The Trump administration announced on Monday the establishment of a $1.776 billion fund to compensate people who claim they were targeted by the Biden Justice Department, creating a potential pipeline to funnel taxpayer money to his allies and supporters.
The highly unusual plan — slammed by critics as a political slush fund — came after President Trump withdrew his lawsuit demanding at least $10 billion against the Internal Revenue Service, an apparent effort to skirt oversight by the judge in the case as he moves toward arranging a fund to funnel taxpayer money to his allies and supporters.
The fund, with its symbolic dollar value, is intended “to provide a systematic process to hear and redress claims of others who suffered weaponization and lawfare,” a department spokesman said in statement.
“The machinery of government should never be weaponized against any American, and it is this department’s intention to make right the wrongs that were previously done while ensuring this never happens again,” said Todd Blanche, the acting attorney general. “As part of this settlement, we are setting up a lawful process for victims of lawfare and weaponization to be heard and seek redress.”
The dismissal and creation of the fund is the latest legal turn in an extraordinary attempt by Mr. Trump to win billions of dollars in damages from a government agency he controls.
Mr. Trump’s withdrawing his suit was a remarkable end-run around the legal system, effectively stripping Judge Kathleen M. Williams, who has been overseeing the case in the Southern District of Florida, of her normal role in approving a formal settlement agreement. By dismissing the case in its entirety, Mr. Trump essentially freed his hand to reach a deal with administration officials without any judicial oversight.
Judge Williams had been considering dismissing Mr. Trump’s suit on her own because he effectively controls both his personal lawyers bringing the complaint and the government lawyers who are supposed to respond to it.
She had ordered the Justice Department, which has yet to make an appearance or filing in the case, and Mr. Trump’s lawyers to brief her by Wednesday to explain whether they were actually in opposition — or were colluding to achieve a mutually agreeable outcome.
In their filing on Monday, Mr. Trump’s lawyers said their dismissal meant that “no judicial analysis is appropriate” for the suit.
The substance of Mr. Trump’s suit stems from the leak of his tax returns to The New York Times in 2019. Mr. Trump, two of his sons and his family business argue that the I.R.S. should have done more to prevent a former contractor from leaking tax information to The Times and ProPublica.
While federal law allows for people to sue the I.R.S. when their tax information is leaked, legal experts saw clear flaws in Mr. Trump’s suit and said that the Justice Department had defended other, similar cases brought by plaintiffs who were not the president.
Just minutes after Mr. Trump’s lawyers informed Judge Williams of their intention to dismiss the suit, 93 Democratic lawmakers filed court papers accusing the Justice Department of having “colluded” with Mr. Trump and asking the judge to throw out the case herself.
“Never in the history of the United States has a sitting president sought a monetary settlement from the government he leads — let alone sought many billions of dollars in taxpayer funds,” lawyers for the lawmakers wrote.
The filing by the lawmakers suggested how jarringly Mr. Trump’s move had short-circuited normal court business. The president’s lawyers essentially beat the lawmakers to the draw by dismissing the case on his own, hamstringing their ability to stop a settlement from going through.
Andrew Duehren covers tax policy for The Times from Washington.
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