Federal Judge Nukes Trump’s Self-Dealt IRS ‘Settlement,’ Sends Lawyers To The Bar

from the it’s-all-corrupt dept

Well, well, well. Last month we noted that Judge Kathleen Williams had agreed to reopen the incredibly sketchy case where Donald Trump (as President of the United States) sued his own IRS (which he controls) for $10 billion because a contractor (who was caught, tried, convicted, and is currently serving his sentence) had leaked tax information on thousands of the country’s wealthiest people, including Trump, to the media. When Judge Williams had initially called out the problems of the lawsuit (namely that there didn’t seem to be any cause or controversy, given that both sides were controlled by Donald Trump), the Trump-controlled Justice Department lead by Acting Attorney General Todd Blanche “settled” the case by setting aside a $1.776 billion fund for MAGA faithful as well as signing an “agreement” that said the IRS could never go after Donald Trump, his companies, or his family for past tax code violations.

This needs to be repeated, because it’s almost impossible to comprehend the sheer audacity of the corruption. Donald Trump sued his own government, asking for $10 billion. Then he had his own government “settle” the case with himself, granting him a massive benefit (which many argued was worth over $100 million, based on back taxes he might owe). It’s just an astounding level of graft. While the judge initially suggested there wasn’t much she could do about it, after some former judges sent a letter calling the whole thing a fraud on the court, Judge Williams agreed to reopen and revisit the matter.

And has she ever.

The 56-page ruling is pretty harsh against the lawyers involved, though they well deserve it.

In the very first paragraph of the Complaint, Plaintiffs introduce their claims stating, “President Trump served as the 45th President of the United States, and is the 47th President of the United States.” (DE 1 ¶ 1). They then go on to state that “President Trump brings this suit in his personal capacity.” (Id.) After a review of the record, and the Parties’ statements, the Court declines to adopt or accept the credulous exercise of divorcing President Trump’s current job title from an understanding of what happened here.

But perhaps the most startling misstatement advanced by Plaintiffs is their characterization of this case as “ordinary.” (DE 89 at 9). The Parties here are not private actors to a mine-run dispute, recounting their proficiency in the art of the deal they negotiated. Lead Plaintiff and Defendants are public servants—the pinnacle of the Executive Branch—sworn to uphold the law, faithfully perform the duties of their office, and protect the interests of the American public. The issue before the Court is whether, instead, they ignored ethical norms, court rules, and legal authority to manipulate the judicial process. The issue is whether they did so to gild their efforts to gain unprecedented access to the public fisc with the patina of legitimacy. There is nothing “ordinary” about this case; it is the very definition of sui generis.

The court also calls out, in a footnote, the absolute chutzpah of Donald Trump’s lawyers, who whine that the former judges who got her to reopen the case only did so for “political motivations.”

Plaintiffs also—with no apparent sense of irony—criticize the non-party movants’ political motivations, their previous disinterest in the case, and their purported inappropriate promotion of “abstract grievance[s].”

The judge then goes through a detailed analysis of why parties are supposed to be adversarial to each other to get into court, and the problems that occur if that’s not the case. And also notes that courts can investigate if the parties are truly adversarial. And here, it’s not even close.

The Complaint purports to present a controversy between Plaintiffs—President Donald J. Trump, Donald J. Trump Jr., Eric Trump, and the Trump Organization, LLC— and Defendants—the Internal Revenue Service and United States Treasury Department—claiming Defendants caused Plaintiffs reputational and financial harm for which they now seek “at least $10,000.000,000.00.” (DE 1 ¶ 11; Id. at 26). At first glance, the Complaint seemingly satisfies Article III by establishing causes of action “arising under . . . the laws of the United States[.]” U.S. CONST. ART. III, § 2. However, closer examination reveals that a justiciable case or controversy is absent; Plaintiffs and Defendants are not adverse because one party controls this litigation. See Muskrat, 219 U.S. at 361 (noting that judicial power only extends to “actual controversies arising between adverse litigants[.]”). In reaching this conclusion, the Court determines that Plaintiffs improperly employed this lawsuit to justify a particular award in this matter—access to taxpayer funds and exemption from audits and other investigations—which was accomplished by leveraging control over Defendants.

