Trump administration's compensation fund may violate former AG's directive

The Trump administration’s $1.776 billion compensation fund for alleged “victims” of “weaponization” appears to violate and contradict a mandate set out by ousted Attorney General Pam Bondi last year, according to legal experts.

Recipients of the fund, announced by Acting Attorney General Todd Blanche last week as part of a settlement after President Donald Trump abandoned his $10 billion lawsuit against the IRS, will likely remain a secret.

While Blanche — who, like Bondi is a former Trump personal attorney — has stated that Trump and his family are not eligible for the fund, the president’s donors, allies, and supporters have not been ruled out.

Now, former Justice Department officials have pointed to a February 2025 directive issued by Bondi that appears to contradict the compensation fund because it could see major payouts awarded to people or groups who are not involved in an underlying lawsuit, according to The New York Times.

The memo, titled “Reinstating the Prohibitions on Improper Third Party Settlements,” sets out how the department should not use settlements “to require payments to nongovernmental, third-party organizations that were neither victims nor parties to the lawsuits,” except in limited circumstances.

“The new fund, however, appears to be structured to steer a large pot of money to third-party claimants, most of whom have not filed suits and may never file suits now that there is a fund,” The Times reports.

“I’ve just never seen litigation risk outside the four corners of the complaint being used as justification for something in a totally unrelated lawsuit,” Jennifer Ricketts, who worked at the Justice Department’s civil division, told the newspaper.

Bondi’s memo aimed to end arrangements made during the Obama administration that saw money handed to nongovernmental organizations, which conservatives viewed as “advancing ideological goals,” The Times reports.

A Justice Department spokesperson said the fund “operates well within the bounds of the memo’s guidelines” in a statement to The Independent.

“AG Bondi’s memo on improper third-party settlements was issued in response to what happened in cases like the Obama-era Keepseagle settlement, where hundreds of millions of taxpayer dollars were irresponsibly disbursed to NGOs that never made claims and did not even purport to be victims,” the spokesperson said.

“The memo’s language expressly allows non-party ‘victims’ to receive funds – and claims of being a victim are precisely what the claims commission will be reviewing,” the statement added.

Blanche said the compensation fund was “unusual” but “not unprecedented” when confronted by Democrats this week. He gave the example of an Obama-era compensation fund to end a decades-long class-action lawsuit from Native American farmers who experienced discrimination by the federal government.

Trump’s agreement, which applies only to existing audits, could spare the president and his family from a more than $100 million tax penalty.

The president said Wednesday that he was not involved int he settlement. “I guess they made a settlement of some kind. I wasn’t involved in the settlement, I could have been involved, but I didn't choose to be, so they made a settlement,” he told reporters.