A federal judge on Monday struck down the settlement agreement reached earlier this year between the Internal Revenue Service and President Donald Trump, wiping out the legal foundation for a controversial $1.7 billion fund that had been established to compensate alleged victims of government weaponization.
The fund had quickly become the focus of intense criticism after its creation, with opponents arguing it amounted to a taxpayer-funded “slush fund” that could be used to benefit individuals and organizations aligned with the president. Amid the backlash, Trump’s Justice Department ultimately abandoned the program.
In a sharply worded ruling, U.S. District Judge Kathleen M. Williams concluded that the case was never a legitimate legal dispute requiring judicial intervention. Instead, she argued that the lawsuit and resulting settlement appeared designed to secure the appearance of judicial approval for an agreement that lacked a valid legal basis.
“This action was never about a party seeking judicial resolution of a legal issue or a factual dispute,” Williams wrote. “The nature of the suit itself and the conduct of the Parties and counsel from its filing make plain that this was an attempt to use the Court to provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the President and to earmark billions of dollars from American taxpayers to redress grievances not defined in the law.”
The judge’s opinion went beyond nullifying the agreement. Williams also recommended that disciplinary action be considered against the attorneys involved in negotiating and presenting the settlement to the court.
The original settlement stemmed from Trump’s lawsuit against the IRS over media organizations obtaining copies of his tax transcripts. That lawsuit was ultimately resolved through an agreement between Trump and the Justice Department, which represented the federal government.
Williams concluded that the litigation itself had been pursued for an improper purpose rather than to resolve an actual legal controversy.
“Court finds that this matter was brought for an improper purpose—to gain the imprimatur of judicial legitimacy for a ‘settlement’ that had no viable basis in law or fact,” the judge wrote, criticizing both the Justice Department and the IRS over how the agreement had been handled.
The ruling also singled out Acting Attorney General Todd Blanche, who previously served as one of Trump’s personal attorneys. Williams cited Blanche’s public comments regarding the compensation fund, arguing they suggested he believed he could speak on behalf of both parties involved in the litigation.
According to the judge, one of Blanche’s statements “demonstrates his confidence that he could speak for, and bind, both sides of this matter.” She added that this “certitude supports the conclusion that the Parties worked in tandem and were never actually adverse.”
The relationship between Trump’s lawsuit and the Justice Department’s handling of the case had already sparked widespread criticism when the settlement was first announced. Because Trump’s own Justice Department negotiated the agreement while being led by a close personal ally and former defense attorney, critics argued the arrangement raised concerns about the department’s independence.
Monday’s ruling effectively invalidates the settlement and erases the legal basis for the now-abandoned $1.7 billion fund. In addition to rejecting the agreement, Judge Williams’ opinion raises questions about the conduct of those involved in crafting the settlement and recommends that disciplinary authorities review the actions of the attorneys who participated in the case.