The judge also points to the Supreme Court’s recent ruling in the Slaughter case that the president has basically full control to fire heads of agencies as further proof:

Here, Defendants are the Treasury Department—an Executive agency—and the IRS, the largest bureau of the Treasury Department. Both Defendants are unquestionably part of the Executive Branch and ultimately answer to its Chief Executive, President Trump. President Trump’s authority to appoint and remove federal officers as he sees fit is evidence of his ability to exercise control over Defendants. See U.S. CONST. ART. II, § 2. Article II explicitly states that “[t]he President shall . . . appoint . . . all Other Officers of the United States, whose Appointments are not herein otherwise provided for[.]” Id.; see also Cunningham v. Neagle, 135 U.S. 1, 63 (1890) (noting that the ministerial officers are marshals of the United States who are “appointed by the president,” and are “removable from office at his pleasure[.]”). While the Constitution strategically allows “individual executive officials” to “wield significant authority,” such “authority remains subject to the ongoing supervision and control of the elected President.” Seila Law LLC, 591 U.S. at 200; see also Br. for Pet’r at 10, Trump v. Slaughter, 609 U.S. __ (2026) (No. 25-332) (“Article II requires that the President control all executive power—especially the authority wielded by agency heads, who are ‘the most important’ of the President’s subordinates and who ‘must be the President’s alter ego[s]’ in their agencies.”) (citing Myers, 272 U.S. at 133); id. at 2 (“Removal is the President’s indispensable tool of control.”). President Trump’s supervisory authority directly implicates two key individuals acting on behalf of Defendants: Scott Bessent, 22 the Secretary of the Treasury Department and Acting Commissioner of the IRS, and Frank J. Bisignano, 23 the Chief Executive Officer of the IRS. Plaintiffs cannot argue before the Supreme Court that Executive Branch actors “unquestionably exercise[] executive power, and must therefore be controlled by the Chief Executive[,]” Slaughter, 609 U.S. at 27, and then here, argue that the Parties are sufficiently adverse to establish an actual case or controversy.

Secretary Bessent, in particular, is subject to President Trump’s actual and direct control in both of his representative roles. First, as Secretary of the Treasury Department, Bessent is a member of President Trump’s cabinet. In this role, Secretary Bessent is “the President’s alter ego” in the matters of the Treasury Department “where the President is required by law to exercise authority.” Myers, 272 U.S. at 133. Consequently, Bessent is under President Trump’s direct control as an appointed member of his cabinet.

While the parties in this case pretended they were adverse to each other, Judge Williams points out that the DOJ’s actions in court do not match up with what you would expect the DOJ to do in any similar case from someone who was not the president, pointing to a different case — one that Trump’s lawyers had suggested showed that this case was legit.

Plaintiffs seem to suggest that the course of litigation in Griffin, supports their position on adverseness, claiming that the plaintiff in Griffin asserted “substantially identical allegations against the same defendants, arising from the same course of conduct by the same individual.” …. unlike this case, the Griffin defendants challenged the plaintiff’s allegations…. In Griffin, the defendants (the same IRS and Treasury Department sued here) contested the plaintiff’s privacy act claims by arguing preemption and, alternatively, the plaintiff’s failure to plead actual damages. Id. The Griffin defendants also challenged the section 7431 claim, arguing the complaint was a shotgun pleading based solely on conclusory allegations. Id. After the motion to dismiss was granted in part and denied in part, the government filed an answer asserting a sovereign immunity defense and denying several allegations in the amended complaint….

[….]

