Two senators introduced legislation today to make settlements with federal enforcement agencies more transparent.
Sens. Tom Coburn (R-Okla.) and Elizabeth Warren (D-Mass.) said the Truth in Settlements Act will require greater public disclosure about agreements and it will create greater accountability concerning the actual value of deals made with federal agencies.
Federal agencies often tout the big-dollar amounts obtained from offenders. In some cases, though, tax deductions and other "credits" reduce the settlement's true value, the senators said in a written summary of the legislation.
The U.S. Department of Justice has faced criticism for the $13 billion settlement with JPMorgan Chase & Co.—the largest settlement ever with a single private company—over the bank’s role in the financial crisis. JPMorgan intends to write off a large chunk of the deal, prompting complaints from Americans For Tax Fairness.
"Taxpayers deserve to know the settlement details corporations arrange with the government, and the best place for Congress to start is with policies that enhance transparency," Coburn said in a written statement.
The bill states that written public statements that reference settlements of more than $1 million must include explanations of how those settlements are categorized for tax purposes and whether payments may be offset by "credits" for particular conduct, according to a summary of the legislation.
Companies that settle with enforcement agencies would have to disclose in federal securities filings whether they have deducted any of settlements from taxes. Federal agencies would have to post basic information about settlements and provide copies of those agreements on their websites.
"When government agencies reach settlements with companies that break the law, they should disclose the terms of those deals to the public," Warren said in a statement. "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," Warren said.
Other lawmakers have sponsored similar bills. The Government Settlement Transparency and Reform Act, was introduced in November by Sen. Jack Reed (D-R.I) and co-sponsored by Sen. Chuck Grassley (R-Iowa), Warren and three others. That bill would prohibit a tax deduction for any settlements with government entities and also change reporting requirements from the government.