Last week, President Trump and his sons agreed to a settlement with the Internal Revenue Service of his lawsuit over his tax returns being leaked during the 2024 election.

In exchange for dropping the Trumps’ request for $10 billion in damages, the Department of Justice agreed to establish an approximately $1.776 billion fund to compensate those who claim they were targeted politically by the prior administration.

The fund would be overseen by a five-person panel, all of whom will be appointed by the attorney general (Todd Blanche, currently, in an acting capacity). They won’t be subject to Senate confirmation (although one will be chosen with input from congressional leadership, apparently) and any of them could be subject to dismissal by President Trump. They won’t get a salary, but they will be able to use the money for expenses, including travel and per diem.

Astonishingly, all of this is perfectly legal.

The money will come from an unlimited pool of money that the Department of Justice can disburse without congressional approval, the Judgment Fund.

Yes, that’s right: to pay settlements from lawsuits, the Department of Justice can spend any amount it likes without Congress having the chance to weigh in.

The fund was established in 1956. Before then, Congress had to pass individual legislation authorizing disbursements of legal judgments to groups and individuals. Essentially, Congress wrote the DOJ a blank check with no expiration date, ceding its authority over budgetary appropriations in this area.

While the mechanism has existed for decades, it’s never been invoked this way before. At the time of its creation, it probably seemed as if it was a simple administrative mechanism. The authors of the bill, however, likely never envisioned a former president suing the federal government and then regaining office, which is exactly what’s happened here.

Now, as a former president, Trump had every right to sue the United States government over alleged mistreatment, just like any other citizen. The conflict only truly began once he took the oath of office again and began appointing officials. Once he did, he was in effect overseeing — even if indirectly — both sides of the case.

That’s a clear conflict of interest. If you’re suing a federal agency, you shouldn’t be able to order the federal agency to settle the case. It really doesn’t make any difference whether Trump or his sons will get any funds from the settlement, either. As a party to the case, he should have no role in overseeing its settlement in any way, shape or form. 

Moreover, in this case there’s evidence that lawyers at the Internal Revenue Service had no interest in settling the matter, and indeed, thought they could have won it in court. They prepared a 25-page memo for the Department of Justice making that argument,  but the DOJ apparently decided to go ahead and settle it. The same day the settlement was announced earlier, the top attorney at the Department of the Treasury resigned.

All of this is not only legal, it appears that neither Congress nor the courts have any recourse to stop it. Congress ceded that authority to the DOJ when it created the Judgment Fund, and the law didn’t allow for exceptions or special circumstances.

Judge Kathleen Williams, first appointed to the federal bench by Barack Obama in 2011, did ask the parties whether this was truly an adversarial lawsuit, since Trump was now the chief executive, and gave them a deadline to respond, but she didn’t approve the terms of the settlement; she never even reviewed it. Instead, she approved Trump’s request to withdraw his lawsuit rather than address the issue she raised.

The only recourse to stop the settlement is probably legal action. Outside parties may well bring suit to stop the distribution of the fund, but that could also take years to make its way through the courts and be resolved. In the meantime, the fund will likely be set up and be operational — indeed, since it expires when Trump leaves office, it may have finished its work before legal questions are answered, absent a stay.

What Congress can do is alter the law regarding the Judgment Fund to make sure this situation never occurs again — by implementing conflict-of-interest laws and caps on settlements, for instance. It could also set a structure for boards overseeing the disbursements of such settlements. It may not be able to stop this particular incident after the fact, but it can ensure that the same loophole is never exploited again.