Considering the brief chronology, the silent docket, and Defendants’ deviation from basic litigation strategies pursued in similar cases, the Court must conclude that Defendants chose not to “advance an interpretation of the law as the position of the United States that contravenes” President Trump’s opinion regarding this lawsuit. See Executive Order § 7. It is clear that obeisance to the mandate of his Executive Order has been fulfilled by Defendants’ actions (or more accurately, inaction) in this case. Therefore, not only does the Executive Order demonstrate President Trump’s espoused control over Defendants’ conduct generally in litigation, it also demonstrates President Trump’s actual control in this litigation.

The judge also goes after Todd Blanche for claiming that there was no way for the court to review the “settlement” agreement, noting that they could have easily submitted it to the court for the judge to review:

The Court is extremely troubled by the testimony given by Acting Attorney General Blanche on May 19, 2026. In response to why the “settlement agreement” had not been submitted to this Court for review, he stated that “there is no judge” because the case had been dismissed and, therefore, there was “no mechanism” for reviewing the agreement. See supra note 13. While temporally accurate, this answer is, at best, misleading and, at worst, disingenuous. The Court was available to review any pleading by any Party at any time during this lawsuit. And if Acting Attorney General Blanche had thought the dismissal was improvidently granted or thought Plaintiffs misspoke when they said, “no judicial analysis is appropriate,” (DE 52 at 2), he only had to file an appearance and ask for relief.

And then there’s sketchiness of the lawyers involved in the case:

The Court’s conclusion regarding the Parties’ shared interest is also underscored by the circumstances surrounding the execution of the “settlement agreement.” First, the “settlement agreement” is signed on behalf of Plaintiffs by Daniel Epstein (“Mr. Epstein”), a former White House Senior Associate Counsel and Special Assistant to President Trump from 2017 until 2020. Notably, Mr. Epstein was never counsel of record in this case; the Complaint’s signature block identified him as counsel41 for Plaintiffs but represented that his pro hac vice application was “forthcoming.” (DE 1 at 27). Since no such application was filed with the Court, and since, in other matters pending in Florida and elsewhere, Mr. Epstein sought pro hac admission within weeks of filing the complaint, the Court can only surmise that Mr. Epstein was aware that he would never need to appear and litigate the merits of Plaintiffs’ claims.

That’s on “Plaintiff Donald Trump’s side.” As for “Defendant Donald Trump” well…

Second, the “settlement agreement” is signed on behalf of Defendants by Stanley Woodward, Jr., the current Associate Attorney General at the DOJ, and Acting Attorney General Blanche. Before he went to the DOJ, Associate Attorney General Woodward represented several individuals charged in connection with the events of January 6, 2021, at the United States Capitol.43 He also represented Walt Nauta, who was President Trump’s personal aide and a co-defendant in the criminal matter involving the return of classified documents at Mar-a-Lago.44 Before his appointment to the DOJ, Acting Attorney General Blanche served as President Trump’s personal criminal defense attorney in several high-profile matters. See, e.g., United States v. Trump, No. 23-cr80101 (S.D. Fla. 2023) (“Mar-a-Lago Documents Case”); United States v. Trump, No. 23-cr-00257 (D.D.C. 2023) (the criminal case charging President Trump with conspiring to overturn the 2020 election and for attempting to obstruct with the election’s results before, during, and after January 6, 2021); People v. Donald J. Trump, No. 71543-23 (N.Y. Sup. Ct. N.Y. Cnty. Dec. 3, 2024) (the “hush money” case that raised allegations of President Trump falsifying business records).

The court points out that ethics rules for lawyers in Florida discuss conflict-of-interest concerns regarding lawyers who work in government and for private parties, and make it clear that government lawyers should avoid being involved in cases that might appear to benefit former clients — as obviously is happening here. The judge wonders why these government lawyers did not recuse themselves due to the obvious conflict. She even cites, in a footnote, the claim by the Justice Department that Blanche would recuse himself from any cases involving Trump:

As a Justice Department spokeswoman stated: “[Blanche] is recused from many cases before DOJ. In any cases that are still ongoing where he previously represented someone, he is recused.” Id. In this case, however, notwithstanding his prior representation of President Trump, Blanche did not recuse.

