Trump’s Corrupt ‘Settlement’ With the IRS Hits Two Judicial Roadblocks

President Donald Trump’s clearly corrupt settlement of his lawsuit against the IRS suffered two setbacks in federal court on Friday. In the Eastern District of Virginia, Judge Leonie Brinkema temporarily barred the Justice Department from allocating money to the $1.8 billion “Anti-Weaponization Fund” described in Trump’s May 18 agreement with the IRS. And in the Southern District of Florida, Judge Kathleen Williams, who closed Trump’s case on May 18 after he dropped his lawsuit, ordered briefing on the question of whether the settlement is “a product of collusion” and “a fraud on the Court.”

Trump’s settlement includes several striking features that amply justify this judicial scrutiny. The pretext for it was a lawsuit provoked by an IRS contractor’s illegal leaking of Trump’s tax returns. That case pitted Trump against agencies he oversees, represented by the Justice Department, which he also oversees. The Anti-Weaponization Fund, which is designed to compensate Trump supporters who claim they were targeted by the Biden administration for “unlawful political, personal, and/or ideological reasons,” has nothing to do with Trump’s claims against the IRS. Nor does another element of the agreement, which promises Trump sweeping immunity from civil or criminal liability for federal offenses, including penalties for past tax violations.

Brinkema was responding to Floyd v. Department of Justice, a May 22 lawsuit filed by a former federal prosecutor and other plaintiffs who say they were “targeted” as “ideological or political opponents” of the Trump administration. They argue that Trump’s settlement is illegal and unconstitutional because it creates a “slush fund” to benefit the president’s allies, discriminates against his opponents, and draws on taxpayer money without congressional authorization.

Brinkema’s order enjoins the Justice Department from “taking any further action pursuant to the creation or operation of the Anti-Weaponization Fund, which includes the transferring of money to the Fund; the consideration of any claims submitted to the Fund; and the disbursing of any funds from the Fund.” It instructs the government to file a response to the lawsuit by Friday.

Williams was responding to a May 27 motion by 35 former federal judges appointed by presidents of both major parties. They urged Williams to reopen Trump v. IRS because “the purported ‘settlement,'” which was never submitted for her review, “raises profound questions about the parties’ candor toward the Court and manipulation of the judicial system, which threatens to undermine confidence in the administration of justice.”

Williams thought those questions were worth exploring. “A court is empowered to investigate serious misconduct as a collateral issue within the purview of Rule 11 and determine ‘whether an attorney has abused the judicial process,'” she wrote. Rule 11, which aims to “deter baseless filings,” authorizes sanctions against attorneys who file claims that are legally frivolous, unsupported by evidence, or driven by “any improper purpose.”

Under that rule, attorneys who submit complaints, briefs, or motions are required to “certify that the filing is not presented for any improper purpose,” Williams noted. “A party’s decision to file a frivolous lawsuit for the sole purpose of forcing a settlement may qualify as such an improper purpose.”

In this case, the former federal judges “advance grievous allegations that Plaintiffs voluntarily dismissed this litigation solely to avoid judicial scrutiny of a lawsuit that ‘was collusive from the start’ and was only filed to provide the imprimatur of legality for an unlawful settlement,” Williams wrote. “They point to the fact that the settlement in question includes a ‘three-paragraph addendum'” that “‘purports to [bar] the United States from pursuing claims that could have been [otherwise] asserted [against] Plaintiffs’ and highlight the fact that Defendants did not ‘even try[] to defend against Plaintiffs’ claims’ despite their active opposition to nearly identical claims in other litigation.” The former judges also “assert that Plaintiffs’ claims were ‘clearly untimely’ and therefore untenable.”

Williams ordered the government to file a response to these allegations by June 15. She said the brief should address “the charges of collusion and whether the Parties are
truly adverse,” “the assertion that the dismissal in this case was premised on deception
by the Parties,” and “the question of whether the case should be reopened because the
Court was the ‘victim of a fraud.'”

Trump’s lawsuit, which he filed on January 29, averred that IRS contractor Charles Littlejohn’s illegal disclosure of his tax returns had inflicted “at least” $10 billion in damages. The complaint did not make any attempt to back up that number, which by some strange coincidence was exactly the same as Trump’s estimate of damages in several other lawsuits involving distinctly different claims.

