Trump Settled His Own Lawsuit Against the IRS to Create a $1.8 Billion "Anti-Weaponization Fund," Then Retreated on the Fund Under Court Order Before a Federal Judge Voided the Entire Settlement and Referred His Lawyer for Discipline

Details

On May 18, 2026, the Justice Department announced that it had settled a lawsuit President Donald Trump filed against the Internal Revenue Service by establishing a $1.776 billion "Anti-Weaponization Fund" to compensate people the administration says were victims of government "weaponization" and "lawfare." Trump received no monetary payment and instead a formal apology from the IRS; in exchange he dropped his $10 billion suit and withdrew a separate $230 million in claims against the Justice Department and FBI. A one-page addendum issued the next day went further, permanently ending audits and investigations of his family. The arrangement—a president settling with the government he leads, then routing nearly $1.8 billion in taxpayer money into a fund his administration would control and securing tax immunity for himself—drew bipartisan condemnation. Within weeks the administration retreated from the fund and a federal judge indefinitely blocked it, but the immunity for the Trump family was left in place. On July 13, 2026, U.S. District Judge Kathleen Williams voided the settlement altogether, ruling that the underlying lawsuit had been filed for an improper purpose and referring one of Trump's lawyers for potential discipline; the ruling's practical effect was to strip away the audit protections along with the fund. The settlement is the culmination of a broader pattern in which the department has paid Trump allies millions to settle cases the government had been positioned to win, covered in a separate entry.

Trump's Claims Against the Government

Before returning to office, Trump filed two claims under the Federal Tort Claims Act (FTCA) seeking roughly $230 million. One, submitted in August 2024 and reviewed by the Associated Press, sought $115 million over the 2022 Mar-a-Lago search and the resulting classified-documents case; it accused former Attorney General Merrick Garland, former FBI Director Christopher Wray, and special counsel Jack Smith of malicious prosecution. The other sought damages tied to the Russia investigation. Trump has acknowledged the awkwardness of deciding claims he himself filed, telling reporters it was "awfully strange" to make a decision in which he would effectively be paying himself, and at one point saying, "I'm suing myself."

The Mar-a-Lago search was authorized by a federal judge who found probable cause, and former Justice Department lawyers have said the government would have had strong defenses had it chosen to fight. The concern, one former department lawyer said, was that the department would simply ask Trump how much it should pay him.

In January 2026, Trump escalated. He, his sons, and the Trump Organization sued the IRS and Treasury for at least $10 billion, alleging the agencies failed to prevent IRS contractor Charles Littlejohn from leaking the family's tax returns to the press in 2019 and 2020. The filing is covered in a separate entry. Littlejohn was convicted and sentenced for the disclosures. Because Trump controlled the agencies he was suing—the Justice Department represents the IRS, and Trump leads the Justice Department—the case presented an unusual conflict. The judge assigned to it, Kathleen Williams, questioned whether the parties were "sufficiently adverse" for the case to proceed, noting that Trump's named adversaries were entities whose decisions are subject to his direction. She ordered Trump's lawyers and the DOJ to brief by May 20 whether they were actually in conflict, and appointed six outside lawyers to advise her on whether the suit was legitimate—steps the May 18 settlement preempted. The government also had ready defenses—and its own lawyers said so. Career attorneys in the I.R.S. office of chief counsel prepared a previously unreported 25-page memo recommending the suit be dismissed, laying out several flaws: that Trump likely filed too late (such claims must be brought within two years, and his own lawyer Alina Habba had appeared at contractor Charles Littlejohn's October 2023 guilty plea—more than two years before Trump sued), and that the I.R.S. could not be held liable for Littlejohn, who worked for the consulting firm Booz Allen Hamilton. The Justice Department had made that same contractor argument in defending other victims' suits over the identical leak; one such victim, hedge-fund billionaire Ken Griffin, settled in 2024 for a public apology and no damages—the non-monetary remedy Trump ultimately accepted, except that Trump also walked away with the audit immunity and the $1.8 billion fund. No Justice Department lawyer ever appeared in the case to contest it. Department attorneys had struggled with whether they could oppose a suit by the president, who had signed an order binding government lawyers to his view of the law; the I.R.S. memo was given to Treasury in April, but it is unclear whether it ever reached its intended recipients at Justice.