The court also suggests that the “get out of IRS jail free” card “settlement” violates the emoluments clause of the Constitution:

Moreover, the conferral of possibly millions of dollars in tax relief and corollary benefits potentially violates Article II, Section I of the United States Constitution, a limitation surely known by former White House Counsel and the current Acting Attorney General. See U.S. CONST. art. II, § 1, cl. 7: “The President shall, at stated Times, receive for his Services, a Compensation, which shall neither be encreased nor diminished during the Period for which he shall have been elected, and he shall not receive within that Period any other Emolument from the United States, or any of them.”53 No sitting President has ever sued federal agencies completely subject to his control for monetary benefits, or any benefits that inure to him, his family, and associates. The failure of any attorney in this case to address, on this docket, the relationship of this Article II proscription with the benefits conferred by the “settlement” is a glaring omission that speaks to the control of the Lead Plaintiff.

Similarly, Todd Blanche then going before Congress to say the MAGA slush fund was dead also raises alarms, given that if he were truly representing the government independent of Donald Trump, and this was part of a negotiated settlement, wouldn’t both parties need to “agree” to adjust the “settlement”? The fact that Blanche unilaterally declared the fund dead highlights how this was one side negotiating with itself.

Another signal that adverseness was absent was Acting Attorney General Blanche’s unilateral repudiation and severance of the purported “Anti-Weaponization Fund” associated with this lawsuit. Two weeks after the dismissal, in testimony before the House of Representatives, Acting Attorney General Blanche conceded that the DOJ was “not moving forward with the fund, period.” Acting Attorney General Blanche’s decision, which has not been memorialized or adopted by Plaintiffs or their lawyers, demonstrates his confidence that he could speak for, and bind, both sides of this matter. This certitude supports the conclusion that the Parties worked in tandem and were never actually adverse. Indeed, “a party may not unilaterally repudiate a settlement agreement once it is reached.” Reed by and through Reed v. United States, 891 F.2d 878, 881 n.3 (11th Cir. 1990). “It is ‘hornbook law’ requiring no citations of authority, except common sense, that a contract once entered into may not thereafter be unilaterally modified; subsequent modifications require consent and ‘a meeting of the minds’ of all of the initial parties to the contract whose rights or responsibilities are sought to be affected by the modification.” Tropicana Pools, Inc. v. Boysen, 296 So. 2d 104, 108 (Fla. Dist. Ct. App. 1974). Acting Attorney General Blanche’s apparent capacity to speak for both Plaintiffs and Defendants, sign a “settlement” document on behalf of all Parties to this action, and then repudiate part of that agreement, demonstrates that there was only one party whose interests were being represented throughout this case.

The court, tackling every angle, also points out that Donald Trump easily could have filed this lawsuit in the multiple years since the tax returns were leaked, but instead, waited until he was back in the White House and in control over the DOJ and the IRS:

Notably, had President Trump (and his then-lawyers Alina Habba and Todd Blanche) brought this lawsuit in a timely fashion while he was a private citizen, this litigation understandably might have been resolved in a 109-day time span. But that is not what happened. Instead, President Trump did not pursue his claims until he once again occupied the White House and had appointed his former lawyer, and the former lawyer of persons who are putative beneficiaries of the “Anti-Weaponization Fund” to prominent positions in the DOJ. These officials then negotiated on behalf of the United States, with his current lawyers, including his former White House Counsel to reach a “settlement.” It is risible to suggest that there was ever adverseness between the Parties.

