Justice Dept. Ending Settlement Payouts to Outside Groups

The Justice Department will no longer allow big companies and banks to settle cases by donating to outside organizations, ending a little-known practice that had become a rallying cry for some conservatives.

In a memo released early Wednesday, Attorney General Jeff Sessions said he is ending the obscure practice that allowed companies to meet some of their settlement burdens by giving money to groups that were neither victims nor parties to the case. That money should go to the U.S. Treasury Department or victims, Sessions said.

The change is sure to please conservatives who had argued donations were going to Democratic advocacy groups and liberal causes. Republican lawmakers this year introduced a bill that would prohibit the Justice Department from requiring defendants to donate money to outside groups. They were concerned, they said, that settlements that allow for such payments bypass the congressional appropriations process.

"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 in a statement.

Bank of America, for example, was required to pay nonprofit organizations as part of a record $17 billion settlement to resolve an investigation into its role in the sale of mortgage-backed securities before the 2008 financial crisis. The groups included organizations that provide housing counseling, foreclosure prevention and community redevelopment assistance.

Gibson Guitar Corp. had to contribute to the National Fish and Wildlife Foundation to resolve a criminal investigation into allegations it illegally imported exotic wood.

In agreeing to pay $4.3 billion in criminal and civil penalties for cheating on diesel emissions tests and trying to cover it up, Volkswagen also agreed to environmental remediation and electric vehicle investment.

It's hard to say what kind of cases could be impacted by the change and how. The new policy allows only for restitution to victims or payment that "directly remedies the harm that is sought to be addressed."