The Settlement and the Fund

On May 18, before the jurisdictional questions were resolved, the department announced the settlement. Trump and his co-plaintiffs agreed to drop the $10 billion IRS suit with prejudice and to withdraw the two $230 million administrative claims. In exchange, they received a formal apology from the IRS but no payment, and the department established the Anti-Weaponization Fund, seeded with $1.776 billion drawn from the Treasury's Judgment Fund. The dollar figure references the year 1776. The agreement was signed for the I.R.S. by Frank Bisignano, who occupied a newly created "chief executive of the I.R.S." role without Senate confirmation to it while simultaneously serving as Social Security commissioner.

The fund was designed to compensate people who allege they were victims of "lawfare and weaponization," terms the announcement described but did not define. Acting Attorney General Todd Blanche said the goal was to "make right the wrongs that were previously done." Sources described the design as a hybrid of a victim-compensation fund and a truth-and-reconciliation commission. It grew out of the DOJ's "Weaponization Working Group," which over the prior year had examined what it called Biden-era abuses—including claims of anti-conservative and anti-Christian bias that former officials dispute. The same "weaponization" rationale drove the department's broader retreat from public-corruption enforcement—including the near-total gutting of its post-Watergate Public Integrity Section—over the same period.

The department cited a 2011 settlement involving Native American farmers, Keepseagle v. Vilsack, as precedent. PolitiFact rated that comparison False, noting the earlier settlement had specific compensation standards, significant judicial oversight, a smaller dollar amount for a larger pool of beneficiaries, and a more conventional creation process.

Structure and secrecy

The fund was built to operate with unusual opacity and little oversight. A five-member commission appointed by the attorney general—one member chosen in consultation with congressional leadership—would issue awards by majority vote, and the president could remove any member without cause. The commission would not be obligated to disclose its procedures or the identities of recipients, and the settlement provided for no appeal, arbitration, or judicial review of its decisions; the only required reporting was a confidential quarterly memo to the attorney general. Eligibility was minimal—a claimant needed only to assert they were a victim of "lawfare and/or weaponization"—and the agreement could be enforced or challenged only by the plaintiffs, the defendants, and the United States, all of them aligned with Trump. Blanche's enforcement order went further, disclaiming government responsibility for the money once it left the Treasury: it stated the United States would bear no liability for safeguarding the funds against bank failure, fraudulent transfers, or misuse. The Cato Institute, a libertarian think tank, described the arrangement as the creation of a new spending program without congressional authorization—"the remedy for weaponized government should not be more weaponized government." The fund was set to stop processing claims by December 2028, a month before Trump leaves office, with any remaining balance transferred to other agencies before January 2029.

The administration said Trump could not apply to the fund as a claimant, and Trump said he would donate any money he personally received, naming the American Cancer Society as a possible beneficiary. But ABC News reported that entities associated with Trump were not explicitly barred from filing claims, and legal observers later noted that the publicly available terms do not actually prohibit Trump or his family from receiving payments. Before the fund was blocked, claims were already coming in: Trump adviser Michael Caputo was reported to be the first to file, at least one claimant publicly sought $2.7 million, and former Proud Boys chairman Enrique Tarrio called the fund a "good direction." Some administration officials raised internal ethical concerns about Trump suing his own government and then controlling an entity that could hand out money to his allies. The most visible sign of that unease came from inside the Treasury, which oversees the IRS and houses the Judgment Fund that would bankroll the payouts: General Counsel Brian Morrissey—the department's top lawyer, a former clerk to Justice Clarence Thomas whom Trump had nominated and the Senate confirmed only about seven months earlier—resigned hours after the fund was announced. Morrissey gave no public reason, and his resignation letter thanked Trump and Treasury Secretary Scott Bessent; a Treasury spokesperson said he had served with "honor and integrity." But the timing, and his role in vetting the department's legal authorities, led observers to connect the departure to the settlement he did not name.

