From The New York Times, I'm Rachel Abrams, and this is The Daily.
In a move that shocked lawmakers on both sides of the aisle.
President Trump is dropping his $10 billion lawsuit against the IRS.
The Democrats and others are crying foul over what his administration plans to do instead.
The Justice Department announced an almost 2 billion fund of taxpayer money to compensate people that the administration claims have been victims of quote weaponization and lawfare.
Among those who could apply for payouts the nearly 1600 rioters charged in connection with the January 6th Capitol insurrection.
This is reimbursing people that were horribly treated, horribly treated as anti-weaponization.
Today my colleague Andy Duren, on the story of how this came about, who might get the money and the bipartisan outrage that has ensued.
He's setting up a 17 billion political slush fund for the Proud Boys and the Oath Keepers and his other political lieutenants and hangers-on.
I think that there are a lot of questions that the administration is going to have to answer.
It's Wednesday, May 20th.
So we have talked a lot on The Daily about President Trump's campaign of retribution against his enemies in his second term, how he's wielded the federal government to do that.
And this week it feels like we entered into a new chapter of that story with the creation of this enormous fund.
We're going to talk about how the fund works and who's likely to benefit.
But before we get into that, you, Andy, have been covering all of this.
And I just want to start with you explaining where did this fund even come from?
So, yeah, this story really starts the first time that President Trump ran for office in 2016.
He was unique among presidential candidates at that time and this was something of a scandal in that he did not release his tax returns.
It was standard practice for presidential candidates to put out some of their tax information.
As a, Trump didn't do that, and this was a topic of wide interest throughout his first term.
There were various attempts to see his tax returns, and that didn't happen until the New York Times, in 2020, published a series of stories describing what Trump had been doing on his taxes and revealing that for many years, Trump had been paying.
Little in federal income taxes.
Right.
And to be clear, those stories relied on leaked tax returns.
I remember this.
Yes.
It wasn't clear how.
It wasn't clear where this information came from.
It could have maybe come from accountants or lawyers who worked for President Trump or ad work for President Trump or the Trump Organization.
It wasn't clear what the source of this information was.
But reporters for The Times had gotten their hands on and reviewed President Trump's tax returns.
Fast forward about six months to a year.
After that, and ProPublica, a separate news organization, They start releasing a series of stories about the tax strategies and tax situations of some of the world's wealthiest people.
You know, looking at the tax situations of people like Jeff Bezos, Elon Musk, the positions they were taking on their taxes and a lot of details.
And so at that point it became clear that, given the tax information of so many different people, I mean eventually it's been disclosed that thousands of individuals and entities had their information released, that somebody within the IRS and with access to internal IRS records must have been the source of these stories.
Put another way, it became clear that the IRS had a leaker.
Yes, that there was somebody in their systems who was providing this information to the press.
And in the fall of 2023, somebody was eventually caught, a man named Charles Littlejohn, a former IRS kid, then a contractor for the IRS.
And he pled guilty to having provided this information about the Trump and then all these other wealthy individuals to The Times and ProPublica.
And then he was sentenced to prison in the beginning of 2024.
Obviously, leaking somebody's tax information is a crime.
Yes, it is a crime, and it's also something that people can sue the IRS for.
So there is a civil lawsuit process that exists for people who think that their tax information has been improperly released by the IRS.
They can sue the IRS and potentially get damages for that.
And so...
In January, President Trump two of his sons in the family business demanded at least 10 billion from the IRS for the leak of this information, basically arguing that the IRS should have stopped Charles Littlejohn from being able to do this.
And, as you said, people can sue the IRS when their personal tax information is compromised, is leaked.
That is what he did.
The difference here, though, is that he's not just a private citizen.
He is suing a government that he oversees.
Yes.
I mean, this was and is an extremely unusual situation, if not unprecedented entirely.
I mean, not only does the president control the leader of the Internal Revenue Service, the agency that he is suing and the Treasury Department, which was also named in the suit.
You know he chooses many of the people who lead those agencies and is involved in their decision making.
He has also played an enormous role in reshaping the Justice Department and kind of molding it in his image in a variety of ways.
And the Justice Department is supposed to be the IRS's lawyer in this case.
But you know there have been all sorts of things that the Justice Department has done in Trump's second term to that are far beyond what a historically independent Justice Department would do.
Right.
He's publicly called on the Justice Department to prosecute those that he considers his political enemies.
