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  • Government Turns Corporate Settlements Into Unaccountable Slush Fund

    By exercising prosecutorial discretion in cases of corporate criminality, the Justice Department enjoys “virtually unlimited discretion” to disburse billions of dollars to private organizations, many of which are politically favored interest groups, according to a report by Paul Larkin of the Heritage Foundation.

    Nonprosecution and deferred prosecution agreements (N/DPA’s) are similar to out-of-court settlements, allowing charges to be resolved without “the entry of a judgment enforceable by a court.” (RELATED: JP Morgan Reaches Record $13 Billion Settlement with Obama Administration)

    Corporations are generally inclined to accept such agreements for fear that “the collateral consequences [they] can suffer from simply being charged with a crime… may exceed whatever monetary penalty a court could impose on the corporation after conviction.”

    Prosecutors, on the other hand, “[wish] to avoid a trial because the government is limited in what it can obtain after conviction only to penalties authorized by Congress,” whereas the monetary penalties obtainable through N/DPA’s are limited only by the amount a corporation is willing to pay in order to avoid prosecution.

    With that kind of leeway, the government is free to pursue “regulation by prosecution”, whereby it attempts “to alter the conduct of a business without going through the Article I lawmaking process or the notice-and-comment rulemaking process demanded by the Administrative Procedure Act.” (RELATED: Taxpayers Pay Justice Department Employees to do Union Work)

    Moreover, penalties imposed by N/DPA’s are not subject to the same strictures as those arising from plea bargains or court judgments.

    Fines collected in the latter two instances must be turned over to the Treasury, “which enables Congress to specify the purposes for which it can be spent,” whereas in the case of N/DPA’s the Justice Department can “[require] corporations to contribute to different charitable organizations of the government’s choosing,” which is to say, “whatever particular recipient the Justice Department selects.”

    One particularly egregious example of the practice, detailed by Investor’s Business Daily, is a recent “$17 billion deal to settle alleged mortgage abuse charges against Bank of America.”

    After making debt forgiveness payments to delinquent borrowers, the settlement requires BofA to turn any remaining funds over to “Interest on Lawyers’ Trust Account (IOLTA), which provides legal aid for the poor and supports left-wing causes, and NeighborWorks of America, which provides affordable housing and funds a national network of left-wing community organizers operating in the mold of Acorn.” (RELATED: DOJ to Give Money from Bank of America Settlement to Liberal Activist Groups)

    Larkin concedes that, irrespective of their political affiliations, the recipients of N/DPA funds “may be organizations that should receive federal funds because they improve the lot of the citizenry in particular ways,” but also points out that in many cases, “the federal government is extorting settlements from businesses in order to transfer funds to cronies that the Administration could never persuade Congress to appropriate for them.”

    Rather than leaving such decisions in the hands of unaccountable officials at the Justice Department, Larking argues that Congress should “require by statute that any and all funds paid by a corporation in connection with an N/DPA or settlement go into the public treasury where they would be paid out as part of the ordinary appropriations process.”

    “To be sure,” he says, “leaving appropriations decisions to Members of Congress hardly guarantees that personal biases will play no role in how public funds are spent,” but it would at least give the voting public “the opportunity to hold Senators and Representatives accountable at the polls for their decisions.”

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