<div>Senators Warren and Lankford Introduce Truth in Settlements Act to Increase Transparency of Federal Agency Settlements   Share <a href="https://twitter.com/home?status=Senators%20Warren%20and%20Lankford%20Introduce%20Truth%20in%20Settlements%20Act%20to%20Increase%20Transparency%20of%20Federal%20Agency%20Settlements%20+https%3A//www.warren.senate.gov/%3Fp%3Dpress_release%26id%3D1605"> Tweet</a>                               MAY 16, 2017  Fact Sheet <a href="https://www.warren.senate.gov/files/documents/2015-4-27Settlement_Transparency_Fact_Sheet_2015.pdf">(PDF)</a> Bill Text <a href="http://www.warren.senate.gov/files/documents/2017_05_16_Truth_in_Settlements_Text.pdf">(PDF)</a> Washington, D.C. - United States Senators Elizabeth Warren (D-Mass.) and James Lankford (R-Okla.) today reintroduced bipartisan legislation to increase transparency around major settlements reached by federal enforcement agencies. The Truth in Settlements Act will require more accessible and detailed disclosures about settlement agreements so that the public can better understand the agreements the federal government is making on their behalf. When closing investigations and settling cases, federal agencies frequently tout the dollar amount obtained from the offender. These numbers are often misleading because the payments may be tax deductible or may include "credits" the settling party can earn toward the settlement amount. Sometimes agreements are deemed confidential, with key details or the settlement itself remaining undisclosed, further obstructing public transparency. "Government accountability requires transparency, and that's what this bipartisan bill provides," Senator Warren said. "The Truth in Settlements Act will shut down backroom deal-making by shining a light on federal agency settlements with lawbreaking companies. More transparency means Congress, citizens and watchdog groups can better hold regulatory agencies accountable for enforcing laws so that everyone - even corporate CEOs - are equal under the law." "Taxpayers deserve an open and transparent government that is accountable to the American people," Senator Lankford said. "The Truth in Settlements Act will ensure the federal government is held accountable for investigations and settlements that are often decided behind closed doors. Federal agencies work for the American people, agencies should show how they protected the taxpayer and followed the law, unless confidentiality is required." The Truth in Settlements Act will increase transparency of government settlements and permit greater public scrutiny by requiring federal agencies to post basic information about major settlements and provide copies of those agreements on their websites. Any written public statement issued by an agency about the value of a major settlement will be required to 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 obligated 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. Additionally, this legislation will require agencies to openly explain why confidentiality is justified in any particular instance. The Act will also direct 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 originally introduced in 2014 by Senators Elizabeth Warren and Tom Coburn (R-Okla.), and advanced through the Senate Homeland Security &amp; Governmental Affairs Committee by voice vote. It was then reintroduced in 2015 by Senators Warren and Lankford, advancing once again through the Senate Homeland Security and Governmental Affairs Committee by voice vote and then through the Senate by unanimous consent. The Senate bill was then advanced via voice vote in the House Oversight and Government Reform Committee. ### TRUTH IN SETTLEMENTS ACT  <div class="indented"><div class="indented">Fact Sheet</div></div> Federal Agency Settlements that Allow Tax Deductions <ol style="list-style-type: decimal;"><li>The Department of Justice (DOJ) and other entities recently settled a case with JPMorgan Chase for $13 billion. However, it appears that approximately $11 billion of the settlement amount will be tax deductible, which reduces the ultimate value of the settlement to the taxpayer by up to $4 billion.1</li></ol> <ol style="list-style-type: decimal;"><li>Two year ago, a district court in Massachusetts refunded $50.4 million in taxes to a health care company that had settled with the DOJ after allegedly defrauding Medicare and other federal healthcare programs for years. After settling, the company sought to deduct nearly all of its $385 million settlement payment from its taxes. Although the Internal Revenue Service (IRS) initially blocked a