Democratic lawmakers have faced federal investigation under his administration.
Exactly.
And the idea that this Justice Department, which is now led by Todd Blanch, the acting attorney general, who was also President Trump's personal lawyer before he returned to the White House, would be making decisions about how to defend a lawsuit that the president had brought immediately just raised all sorts of questions about the conflict of interest inherent in such a situation, where President Trump is obviously controlling the private lawyers that he hired to bring this suit against the government.
But he is also, to a very unusual degree, controlling the lawyers who are supposed to respond to this suit.
I feel like you almost need a whiteboard to, like, map out all of these conflicts.
Yeah, I mean.
It's just there are two sides to the case, but Donald Trump sits on top of both parties in this lawsuit.
And so, in that sense, while federal law does allow for people to bring these types of lawsuits against the IRS, this case raises profound questions about what the outcome would be and whether there would be a real defense of the suit and whether the Justice Department would contest what President Trump was claiming in his lawsuit against the IRS.
So how does all this play out in court?
Basically, given all of these tangled web of conflicts between President Trump and the Justice Department and the conflict of interest between lawyers who are working for the president in a private capacity and the lawyers who are working for him under the federal government, the judge starts to worry that this lawsuit can't proceed.
There's a legal principle that the two sides in a lawsuit have to actually be in conflict with each other.
That you can't sue yourself or sue your friend and hope to go manufacture a favorable legal ruling from a judge that will benefit both sides.
That there has to be a genuine tension between the two parties in a lawsuit or else the judge has to throw it out.
The judge can say, I can't rule on this because it's not a real lawsuit, essentially.
And so the judge was questioning whether a real lawsuit even existed here.
And so she asked the Justice Department and President Trump's lawyers to write briefs they were supposed to be due today explaining themselves and telling her are you actually fighting with each other or is this kind of all a charade and you have filed this lawsuit essentially under false pretenses, and in which case the judge could have dismissed it?
And she was indicating that she was certainly considering just throwing it out entirely.
It was looking like this was not going in the president's favor, in other words.
Yeah.
Yes.
And the Justice Department was going to have to explain that in doing so would have potentially been very awkward, because for them to say that this lawsuit should exist they would have had to show their face in this case and say here I am to oppose the president's claims, which people at the Justice Department, especially this Justice Department, didn't want to do.
Where people have gotten fired for opposing the president.
Yes, exactly.
And so folks within the administration were working feverishly last week to avoid that scenario and to avoid potentially embarrassing ruling from the judge.
And what they arrived at was that President Trump would drop his lawsuit entirely.
And in exchange, the Justice Department would create this unprecedented gigantic pot of taxpayer money that the Justice Department will control to compensate victims of quote unquote weaponization.
We'll be right back.
Okay, so Andy, talk to us about this gigantic pot of money.
What do we know about it?
How is it supposed to work?
Yeah, so we don't know everything yet, but what we do know is that this will be $1,776,000,000.
1776, year of our nation's founding.
Exactly, which I do not think is a coincidence, obviously.
But yeah, this is a huge amount of money that will be drawn from an account called the Judgment Fund, which is basically a pot of money that the Justice Department can use to settle legal claims against the United States.
So anytime the government is sued and they want to settle, they can use money from this fund.
It's not usually quite this much that's taken out of it at a time, but they will be withdrawing money from that account.
And they will consider claims from people who say that they have been victimized by the federal government and pay them for it.
There's a lot that we still don't know and are hoping to find out about this money, including exactly how claims for payment will be evaluated, what weaponization means, exactly when the Justice Department says that, and how they'll decide how much money they should be paid.
We still don't even know who these five people are that will be controlling this money and making these decisions.
And obviously, they'll play a huge role in all of this.
So there are a lot of questions across Washington right now about what this could ultimately look like.
Has something like this ever happened before?
I mean, I think it's safe to say that, while the Justice Department does settle other lawsuits, they've never done something quite like this before.
Can you just talk a little bit Andy, about the types of people that theoretically could be eligible to apply for this fund?
Like, who are we talking about here?
Yeah, so all the Justice Department themselves have said about this are people who are victims of quote-unquote weaponization and quote-unquote lawfare.
But in terms of people who believe that they'll be eligible and people who are excited about this, I mean one of the main groups we've heard from so far are people who were convicted on January 6th 2021 for storming the Capitol and who President Trump previously pardoned.