The judge even calls them out for “saying the quite part out loud” in basically admitting that they were negotiating with themselves:

In dismissing the non-parties’ claims of collusion, Plaintiffs reveal the true position of the Parties and say the quiet part out loud: “Regardless of whether Plaintiffs had ever filed this action, the Government and Plaintiffs still had the power to resolve all disputes between the parties.” (DE 89 at 15). The power to resolve was never a question before this Court. Whether Executive Branch actors can privately agree to give themselves and their former clients blanket immunities and billions of dollars in tax monies for legally undefined grievances was never an issue advanced to this Court. The question is whether the Parties could do so by claiming to be adverse and engaging the legitimacy of a court proceeding. The answer is a resounding “no”: the Lead Plaintiff and the Government are one, a fully realized unitary interest. Because “Plaintiffs have no answer for the fact that the [L]ead Plaintiff, President Trump, directs and controls the Defendants[,]” this “renders this lawsuit non-adversarial, collusive, and jurisdictionally improper.”

And because this fact was so obvious and so insurmountable, the Court finds that this matter was brought for an improper purpose—to gain the imprimatur of judicial legitimacy for a “settlement” that had no viable basis in law or fact.

The judge then explores whether the lawyers should be sanctioned for filing such a sham lawsuit, and decides that they should be. The sanctions involve referring some of the lawyers to their respective Bar associations for review (including having the court clerk mail this ruling to the NY Bar in reference to Todd Blanche), barring Trump’s lawyer Daniel Epstein (mentioned above) from seeking admission in Florida Southern District cases for one year, and prohibiting both Trump and the government from referring to the agreement as a “settlement agreement.”

The Parties are prohibited from referring to the purported “settlement agreement,” or using, offering, admitting, or citing any of its provisions in any judicial, administrative, regulatory, arbitration, or any other official proceeding as evidence of a “settlement” reached in this matter

The closing summary is pretty direct:

John Adams warned, “Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence.” Thus, whatever may be the Parties’ wishes, inclinations, or the dictates of their passion, they cannot alter the state of the facts or evade the rule of law. Contrary to Plaintiffs’ concern, the Court did not have to “sally forth” to look for a wrong to right…. The Court need only look to the uncontroverted facts here:

1. Donald Trump is President.
2. President Trump controls the actions of the Secretary of the Treasury Department Scott Bessent, IRS CEO Frank Bisignano, and all Executive Branch actors.
3. President Trump, through Executive Order § 7, also controls the litigation strategy and interpretation of the laws guiding the Department of Justice….
4. For the 109 days that this case was pending, no attorney representing the United States filed a notice of appearance or any document indicating the government’s position, interest, or awareness of this matter.
5. Defendants’ actions are consonant with the dictates of Executive Order § 7

These facts lead to the inexorable conclusion that the “settlement” terms, the individuals who signed the “settlement” as well as the putative beneficiaries of the “settlement,” demonstrate a shared, unitary interest. And the unilateral revision and renunciation of the “Fund” component of the “settlement” demonstrate the fact that all Parties were aligned, and ultimately, undifferentiated. This action was never about a party seeking judicial resolution of a legal issue or a factual dispute. The nature of the suit itself and the conduct of the Parties and counsel from its filing make plain that this was an attempt to use the Court to provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the President and to earmark billions of dollars from American taxpayers to redress grievances not defined in the law. The President may be the functional “dominus litus” of the Executive Branch, but as a party to a civil suit, he, as well as all the parties and lawyers before a court, are bound by the rules. Ensuring that our courts are used only for the express purpose created by the Constitution is the obligation of every judge and an obligation that this Court must discharge in light of the matter before it.

Of course, Donald Trump (both as plaintiff and defendant) can still appeal to the Eleventh Circuit. But at least for this shining moment, we’ve finally had a federal judge look at this blatantly corrupt “settlement” and call it out for what it obviously was: the President of the United States suing his own government, using his own lawyers to create a faux settlement that benefits him and his friends at the literal expense of the American public. A “fully unitary interest” indeed. Just one that is focused on Donald Trump’s best interests over the American public.

Filed Under: daniel epstein, donald trump, irs, kathleen williams, self-dealing, settlement, slush fund, stanley woodward, todd blanche