U.S. Senators Elizabeth Warren (D-Mass) and James Lankford (R-Okla) have reintroduced a bipartisan measure, the Truth in Settlements Act of 2017, to increase the transparency of major settlements reached by federal enforcement agencies. Seeking to inform the public and to hold federal regulators accountable for the true value of these settlements, the bill would require more accessible and detailed disclosures and "adequate information regarding the tax treatment" of payments made by companies and individuals under settlements with the agencies.
In a May 16, 2017, release, Warren commented that the Truth in Settlements Act "will shut down backroom deal-making by shining a light on federal agency settlements with law-breaking companies." In Warren’s view, more transparency "means Congress, citizens and watchdog groups can better hold regulatory agencies accountable for enforcing laws so that everyone—even corporate CEOs—are equal under the law." Similarly, Lankford remarked, "Taxpayers deserve an open and transparent government that is accountable to the American people … Federal agencies work for the American people; agencies should show how they protected the taxpayer and followed the law, unless confidentiality is required."
Backdrop. Warren and Lankford previously presented the measure for the 114th Congress (see Banking and Finance Law Daily, April 29, 2015). Accordingly, that proposed legislation advanced through the Senate Homeland Security and Governmental Affairs Committee by voice vote and then through the Senate by unanimous consent. Afterward, the bill advanced via voice vote in the House Oversight and Government Reform Committee.
Truth in Settlements Act. According to Warren and Lankford, when federal enforcement agencies close an investigation and arrive at a settlement, they often "tout the dollar amount obtained" from the alleged offender. However, in some instances, these dollar amounts may be misleading because "the payments may be tax deductible or may include ‘credits’ the settling party can earn toward the settlement amount." Further, some settlement agreements are deemed confidential, "with key details or the settlement itself remaining undisclosed, further obstructing public transparency."
Accordingly, the proposed Truth in Settlements Act of 2017 would demand more specificity and transparency by:
- applying to all federal agency settlements that include $1 million or more in payments;
- requiring federal agencies to explain whether any portion of the settlement amount is potentially tax deductible and whether any payment may be offset by "credits" for certain conduct;
- requiring federal agencies to post information about major settlements on their websites, including a copy of the settlement agreement;
- obligating companies settling with federal agencies to disclose in their Securities and Exchange Commission filings whether they have deducted any settlement payments from their taxes;
- requiring federal agencies to explain why confidentiality is justified in any particular instance; and
- directing the Government Accountability Office to "conduct a study of confidentiality procedures and to provide additional recommendations for increasing transparency."
The senators also released an accompanying Fact Sheet, which points to past settlements by federal agencies that have allowed tax deductions or offsetting credits or that designated the agreements as confidential.
U.S. PIRG approves. In a May 16, 2017, release, the U.S. Public Interest Research Group commended Warren’s and Lankford’s reintroducing the Truth in Settlements Act for the 115th Congress. U.S. PIRG advocate Michelle Surka commented that "Republicans and Democrats agree that the transparency of our government agencies is vital to ensuring public trust, a robust democracy, and fair settlement deals." "When government agencies strike settlement deals on behalf of the American public, we deserve to know the details," she stated.
Companies: U.S. Public Interest Research Group
MainStory: TopStory EnforcementActions
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