Justice Department ends practice of using settlements to fund outside groups

Justice Department ends practice of using settlements to fund outside groups
© Greg Nash

The Justice Department will end an Obama-era practice of allowing settlements won in federal legal cases to be donated to community organizations or other third-party groups, declaring that settlements must now be directed toward those directly harmed by wrongdoing, according to a memo obtained by Reuters. 

The Justice Department's policy on settlements was a hallmark of the legal proceedings following the U.S. housing market collapse. From 2013 to 2016, the Obama Justice Department directed $46 billion in settlements to outside groups that focused on housing aid and other issues.

The move from Attorney General Jeff SessionsJefferson (Jeff) Beauregard SessionsPress: For Trump endorsement: The more sordid, the better Those predicting Facebook's demise are blowing smoke If bitcoin is 'digital gold,' it should be taxed like gold MORE is the latest in the Trump administration's efforts to undo Obama-era policies long criticized by conservatives. 


"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," Sessions said in a statement. "We are ending this practice and ensuring that settlement funds are only used to compensate victims, redress harm, and punish and deter unlawful conduct."

The decision by the Justice Department throws into question an upcoming $12 million settlement against Harley-Davidson. As part of the settlement, the motorcycle manufacturer agreed to stop selling illegal after-market devices that increase the air pollution emitted by the motorcycles.

Harley-Davidson had agreed to donate $3 million to a project to reduce air pollution, the Justice Department said in August. With Sessions's decision Monday, that settlement's fate is now up in the air.