Lawyers say Congress has best chance to block Trump’s ‘legal’ fund

Congress has the best chance of blocking in court the controversial $1.8 billion “legal costs” compensation fund created by the Justice Department to settle President Donald Trump’s lawsuit against the Internal Revenue Service, former federal prosecutors told CNBC on Wednesday.

Both lawyers, now in private practice, said there is ample legal basis for members of Congress to challenge the use of taxpayer funds for the fund, which allegedly pays people unfairly targeted by the Justice Department under the Biden administration.

Two days after President Trump and Acting Attorney General Todd Blanche announced the creation of the fund, skeptics across the political spectrum emerged looking for next steps to challenge the fund’s legitimacy. Challenges could wind up through the court system over the course of Trump’s presidency, or longer, and eventually reach the Supreme Court.

Opponents have various avenues for litigation that could delay payments to anti-weaponization fund claimants or even eliminate the fund itself, lawyers said.

On Wednesday, two police officers who protected the U.S. Capitol from a mob of Trump supporters on Jan. 6, 2021, sued Trump in federal court in Washington, seeking to block the fund from taking effect.

It remains to be seen whether the executives will be found legally entitled to challenge the fund, or whether their theory of why it is illegal will prevail in court.

“This is one of the most corrupt things we’ve ever seen,” said Chris Mattei, a Connecticut public defender who previously headed the financial fraud and corruption division of the U.S. Attorney’s Office.

“Essentially, what you have is a president who used frivolous lawsuits to create a pretext within a deeply corrupt Justice Department, agreed to repay the president’s allies, and set up a fund that exempted the president from any tax consequences,” said Mattei, who works at Koskoff, Koskoff & Bieder.

He was referring to a prior settlement that barred the IRS from auditing or enforcing tax returns against Trump and his family.

President Trump told reporters Wednesday that he was not involved in the settlement that created the fund, but defended the fund’s purpose, saying “people were destroyed” by the weaponization of the law against the defendants at the Capitol on Jan. 6.

“They went to prison, their families were destroyed, they committed suicide,” Trump said. “You know, both the Biden administration and the Obama administration, the Obama administration started it.”

“The Biden administration has been terrible in what it has done to people,” Trump said. “We will reimburse these people for their legal costs and expenses and everyone involved.”

“I still think the best legal argument for the fund is for Congress to say it violates the appropriations clause of the Constitution,” another former federal prosecutor, Neema Rahmani, told CNBC.

The Constitution’s Appropriations Clause prohibits the U.S. Treasury from making expenditures not authorized by law passed by Congress.

In a statement announcing the fund on Monday, the Justice Department implied that it would not violate appropriations provisions because “the fund will receive $1.776 billion, but its source comes from the Judgment Fund, a permanent appropriation that allows the Department of Justice to resolve and pay cases.”

The department also noted that the Obama administration created a $760 million fund to address claims of Native American farmers who were discriminated against by the USDA, and said there is precedent for such a fund.

Rahmani, a Los Angeles lawyer, rejected the idea that the Anti-Weaponization Fund could receive money from the Justice Department’s Judgment Fund.

“This is not a clear mandate by Congress,” he said, “and they have no statutory legislative authority. So legally the courts will be very skeptical.”

“This is not a 9/11 fund,” Rahmani said. “This is not something that is authorized or set by Congress.”

The Justice Department defended the new fund, saying in an email that “the only thing that is illegal and corrupt about this situation is the previous administration’s brazen use of federal resources as a weapon to retaliate against those with opposing political beliefs. The Department of Justice will continue to expose this legal conduct and work to ensure that those who have experienced injustice are healed.”

Individuals can also sue to stop the funds based on the appropriations clause, but private citizens often have difficulty convincing federal courts that they have legal standing to challenge government actions.

Both Mr. Rahmani and Mr. Mattei said it was unlikely that members of Congress who vote on federal spending would have ongoing problems.

Some lawmakers expressed dissatisfaction with the fund Wednesday.

Rep. Brian Fitzpatrick (R-Pennsylvania) said, “As far as I’m concerned, this is a completely unprecedented arrangement, and, as you know, it’s essentially the same political parties negotiating on both sides of the table over taxpayer dollars that are obviously going to be distributed without any involvement from Congress. So this is very concerning.”

“We’ve got to figure out what those are and figure out what we can do within those Article I powers,” Fitzpatrick told reporters at the Capitol, referring to Congress’ powers enumerated in Article I of the Constitution.

Mr. Fitzpatrick wrote to Mr. Branch on Wednesday “to express my urgent concerns” about what he called “a large discretionary fund with no oversight or Congressional approval.”

He said in the letter that the fund “represents a dangerous setback to the transparency of our institutions and our commitment to American taxpayers.”

On Wednesday, lawmakers on both sides of the aisle spoke out against the creation of the fund.

“The $1.8 billion slush fund is completely illegal and unconstitutional because Congress has never appropriated any funds,” Rep. Jamie Raskin (D-Md.) told reporters.

“The president has failed to properly handle the funds and is therefore lawless,” Raskin said.

“Second, even if Congress wanted to, and we never wanted to, we couldn’t do it, because the 14th Amendment says that the United States will not pay debts related to insurrection or insurrection against unions, and that such debts are void in the eyes of the law,” Raskin said.

Mr. Raskin introduced legislation late Wednesday that would prohibit the Justice Department from using federal funds for the fund.

“If there were to be a legal challenge to the creation of the fund…it would likely come from members of Congress who argue that the purpose of the fund is a misuse of Congress-authorized funds,” said Mattei, the Connecticut attorney.

Matei also said private entities could challenge the legality of the fund under the Administrative Procedure Act, which regulates the administrative functions of federal agencies.

A private group’s pending legal challenge to President Trump’s $400 million White House ballroom construction alleges the project violates the APA.

Matei also speculated that each state’s attorney general could file a lawsuit seeking to block the Justice Department’s funds, arguing that the funds provide alleged victims of prosecutorial overreach with financial relief unavailable to individuals with claims related to other types of government misconduct.

Matei and Rahmani said that in addition to the source of the funds, the fund’s unusual structure provides multiple springboards for legal challenges that could lead to the fund’s delay or suspension.

The fund will have five members, each appointed by the U.S. Attorney General and one member selected in consultation with Congressional leadership. The President may dismiss members of the panel.

Mattei said he expects legal challenges under the APA will be filed related to the fund’s membership, which is determined by the Department of Justice rather than Congress.

“Then there will be all kinds of lawsuits over people who have been denied compensation…and people like the police officer (who filed Wednesday’s lawsuit) will challenge the award of compensation,” Mattei said.

Matei said he believed the wide range of options available for legal challenges to the fund meant that its operations could be hampered for some time.

“I think at some point there will be a case that will be allowed to go to the discovery stage, and the funds during that case will likely be withheld during that time,” he said.

“I think there’s going to be a lot of work for plaintiffs who challenge the creation of this fund, the governance of this fund, or the way it’s supervised,” Mattei said.

— Justin Papp contributed to this report.