By Jason Bramwell, Staff Writer
In an effort to shut down backroom deal-making and increase accountability, two senators introduced a bipartisan bill on January 8 that would force federal enforcement agencies to increase transparency around settlements reached with companies that break the law.
The legislation, known as the Truth in Settlements Act of 2014, introduced by senators Elizabeth Warren (D-MA) and Tom Coburn (R-OK) on Wednesday, would require federal regulators to post copies of settlements of more than $1 million on their websites. Key details of all settlement agreements – including dates, settling parties, settled claims, and the amount and classification of any payments – would also have to be disclosed.
All written public statements that reference the dollar amounts of settlements would be required to include explanations of how those settlements are categorized for tax purposes and whether payments may be offset by “credits” for particular conduct.
The bill would also force companies that settle with enforcement agencies to state in their filings with the US Securities and Exchange Commission (SEC) whether they have deducted any settlement payments from their taxes.
According to Warren and Coburn, when federal regulators close investigations and settle cases, they often tout the dollar amount obtained from the offending company. But in many instances, that amount is misleading because of tax deductions and other credits built into the settlement that reduce its true value. Oftentimes, agreements are deemed confidential, with key details hidden from the public.
“When government agencies reach settlements with companies that break the law, they should disclose the terms of those deals to the public,” Warren said in a written statement on Wednesday. “Anytime an agency decides that an enforcement action is needed, but it is not willing to go to court, that agency should be willing to disclose the key terms and conditions of the agreement.”
The Truth in Settlements Act would stipulate that agencies explain publicly why confidentiality is justified in any particular instance and would direct federal regulators to disclose basic information about the number of settlements they deem confidential each year.
The legislation also directs the US Government Accountability Office (GAO) to conduct a study of confidentiality procedures and to provide additional legislative and administrative recommendations for increasing transparency.
“Since agencies are not currently required to disclose the financial structure of government settlements, too often the true value of those settlements is not known because, often, companies are allowed to deduct part of the payment,” Coburn said. “Our bill gives taxpayers the transparency tools they need to access real information and numbers regarding enforcement settlements.”