And there are other similar supporters and political allies of the president who who say that under President Obama, the Justice Department, the FBI, improperly investigated them basically because they were Trump supporters, and now this is their opportunity to get money to make them whole from that experience.
But again, there are all sorts of questions swirling around this and we don't know if These payments would be specifically to pay back any sort of legal fees they may have incurred or if there will just be payments beyond that where they can basically profit from the experience overall.
So there's not necessarily going to be clear receipts about who's receiving this money and how much money they're receiving.
Wow.
And so based on what we know right now. this entire operation might be very hidden from public view.
But obviously, that's a live question.
I think.
To a lot of people though, the idea that somebody who stormed the Capitol on January 6th could get paid by the government would be shocking, to put it mildly.
Like we are talking about, in some cases, convicted criminals who could theoretically get money from a government that they attacked.
Is that right?
That is certainly the scenario that people are asking a lot of questions about.
And that certainly seems possible under the way that this fund has been set up, for sure.
It would also, by the way, explain some of the reaction that we have heard to this announcement about this money that we've seen from both sides of the aisle.
Yeah, so the acting attorney general, Todd Blanch, happened to be scheduled to testify on Capitol Hill on Tuesday to discuss appropriations.
The Justice Department's budget.
Good morning to all of you, Ranking Member Van Hollen, Senator Collins, Senator Moran.
Good morning.
Thank you for the opportunity to present President Trump's fiscal year 2027 budget.
During the hearing, Lanch defended the arrangement by saying that the judgment fund this pot of money, had been used in similar ways in the past.
It is true that this is unusual.
That is true.
But it is not unprecedented and it was done And he told the committee that anyone could get money out of the fund, regardless of their politics.
It's not limited to Republicans, it's not limited to.
It's not limited to the biden weaponization, it's not limited to um in any way, scope or form, to january 6 or to jack smith.
There's no limitation on the, on the claims.
But that hearing quickly became basically an opportunity for lawmakers, and particularly Democrats, to really push him on this arrangement.
Mr Attorney General, this is an outrageous, unprecedented slush fund and push him on what they called a slush fund that the administration had set up to pay the president's political allies.
Will individuals who assaulted Capitol Hill police officers be eligible for this fund?
Well as it makes plain, anybody in this country is eligible to apply if they believe they are a victim of opposition.
Mr. Attorney General, let me ask you this.
In particular, these Democrats wanted to know whether people who stormed the Capitol on January 6th would be beneficiary of these funds.
That is pure theft of public funds.
And rewarding individuals who committed crimes is obscene.
Every American can see through this illegal, corrupt, self-dealing scheme.
Senator Chris Van Hollen accused Blanch of public theft of this money and said that it was part of President Trump's broader revenge tour during his second term in office.
Mr. Blanch, the record is crystal clear.
You are still acting. as the president's personal lawyer, not as acting attorney general.
It is hard to justify giving you any funds that will enable this pattern of wrongdoing to continue.
Thank you, Mr. Chairman.
But there are also signs that Republicans on Capitol Hill are a little squeamish about this whole idea.
You start to see some, some questions from them about what this money could be for and how it could be used.
And even the Senate majority leader, John Thune.
Another topic.
The acting attorney outside of the hearing made some comments to reporters on Tuesday, essentially suggesting that Congress will be taking a close look at this pot of money.
Do you believe this is a legitimate fund, and do you believe those terms are fair?
I think that there are, and will continue to be, a lot of questions around that that the administration is going to have to answer.
And so even some of the mild discontent that we're seeing right now publicly from top Republican lawmakers is, I think, an indication that this is not something again, that even people in President Trump's party are excited about or proud of.
And it sounds like there are concerns too, even within the Trump administration, about the top lawyer at the treasury department, which will play a role in creating this fund, suddenly resigned on monday, just hours after its creation, and my initial reporting is that this resignation was in part because of the creation of this fund.
I want to ask about President Trump himself and whether he is going to benefit from this.
He's obviously the one who sued the IRS, right?
So can he apply for this fund?
So the Justice Department has said that the president himself and his two sons and the Trump family organization, which again are the people who and the entities that brought the suit in the first place, will not be paid out of the fund themselves.
That said, we learned on Tuesday that another provision in this agreement between Trump and the Justice Department is that the IRS will drop any audits it has of Trump, his family members and any related business entities, which is itself very unusual and extraordinary concession to make to the president, and is also one that could directly benefit him financially.
