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From Banking and Finance Law Daily, September 23, 2015

Senate unanimously votes to bring transparency to enforcement actions

By Stephanie K. Mann, J.D.

On Sept. 21, 2015, the Senate passed by unanimous consent the Truth in Settlements Act, a bipartisan bill introduced by Senators Elizabeth Warren (D-Mass) and James Lankford (R-Okla) to increase transparency around major settlements reached by federal enforcement agencies.

When federal agencies close investigations and settle cases, they often tout the dollar amount obtained from the offender, but in many cases that amount is misleading because of tax deductions and other “credits” built into the settlement that reduce the settlement's true value. The Act will require more accessible and detailed disclosures about these agreements to allow the public to hold regulators accountable for the true value of these deals.

“The idea behind this bill is straightforward: If the government is going to cut deals on behalf of the American people, the American people are entitled to know what kind of a deal they're getting,” said Warren. This Act would ensure that Congress, citizens, and watchdog groups can hold regulatory agencies accountable and shut down backroom deal-making, added Warren. Lankford stated that the bill will also “shed light onto settlements that result in new federal regulations, especially when taxpayers are forced to pay the cost for reimbursing legal fees for private parties that sue the government.”

Posting of information. Under the Truth in Settlements Act, federal agencies will be required to post basic information about major settlements and provide copies of those agreements on their websites. Any written public statement that an agency issues about the value of a major settlement must include an explanation of how those settlement payments are categorized for tax purposes and whether payments may be offset by “credits” for particular conduct.

To address concerns about confidentiality, the Act also requires agencies to explain publicly why confidentiality is justified in any particular instance. Agencies will be directed to disclose basic information about the number of settlements they deem confidential each year, and the legislation directs the Government Accountability Office to conduct a study of confidentiality procedures and to provide additional recommendations for increasing transparency. According to the legislators, these provisions will increase the transparency of government settlements and permit greater public scrutiny.

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