Legal twisting and turning
On May 19, the US Department of Justice announced that it had settled a lawsuit brought by Donald Trump, two of his sons and his real estate company against the US Treasury and the IRS. The settlement included the creation of a fund of $1,776,000,000 to be distributed under the control of a committee appointed by Donald Trump to claimants who included, among others, rioters and insurrectionists from January 6, 2021. The settlement would also end any prosecution by the IRS or Treasury for Trump family or company tax crimes.
The Trumps filed their lawsuit in the first place because a contractor working for the IRS had, in 2018, leaked information about Donald Trump's and his father's tax filings over many decades to the New York Times. The Times ran a comprehensive investigation. It published a long and damning article documenting tax evasion – a serious financial crime with serious penalties – by both men and the company they operated.
Donald Trump, Eric Trump and Donald Trump Jr. didn't like the story. Their lawsuit asked for ten billion dollars in damages, to be paid by the US Treasury, and thus by the US taxpayer.
The suit did not dispute the core facts that the Times reported – that Trump family history of tax evasion. Instead, it argued (correctly) that release of private tax information was illegal.
One problem with the lawsuit was that an outside contractor, not an employee of the government, leaked the information. If guilt and penalty were to be assessed, should the government be liable, or the person and his employer?
A second, and bigger, problem was that Donald Trump, as President of the United States, oversaw the Treasury and the Internal Revenue Service. He had appointed leaders and issued orders controlling both. The acting US Attorney General who oversaw the Department of Justice was, likewise, his appointee. Donald Trump was suing two organizations that he controlled, using a Justice Department that he controlled. The law does not allow "collusive lawsuits," where two parties work together to extract penalties from a third party (once again: you and me!).
Just before May 19, it appeared that US District Judge Kathleen Williams, in whose court the suit was being heard, might dismiss the case on that basis. She had asked lawyers from both sides to brief her on the matter, and had asked plaintiff counsel (the Trump side) in particular to prove to her that it was not a collusive lawsuit.
Instead of filing those briefs, Trump's lawyers announced that they were withdrawing their suit.
The facts at this step are crucial: The filing in Judge Williams' court announced no settlement – no mention of money to be paid to anyone, no intention to suspend any other lawsuit or investigation. The settlement was only announced after the judge permitted the suit to be withdrawn.
In the wake of the May 19 settlement announcement, there's been enormous public backlash over saddling the public with a $1.8 billion bill to pay out insurrectionists who committed crimes on January 6. Even Republicans in Congress hated the idea and were willing to say so out loud. The Justice Department and the President have backed away, some, from that fund.
But the Trump family still aims to immunize itself from prosecution for tax crimes.
This week, the story took a new and interesting turn. A collection of retired federal judges filed a new motion, demanding that the dismissal be rescinded. They argue that the Justice Department and Trump attorneys lied to the court when it filed its dismissal by saying nothing of the purported "settlement." Had Williams dismissed the suit as collusive, there'd have been no fund, no immunity on tax crimes. The motion argues that by not telling the judge about those plans, the Trumps and the US Department of Justice perpetrated a fraud upon the court.
Even if you're not a lawyer, even if you don't normally read legal motions, you might take a look at this one. You can jump straight to Section II, Introduction, where you'll see some damning language used to describe the plaintiffs and their lawyers.
Judge Williams has demanded answers from the DoJ and from the Trumps in response to the new motion.
The acting US Attorney General right now is Todd Blanche. "Acting" means that Trump appointed him, but he hasn't been confirmed by the Senate. He signed the settlement agreement. If Williams finds that there was a fraud perpetrated on the court, then the parties – the Trumps, their lawyers – will be liable, but so will he, personally, be subject to sanction by the court.
This is a huge deal. The lawsuit and the settlement stand a very good chance of being thrown out altogether. That'd be a huge blow to the Trump family, putting them back at risk of prosecution for tax evasion. But it would also be an enormous blow to a weaponized and incompetent Justice Department if the guy who runs it – the guy responsible for enforcement of the law in the US – is found to have broken the law and lied to the court.
Stay tuned.