A coalition of state attorneys general is urging a federal judge to reject what they characterize as a fraudulent settlement that would funnel nearly $2 billion in public funds through an "anti-weaponization fund" benefiting President Donald Trump, his family, and political allies.
Background
The dispute stems from a lawsuit Trump filed against the IRS in January in the Southern District of Florida, alleging his tax information was improperly disclosed. The case was closed in mid-May at Trump's request, with the settlement creating the controversial fund rather than providing direct compensation to the plaintiff.
U.S. District Judge Kathleen Williams, an appointee of former President Barack Obama, raised concerns about the case's unusual circumstances from the outset. During proceedings, she questioned whether a true adversarial relationship existed given that Trump was suing an agency his administration controls through political appointments.
The states' 19-page amicus brief argues the entire trajectory of the litigation demonstrates the settlement was not conducted in good faith. "The 'settlement' that purports to resolve the case is further evidence that the litigation has been colored by fraud from the beginning," the filing states.
The Charges
The attorneys general representing California and 22 other states allege the $1.776 billion settlement represents an improper attempt to circumvent constitutional limits on executive authority and enrich Trump's allies at taxpayers' expense.
Among their specific objections, the amici argue the Justice Department failed to assert several substantive defenses it had previously used in similar cases, declined to argue the case was time-barred under applicable law, and did not challenge the scope of damages or defects in Privacy Act claims. The brief also notes the settlement purports to bar IRS audits of Trump, his sons, and the Trump Organization.
The states contend the use of the Treasury Department's Judgment Fund—a permanent congressional appropriation—as the funding source for the settlement amounts to an unconstitutional end-run around normal appropriations processes.
"This Court should not countenance such a scheme," the brief argues. "Here, that abuse would open a backdoor through which the President could shovel public funds to his friends and family."
Judge Williams had ordered the parties to brief whether a case or controversy existed by May 20. Rather than respond, plaintiffs voluntarily dismissed their claims with prejudice on May 18—two days before the deadline, according to court filings.
Key Takeaways
- Trump filed suit against the IRS in January alleging improper disclosure of his tax information
- The case settled for $1.776 billion through a Treasury Department Judgment Fund rather than direct payment
- Judge Williams previously expressed doubts about whether adversarial litigation actually occurred
- States argue DOJ failed to mount standard defenses it had successfully used in similar cases
- Settlement includes provisions allegedly barring IRS audits of Trump and his family members
What's Next
At least five separate lawsuits or claims have been filed challenging the settlement. The California-led amicus brief represents one of those challenges. Judge Williams must decide whether to approve, modify, or vacate the settlement agreement. No criminal charges have been filed in connection with the fund's establishment.