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This week, we learned that the Internal Revenue Service is considering settling a $10 billion lawsuit with president Donald Trump, who brought the suit against the agency for the leak of his old tax returns during his first term. Perhaps recognizing the optics of such a deal—the president of the United States ordering the leaders of a federal agency, whom he appoints, to personally pay him billions of dollars—would be less than ideal, Trump has supposedly settled on a new idea. In exchange for dropping his IRS lawsuit, the president wants a $1.7 billion compensation fund created that will pay out anyone who alleges the Biden administration “weaponized” the legal system against them. It’s a classic shakedown meant to enrich Trump and his political cronies, yet again.
The creation of this compensation fund, according to ABC News, is a “main condition” for Trump to even consider dropping the IRS suit, plus the $230 million in legal claims he has filed over the 2022 FBI raid of Mar-a-Lago and former special counsel Robert Mueller’s Russia investigation. The fund apparently will not be allowed to pay out Trump directly if he were to file claims related to these three legal challenges, but entities associated with him are welcome to apply for the money. Oh, and if Trump dreams up a new, unchallenged grievance against the Biden administration, he could in theory file a claim with this compensation fund and be paid out, with taxpayer dollars.
The news of a potential compensation fund comes as Trump has hit a wall with his IRS lawsuit, which was filed early this year, and roughly six years after former federal contractor Charles Littlejohn leaked the president’s, and other influential figures’, tax returns to the New York Times. Asking for $10 billion in damages, the president argued the IRS should have done more to protect his privacy and to prevent Littlejohn from leaking his personal tax information. However, Littlejohn pleaded guilty three years ago and the Biden Justice Department sentenced him to five years in prison.
The key thing is this: Trump’s Justice Department is representing the IRS in this case, presenting a staggering conflict of interest. Currently, Trump’s former personal attorney Todd Blanche is running the DOJ as acting attorney general, after Pam Bondi’s firing last month, and has been on quite a tear to prove himself acquiescent enough to his boss to win the top job. In April, Blanche revealed an indictment against the civil rights group the Southern Poverty Law Center and one week later also announced he had managed to re-indict former FBI Director James Comey on a fresh set of (absurd) criminal charges. Within days of the assassination attempt on Trump during the White House Correspondents’ Association dinner, Blanche was also quick to file a motion essentially in the voice of Trump arguing the dire need for a White House ballroom.
And if Blanche obliges Trump’s $1.7 billion compensation fund demand, it would be yet another win for him, and likely put him an inch closer to becoming the U.S. attorney general.
Trump’s lawsuit itself is also probably totally unlawful. In order to evaluate whether Trump’s lawsuit was valid, U.S. District Judge Kathleen M. Williams ordered his personal attorneys and the DOJ to separately file motions explaining in their own words if they were in conflict with one another. The deadline for those filings is Wednesday, and it has been creating an especially thorny situation for Blanche, who can’t credibly claim the DOJ stands in genuine opposition to Trump. Meanwhile, Trump is famous for his pressure campaigns meant to coerce his administration into doing as he wishes, and just this week he praised Blanche “because he kept me out of jail for years.”
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Therefore, in Blanche’s mind, a settlement with his boss, including establishing a clearly corrupt compensation fund, is his best option. It also might strip Judge Williams of any real power over the legal dispute, even if she believes the settlement was collusive in nature.
Martin Sheil served as an IRS investigator for over 30 years, including as supervisory special agent for IRS Criminal Investigation Division, and he told me that Trump does technically have the right to sue the IRS over Littlejohn’s behavior. Even as a contractor, he violated IRS privacy policy. However, “it’s unprecedented in that Trump is on both sides of the settlement,” Sheil told me. As president, Trump is the boss of the DOJ and any judge would reasonably doubt whether or not there is an adversarial relationship between the litigants. There could even be reasonable suspicion of coercion.
“If he does get the $10 billion, that becomes income to Donald Trump, and even embezzled income or extorted income is still taxable,” Sheil noted.
At one point, Trump committed to giving his settlement money to charity, acknowledging that “If I pay myself, that somehow will never look good.” (Whether he would actually do so is up for debate.) Crucially, a big charitable contribution can be used as a deduction on Trump’s personal income tax return. “So once again, we have Mr. Trump playing both sides, but Mr. Trump being the only one that actually benefits,” Sheil noted.
Whether Trump settles with the IRS, and a $1.7 billion compensation fund is established or not, Trump reminded us just this week what his priorities are. Speaking to reporters near Air Force One, he was asked if he’s taking Americans’ financial situation into account as the Iran war rages ahead with no end in sight, while gas prices skyrocket here at home and inflation nears a three-year high: “Not even a little bit,” Trump said.