That was by no means the only problem with Trump’s lawsuit. Under federal law, plaintiffs must file such claims within two years of learning about an unauthorized disclosure of their tax information. Trump plainly missed that deadline, since he filed his complaint more than two years after Littlejohn pleaded guilty to illegally disclosing thousands of tax returns, including Trump’s. Alina Habba, one of Trump’s personal attorneys, attended that hearing, where she described the leak as “an egregious breach” that had cost her client “thousands of votes” in the 2020 presidential election.

IRS officials noted the tardiness of Trump’s lawsuit in an April 2026 memorandum about his case, which was one of several that had been filed in response to Littlejohn’s leaks. They also argued that the IRS should not be held responsible for the conduct of a someone who was employed by a private contractor. At the time of his leaks, Littlejohn worked for the consulting firm Booz Allen Hamilton.

The government’s lawyers did not try any of the defenses suggested by the IRS. In fact, they never officially responded to Trump’s claims at all—a failure that highlighted the egregious conflicts of interest created by the lawsuit.

“I’m supposed to work out a settlement with myself,” Trump acknowledged a few days after he sued the IRS and the Treasury Department, components of his own administration. The defendants were represented by lawyers at the Justice Department, which also answers to Trump. And under an executive order that Trump issued in February 2025, those lawyers are not allowed to “advance an interpretation of the law” that “contravenes” the president’s position.

That bizarre situation prompted Williams to question whether the case involved a genuine controversy between adverse parties, as required for the lawsuit to proceed. Williams ordered briefing on that issue by May 20. The Justice Department dodged that order by announcing the settlement two days before the deadline.

The terms of the settlement were startling. In addition to an apology from the IRS, Trump got $1.8 billion for purported victims of “lawfare and weaponization,” which the settlement and Trump himself described as abuses peculiar to Democrats. Although the Justice Department said “there are no partisan requirements to file a claim,” it seemed clear that the process would favor Trump’s friends, potentially including the Capitol rioters he pardoned on his first day in office. The five-member board charged with doling out the money would be completely under Trump’s control, and it is supposed to stop accepting claims a month and a half before he leaves office.

It is highly unusual for the Justice Department to settle a lawsuit by agreeing to pay people whose grievances are completely unrelated to the plaintiff’s claims. Such settlements, in fact, are prohibited by a rule that the Justice Department issued during Trump’s first term. That rule, which Pam Bondi, then the attorney general, reaffirmed in February 2025, generally bars settlement payments to “a non-governmental person or entity that is not a party to the dispute.” There are a few limited exceptions, none of which seem to apply here.

In case the payoffs to Trump’s allies were not corrupt enough, an addendum that Acting Attorney General Todd Blanche revealed on May 19 bars the IRS from pursuing claims against Trump stemming from “any matters currently pending or that could be pending” based on “tax returns filed” before that date. Judging from just one potential dispute between Trump and the IRS, that immunity could be worth $100 million or more.

The relief was not limited to the IRS. “The plain language of this extremely broad provision” also covers “all other claims the United States might have against” Trump, the two sons who joined his lawsuit, or their business, the former judges noted in their motion. They added that these grants of immunity are “extraordinary benefits for which no consideration was provided to the government.”

When Trump dropped his case, neither his personal attorneys for the Justice Department’s lawyers (who also work for him) informed Williams about any of this. “There is no settlement of record,” she noted when she closed the case. The Justice Department “neither submitted any settlement documents nor filed any documents ensuring that settlement was appropriate where there was an outstanding question as to whether an actual case or controversy existed.”

Williams “was deceived,” the former federal judges said in their motion. Although neither the plaintiffs nor the defendants said anything about a settlement in court, the Justice Department publicly “announced a ‘settlement’ of this action shortly after Plaintiffs filed their dismissal.”

Trump’s case against the IRS “was never an adversarial proceeding over which the Court even had jurisdiction,” the motion argued. Yet the parties used it “as a means to allow a ‘commission’ controlled by the President to dole out $1.776 billion in taxpayer dollars without constitutional or congressional authority to do so, and to confer unlawful private benefits to the President and his family by purportedly prohibiting the United States from prosecuting any and all claims against them.” They “have plainly tried to shield this conduct from necessary judicial scrutiny by short-circuiting this Court’s inquiry into whether the lawsuit is in fact an actual case or controversy.”

On the same day that Williams sought to apply such scrutiny, The Wall Street Journal reported that “Trump’s top aides have discussed whether he should kill” the Anti-Weaponization Fund “in exchange for getting immigration enforcement funding passed next month.” That bill was derailed by Republican objections to the slush fund. According to the Journal, the administration “hadn’t anticipated the level of backlash” from Republican lawmakers.