I mean, it's unclear what sort of audits the president himself may be facing right now, but it's potentially a protection that could potentially deliver him tens of millions of dollars in direct financial benefit.
If the IRS was planning to charge him more in taxes and now they are not going to be able to under this agreement, that is something that could go directly into his pockets.
He might avoid giant tax bills to the tunes of tens of millions of dollars is what you're saying.
I mean essentially.
Again, The Times has reported, and it's been publicly reported, that the president has faced audits in the past in which, if the IRS won, essentially the president would owe more than 100 million in additional taxes.
And so we don't know what the situation is now, what audits he and his family members may be facing.
But this has robbed the IRS of the opportunity to demand that the Trumps pay the taxes that the IRS says that they may owe under the law.
Is there anything that anybody in Congress, or anybody for that matter, can do to stop this if they find it objectionable?
We'll find out.
So I think on one level there was an attempt by some House Democrats to intervene in the original lawsuit that President Trump filed and can further try and convince the judge to put a stop to it.
Obviously, that ship has now sailed.
So I think the question now is whether Congress takes any steps to change how money can be spent on legal settlements generally or specifically trying to address this situation.
So under the Constitution, Congress has the power of the purse.
That's a power that's certainly been eroded under this presidency and that the Trump administration has tried to kind of pull back into the executive branch.
But it is something that, at least theoretically, Congress could take some steps and pass some laws to address.
But it's unclear if that will actually happen.
I don't think I'm going out on a limb here by saying that most people probably did not even know that this pot of money existed for the DOJ to use until this week probably.
So you are in a good position to kind of help us make sense of this.
Like, what should we make of the fact that this money is now being used in this way?
I think we should think about this in the broader context of what President Trump has hoped to accomplish in his return to office.
And one of his main goals was obviously retribution against people and agencies that he saw as having been opposed to him the first time he was in office and while he was out of it.
And I think what this usage of the fund indicates is that now the Trump administration is making that next step from revenge to compensation for President Trump's allies.
And some ethics experts and watchdogs are calling this the most corrupt act in American history.
Just to bring it back to where we started.
What this represents is also not just using the DOJ to punish enemies, but using it to reward allies.
Yes, exactly.
But I think there is a significant difference and advancement of that agenda in this prospect of directly paying people of essentially the president's choosing with taxpayer dollars.
There are Almost no limits or controls on how this money will be used.
These people, who will be selected by Todd Blanch, the president's former defense lawyer, will have seemingly total freedom to give money to whoever they deem is worthy of it, and to give them as much money as they want.
And so this is a very aggressive and extraordinary use of the money that we, the American public, all pay on our taxes and that the government borrows on our behalf.
And it could go to simply whoever has been loyal to the president.
They could be cashing out to the tunes of thousands or tens of thousands, hundreds of thousands or even millions of dollars.
And so it's just a really radical and striking situation.
Andy Duren, thank you so much.
Thanks for having me.
We'll be right back.
Here's what else you need to know today.
In a closely watched Republican primary, seven-turned-congressman Thomas Massey of Kentucky was defeated by President Trump's hand-picked challenger, Ed Galrein.
I want to thank President Trump for his support, his endorsement, and his counsel.
As I navigated this campaign, which is a journey.
Massey's loss caps a remarkable demonstration across three states of Trump's power to exile his opponents from the Republican Party.
In a matter of weeks, Trump ousted five Republican state lawmakers in Indiana who opposed his plan to redraw election maps there, a US senator from Louisiana who voted to impeach Trump, And now Massey, who broke with Trump on several key issues, including Jeffrey Epstein.
For 14 years, those SOBs in Washington tried to buy my vote.
They couldn't buy it.
And the Senate agreed to take up a measure to force President Trump to either end the war in Iran or secure approval from Congress to continue it.
The move comes after a handful of Republicans joined Democrats in pushing forward with a resolution that the GOP has managed to block for months.
Today's episode was produced by Lexi Diao and Stella Tan.
It was edited by Rachel Quester and Lizzo Balin and contains music by Diane Wong, Alicia Baitube, Marion Lozano and Dan Powell.
Our theme music is by Wonderly.
This episode was engineered by Chris Wood.
Special thanks to Alan Foyer.
That's it for The Daily.
I'm Rachel Abrams.
See you tomorrow.