The audit addendum

A one-page addendum, issued the day after the fund announcement and signed only by Blanche, directed the IRS and DOJ to permanently end current and potential audits, investigations, and prosecutions of the Trump family, the Trump Organization, and related entities for conduct before May 19, 2026. The Center for American Progress characterized it as effectively a preemptive civil and potential criminal pardon, arguing it would make it difficult for federal agencies to review the more than 3,600 stock trades executed on Trump's behalf in the first quarter of 2026 alone, tracked separately. Rep. Rosa DeLauro estimated the tax immunity alone was worth roughly $100 million to the family—a figure consistent with the Times's 2024 finding that losing an ongoing audit could cost Trump more than $100 million. Because I.R.S. procedures require a mandatory annual audit of the sitting president's returns, the addendum overrode not just discretionary scrutiny but a standing requirement. Critics also pointed to a federal criminal statute that bars presidents from requesting the termination of IRS audits of themselves or their families—a law the Justice Department's announcement did not address—and Rep. Richard Neal, the senior Ways and Means Democrat, called the audit provision corruption. Blanche defended it as routine, saying it was "not immunity" but a standard, backward-looking resolution of past audits that gave no forward-looking protection. The order's reach is in fact backward-looking, though two features make it sound broader. Its "forever barred" language describes duration, not coverage: it permanently forecloses the covered matters, but those matters are Trump's previously filed returns and pre–May 19 conduct, not future filings. And "whether presently known or unknown" sweeps in past wrongdoing not yet discovered—not future acts—while reaching across tax and non-tax matters and the more than 500 Trump-related business entities. That permanence is itself unusual: former IRS Commissioner Daniel Werfel said he knew of no precedent for the agency agreeing in advance to permanently forgo examining a specific taxpayer's previously filed returns. Tax specialists also called the order poorly drafted and noted that the IRS, currently without a chief counsel, had no clear authority to interpret it. In late June, four former IRS and DOJ officials filed a brief arguing the immunity was unlawful: that Blanche lacked authority to grant it absent any referral for prosecution, and that it amounted to an improper personal benefit creating "two separate tax codes," one for Trump's family and another for everyone else. Judge Williams herself, in reopening the IRS case, questioned in a footnote whether the audit provision ran afoul of DOJ rules requiring settlements to relate directly to the issues in the suit; she also noted that Blanche alone had signed it, while the separate nine-page fund agreement was signed by Woodward and Frank Bisignano, who held the newly created post of IRS chief executive without Senate confirmation while simultaneously serving as commissioner of the Social Security Administration. Unlike the fund, this provision was not separately announced—and, as discussed below, the administration kept it even after abandoning the fund.

Conflicts of interest

The officials who structured and approved the settlement have personal ties to its principal beneficiary. Blanche, the acting attorney general, was one of Trump's lead defense lawyers in the Mar-a-Lago case; Associate Attorney General Stanley Woodward represented Trump's co-defendant Walt Nauta; and Attorney General Pam Bondi, a former Trump lawyer, fired the department's top ethics adviser in July 2025. New York Times legal writer Adam Liptak observed that the settlement raised constitutional questions akin to a self-pardon. Legal scholars have noted that no sitting president had previously sought a monetary settlement from the government he leads, and that the FTCA framework presumes the claimant and the agency are independent—an assumption that collapses when the claimant runs the agency. The charge that the president had made himself judge in his own cause came from beyond the left: conservative columnist Jonah Goldberg invoked the founders' bedrock rule, citing Madison and Burke, that "no man should be a judge in his own cause," and the nonpartisan Society for the Rule of Law said Trump had effectively become "plaintiff, defendant, and arbitrator" in his own case. Historians placed the deal outside precedent: Barbara Perry, a presidential scholar at the University of Virginia's Miller Center, told the Times that even the most infamous earlier scandals—Credit Mobilier under Grant, Teapot Dome under Harding, Watergate under Nixon—looked minor by comparison, and that in those cases the presidents themselves did not pocket the money. Trump distanced himself from the deal his own lawyers had negotiated, saying he "wasn't involved in the settlement" and could have been but chose not to be. The White House rejected the self-dealing framing outright; spokeswoman Anna Kelly called it a "tired narrative" and said there were "no conflicts of interest."

The January 6 Question

Although the announcement listed no eligibility category tied to January 6, the fund quickly became understood as a likely vehicle for compensating pardoned rioters. Asked whether they could be reimbursed, Trump said the fund would help people who were "horribly treated" and in some cases "imprisoned wrongly," and he has previously called the January 6 defendants "patriots" who were treated "very unfairly." Vice President JD Vance said the administration would consider January 6 defendants on a case-by-case basis, and Blanche told a Senate subcommittee that "anybody can apply." Jake Lang, who was charged with assaulting officers before his case was dismissed, said publicly he plans to apply and expects others to do the same, suggesting misdemeanor cases might draw several hundred thousand dollars and cases like his closer to a million. Earlier in 2026, House Democrats had introduced a bill to bar January 6 defendants from receiving such compensation.

