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AG Sessions nixes settlement payments to nongovernment third parties

By Pamela Wolf, J.D.

Under a June 5 memorandum issued by Attorney General Jeff Sessions, Justice Department attorneys will no longer enter into any agreements on behalf of the United States in settlement of federal claims or charges that direct or provide for a settlement payment to nongovernment third parties not directly harmed by the conduct at issue. There are limited exceptions to the new rule, however.

Under the Obama Administration, the DOJ repeatedly required settling parties to pay settlement funds to third party community organizations that were not directly involved in the litigation or harmed by the defendant’s conduct, according to the agency’s news release. That practice will now end.

“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,” Sessions said. “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.”

Sessions’ memorandum provides three limited exceptions to the new directive:

  • An otherwise lawful payment or loan providing restitution to a victim that otherwise directly remedies the harm sought to be redressed, including for example, harm to the environment or from official corruption;
  • Payments for legal or other professional services rendered in connection with the case; and
  • Payments expressly authorized by statute, including restitution and forfeiture.

The new policy applies to all civil and criminal cases and includes settlement agreements, cy pres agreements or provisions, plea agreements, nonprosecution agreements, and deferred prosecution agreements.