, although probably not the legality of the fund itself. 

In a totally different challenge, 35 former federal judges asked Judge Williams to reopen the IRS case to question whether the deal was a fraud on the court. On May 29, Judge Williams announced that she would investigate “grievous allegations” that the grounds for the earlier dismissal were “premised on deception.” She requested a response from the government, due on June 12. The former judges want the court to invoke Federal Rule of Civil Procedure 60, which would allow Judge Williams to set aside her prior order in certain extraordinary circumstances, including fraud. Here, the alleged fraud is concealment of the immunity provision that was signed by Todd Blanche but not disclosed until Judge Williams had already dismissed the case.

But what is the legal justification for reopening a lawsuit that was previously dismissed with prejudice? That question is especially relevant if the reopening is triggered by an extraordinary post-dismissal filing on behalf of non-parties who did not suffer a direct personal injury. Evidently, the judges’ primary concern is to protect the integrity of the judicial process rather than to vindicate their own legal rights. Is that a valid justification? If not, will Judge Williams insist that she would have reopened the case on her own initiative? The timing of the original dismissal (May 18), the motion by the former judges nine days later (May 27), and Judge Williams’s prompt action (May 29) suggests a causal connection between the motion and the reopening.

Finally, it is conceivable that the Anti-Weaponization Fund could be tested legislatively, either by state legislatures or by Congress. Indeed, several blue states have proposed a 100 percent state income tax on any payouts from the fund. Those proposals are unlikely to prevail if challenged in court. Assuming the fund’s legitimacy withstands judicial scrutiny, a confiscatory tax designed to frustrate distributions might be considered as contrary to federal intent and thus preempted. Or the tax might be deemed to interfere with, and discriminate against, an authorized federal program, or it might be a bill of attainder (i.e., targeted legislative punishment).

With respect to Congress: It has the power of impeachment, but that’s probably a nonstarter given Trump’s control over Republican legislators. Even if Congress were to pass a joint resolution condemning the slush fund or limiting the use of the Judgment Fund, Trump would veto the resolution. A two-thirds vote to override his veto faces an uphill battle. It’s possible, however, that members of Congress who oppose the fund could head off a veto if a provision reflecting their opposition were appended to another bill that Trump considered must-pass legislation—for example, the ICE/​Border Patrol $70 billion budget reconciliation package. In fact, that may have been what transpired (or was threatened) on May 22, when Congress recessed rather than approve ICE funding. We’ll see if a typically docile Congress can find a way to constrain or terminate the Anti-Weaponization Fund.