Erasing the Record

As the fund was being set up, the Justice Department was simultaneously stripping its own website of the January 6 prosecutions. By late May 2026, most of the department's press releases about Capitol-attack defendants had been removed, following the earlier deletion of the searchable database of all roughly 1,600 defendants. When a Washington Post reporter flagged the deletions—pointing to one erased release describing the 74-month sentence of a rioter who attacked police with bear spray and a metal whip while out on bail on a charge of soliciting a minor online—the department's official account did not walk them back but defended them, saying it was "proud to reverse" the prior administration's "weaponization" and was clearing its site of "partisan propaganda." The broader unwinding of the January 6 cases—including motions to dismiss the seditious-conspiracy convictions of Proud Boys and Oath Keepers leaders—is tracked in a separate entry.

The Strongest Case for the Premise

Beneath the condemnation of the fund's design lies a contention that is harder to dismiss: that the category of government "weaponization" is not imaginary. The Carter Page surveillance was found by an inspector general to contain 17 significant errors, and Page was wiretapped for roughly a year and never charged. The conviction of Douglass Mackey over 2016 election memes was reversed on appeal for insufficient evidence. And in 2024 the Supreme Court narrowed an obstruction statute that prosecutors had applied to roughly 350 January 6 defendants. As a Newsweek analysis put it, none of this proves every weaponization claim, but it shows the category cannot be waved away—and civil libertarians make similar arguments in other contexts. The administration's own framing rests on this: Blanche said the goal was to give victims of lawfare and weaponization a process "to be heard and seek redress." The force of the criticism is not that no one was ever mistreated, but that the chosen remedy—an opaque, unreviewable fund seeded with money Congress never appropriated, administered by the president's former lawyer, and paired with immunity for the president's family—is, even to sympathetic observers, the wrong instrument. A neutral process, several analysts argued, would require sworn evidence, published standards, adversarial testing, and exclusions for those whose convictions still stand.

Legal Challenges and Court Blocks

The fund drew immediate and bipartisan opposition, and four lawsuits followed on distinct theories. Two officers who defended the Capitol on January 6—former Capitol Police Officer Harry Dunn and D.C. Metropolitan Police Officer Daniel Hodges—sued to block it, arguing it exceeded the administration's statutory authority and violated Section 4 of the 14th Amendment, which bars the government from paying debts incurred "in aid of insurrection." Their attorney, former federal prosecutor Brendan Ballou, called the fund potentially "the most corrupt act of presidential power in American history." A coalition including the City of New Haven, the National Abortion Federation, Common Cause, and a former prosecutor, represented by Democracy Forward, argued the fund showed unconstitutional "blatant partiality"; Citizens for Responsibility and Ethics in Washington challenged its secrecy provisions; and a separate suit alleged the settlement bypassed required public-comment procedures.

In a notable bipartisan signal, Sens. Cory Booker (D-N.J.) and Bill Cassidy (R-La.) filed a brief opposing the fund, and Reps. Brian Fitzpatrick (R-Pa.) and Tom Suozzi (D-N.Y.) introduced a bill to bar federal money from paying fund claims. Republican concerns stalled a $70 billion immigration-enforcement funding package: retiring Sen. Thom Tillis (R-N.C.), who called the fund "stupid on stilts" and likened it to tyranny, refused to support the bill unless it permanently barred the fund, and Cassidy sought an amendment to ban payouts. The Senate ultimately rejected efforts to permanently outlaw the fund. The revolt was driven partly by electoral self-interest less than six months before the midterms; retiring Rep. Don Bacon (R-Neb.) called the fund and a separate White House ballroom project "poison pills" for vulnerable House Republicans. The opposition was not unanimous—Reps. Abraham Hamadeh (R-Ariz.) and John Rose (R-Tenn.) defended the fund, and Trump insisted he was helping people "badly abused" by the Biden administration—and some analysts doubted the rebellion would hold: Republican strategist Doug Heye noted to Reuters that talk of a party revolt had recurred for a decade without materializing, with Republicans "constantly capitulating" on Trump's priorities. The criticism extended to figures from Trump's own orbit: Ty Cobb, who served as a lawyer in Trump's first White House, told CNN that Blanche had "given up integrity" and described the arrangement as a criminal conspiracy to steal from taxpayers. Democratic critics were blunt—Sen. Elizabeth Warren called it corruption on an "insane" scale, Sen. Ron Wyden called it a slush fund for political violence, and Rep. Jamie Raskin (D-Md.) called it pure fraud and highway robbery.

