Senators Lankford, Warren Introduce Truth in Settlements Act to Make Federal Agency Settlements More Transparent
WASHINGTON, DC – Senators James Lankford (R-OK) and Elizabeth Warren (D-MA) today introduced the Truth in Settlements Act, bipartisan legislation to increase transparency around major settlements reached by federal enforcement agencies. When federal agencies close investigations and settle cases, they release the dollar amount obtained from the offender, but in many cases the amount is misleading because of tax deductions and other ‘credits’ built into the settlement that reduce the settlement’s true value. Sometimes agreements are deemed confidential, with key details or even the fact of a settlement hidden from the public. The Truth in Settlements Act will require more accessible and detailed disclosures about agreements to allow the public to hold regulators accountable for the true value of the settlement to the taxpayers.
“The Truth in Settlements Act is needed to hold the federal government accountable for the investigations and settlements that it negotiates on behalf of American taxpayers,” said Lankford. “An open and transparent government will lead to an accountable government. Federal agencies should not hide behind top-line settlement figures – the taxpayers deserve to access how settlement decisions are made, what the true post-tax settlement dollar amount is, and why confidentiality is justified in a case.”
“When government agencies reach settlements with companies that break the law, they should disclose the terms of those deals to the public,” said Warren. “Anytime an agency decides that an enforcement action is needed, but it is not willing to go to court, that agency should be willing to disclose the key terms and conditions of the agreement. Increased transparency will shut down backroom deal-making and ensure that Congress, citizens and watchdog groups can hold regulatory agencies accountable for strong and effective enforcement that benefits the public interest.”
Under the Truth in Settlements Act, federal agencies will be required to post basic information about major settlements and provide copies of those agreements on their websites. Any written public statement that an agency issues about the value of a major settlement must include an explanation of how those settlement payments are categorized for tax purposes and whether payments may be offset by “credits” for particular conduct. Companies that settle with federal agencies will be required to disclose in their Securities and Exchange Commission (SEC) filings whether they have deducted any or all of the dollar amounts of their settlements from their taxes.
To address concerns about confidentiality, the Truth in Settlements Act also requires agencies to explain publicly why confidentiality is justified in any particular instance. The Act also directs agencies to disclose basic information about the number of settlements they deem confidential each year and directs the Government Accountability Office (GAO) to conduct a study of confidentiality procedures and to provide additional recommendations for increasing transparency.
The bill was introduced in the last Congress by Senators Elizabeth Warren and Tom Coburn (R-OK), and was voted out of the Senate Homeland Security & Governmental Affairs Committee without opposition.