portion of the deduction – arguing that the portion was intended to be punitive and therefore was non-deductible – the court reversed the IRS’s decision because the DOJ had not clearly specified in the agreement that the payments were to be punitive.2</li></ol> Federal Agency Settlements that Include “Credits” for Routine Conduct <ol style="list-style-type: decimal;"><li>In 2013, the Federal Reserve and Office of the Comptroller of the Currency claimed that they settled for $8.5 billion with 13 mortgage servicers accused of illegal foreclosure practices. Of that $8.5 billion figure, $5.2 billion – over 60% of the settlement value – was in the form of “credits” for what the agencies described as “loan modifications and forgiveness of deficiency judgments.” But that vague public statement left out a key detail: servicers could simply rack up those credits by forgiving mere fractions of large unpaid loans. For example, a servicer that wrote down $15,000 of a $500,000 unpaid loan balance would get a credit for $500,000, not $15,000. 3 That undisclosed method of calculating credits could end up cutting the overall value of the $8.5 billion settlement by almost 60%.</li></ol> <ol style="list-style-type: decimal;"><li>In February of 2012, the $25 billion National Mortgage Settlement included $17 billion in credits for activities such as demolishing homes that were already standard practice for the settling banks. Credits represented nearly 70% of the settlement value.4</li></ol> Confidential Settlements <ol style="list-style-type: decimal;"><li>The Federal Housing Finance Agency (FHFA) recently reached a settlement with Wells Fargo &amp; Co. for $335 million for allegedly fraudulent sales of mortgage-backed securities to Fannie Mae and Freddie Mac. That figure is just a fraction of what other big banks paid to settle with FHFA for liability arising from their sale of mortgage-backed securities.5 But because the agency deemed the settlement confidential,6 Congress and the public cannot scrutinize the deal.</li></ol>    <ol style="list-style-type: decimal;"><li>Karen Freifeld, Aruna Viswanatha &amp; David Henry, J.P Morgan Agrees $13 Billion Settlement Over Bad Mortgages, Reuters (Nov. 19, 2013), at http://www.reuters.com/article/2013/11/20/us-jpmorgan-settlement-idUSBRE9AI0OA20131120.</li></ol> <ol style="list-style-type: decimal;"><li>Fresenius Medical Care, Inc. v. United States, No. 08-12118-DPW, 2013 WL 2068352 (D. Mass. May 10, 2013).</li></ol> <ol style="list-style-type: decimal;"><li>Julie Schmit, Foreclosure settlement to distribute $3.6 billion, USA Today (Feb. 28, 2013), at http://www.usatoday.com/story/money/business/2013/02/28/foreclosure-settlement-banks/1954871/.</li><li>Shaila Dewan and Jessica Silver-Greenburg, Foreclosure Deal Credits Banks for Routine Efforts, N.Y. Times (Mar. 27, 2012), at http://www.nytimes.com/2012/03/28/business/foreclosure-deal-gives-banks-credit-for-routine activities.html?adxnnl=1&amp;adxnnlx=1354723516-feqZr2sGpNkDI5QxtMUkYA&amp;_r=0.</li><li>Shanydi Rice, Wells Fargo Settles with FHFA for $335 Million, Wall Street Journal (Nov. 6, 2013), at http://online.wsj.com/news/articles/SB10001424052702304448204579181732009850594.</li><li>Dakin Campbell, Wells Fargo Said to Settle FHFA Claimsfor Less Than $1 Billion, Bloomberg (Oct. 31, 2013), at http://www.bloomberg.com/news/2013-10-31/wells-fargo-said-to-settle-fhfa-claims-for-less-than-1-billion.html.</li></ol></div>

Warren, Lankford Announce Settlement Transparency Bill

U.S. Senate

In a May 16 release, Sens. Elizabeth Warren, D-Mass., and James Lankford, R-Okla., announced the Truth in Settlements Act, which would require the disclosure of information involving federal agencies, including whether settlement payments are tax-deductible.

In a May 16 release, Sens. Elizabeth Warren, D-Mass., and James Lankford, R-Okla., announced the Truth in Settlements Act, which would require the disclosure of information involving federal agencies, including whether settlement payments are tax-deductible.

In a May 16 release, Sens. Elizabeth Warren, D-Mass., and James Lankford, R-Okla., announced the <a href="/lr/resolve/source-document/17gvr" title="Source document">Truth in Settlements Act</a>, which would require the disclosure of information involving federal agencies, including whether settlement payments are tax-deductible.

In a May 16 release, Sens. Elizabeth Warren, D-Mass., and James Lankford, R-Okla., announced the Truth in Settlements Act, which would require the disclosure of information involving federal agencies, including whether settlement payments are tax-deductible.