Facing the backlash, Blanche testified on June 2 that the fund was not moving forward, "period," and confirmed the plans would be dropped permanently. But he made clear the audit protections were a separate matter: "Nothing has changed" on the tax immunity for the Trump family, he said. On June 12, U.S. District Judge Leonie Brinkema, in Alexandria, Virginia, issued a preliminary injunction blocking the fund. Brinkema cited Trump's own shifting statements—including his remark that he would be "disappointed" if the fund were not approved—as reason to doubt it was truly abandoned, and pressed a department lawyer on why Blanche had not simply rescinded the memo creating it. She gave Blanche and Treasury Secretary Scott Bessent one week to file sworn declarations, under penalty of perjury, that the program would not proceed "in any manner, or under any name." On June 19, the department refused, arguing that compelling such testimony from senior officials raised "serious separation of powers concerns."

Status (as of July 2026)

The IRS settlement that produced both the fund and the audit immunity was under scrutiny in Florida throughout June. Some 93 Democratic lawmakers, represented by former New Jersey Attorney General Matt Platkin, had urged U.S. District Judge Kathleen Williams to scrutinize the deal rather than dismiss the case; Platkin warned that if a president can "sue himself and then settle with himself," no president would ever again need to ask Congress for money. Williams initially closed the matter on May 18, ruling she lacked authority because the settlement was never entered on the court's docket. But after 35 former federal judges—appointed by presidents of both parties—filed a motion calling the case a "collusion" used to justify the "looting" of taxpayers, Williams reopened the case on May 29, asserting authority to investigate serious misconduct in any case before her and citing allegations that the settlement was "premised on deception." She ordered Trump's lawyers to address by June 12 whether the case should be formally revived because the court had been defrauded, and whether Trump had colluded with his own government to avoid judicial scrutiny.

On July 13, 2026, Williams ruled on that question and voided the settlement in its entirety, finding the suit "was never about a party seeking judicial resolution of a legal issue or a factual dispute" between Trump and the IRS, which he controls as president. She cast it instead as an arrangement carried out by lawyers with ties to Trump and to people who claimed to be government targets, writing that it sought 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." Her order bars Trump, his sons, and the Trump Organization from referring to the settlement or citing its terms in future legal proceedings—which could allow the IRS to resume the audits of his family that the addendum had sought to permanently foreclose. She also referred one of Trump's attorneys, Alejandro Brito, to the Florida Bar to determine whether he violated ethics rules and whether disciplinary action is warranted, and barred a second attorney, Daniel Epstein, from taking on cases in the Southern District of Florida for at least a year. Williams further ordered that her ruling be sent to the state bars in New York and the District of Columbia, where ethics complaints had already been filed against Acting Attorney General Todd Blanche and Associate Attorney General Stanley Woodward. Central to her finding that only one side's interests were ever represented was Blanche's own June testimony: pointing to his apparent capacity to speak for and bind both plaintiffs and defendants, sign a settlement on behalf of all parties, and then repudiate part of it, she wrote that this "demonstrates that there was only one party whose interests were being represented throughout this case." The ruling landed two days before Blanche was scheduled to face the Senate Judiciary Committee on July 15 for his confirmation hearing as attorney general, teeing up a politically uncomfortable line of questioning.

A spokesman for Trump's legal team told the BBC that the IRS "wrongly allowed a rogue, politically-motivated employee to leak private and confidential information" to the media, and said Trump "continues to hold those who wrong America and Americans accountable." Brandon DeBot, policy director at the Tax Law Center at NYU, called the original agreement a "sweetheart deal" that had given Trump "unauthorized and unprecedented" exemptions from tax audit rules and undermined "the tax system's protections against political interference." He said the ruling was important but "does not remove the need for congressional action to nullify the entire deal and to prevent any similar attempts at presidential self-dealing in the future."

The fund itself had already been abandoned in early June, about a week after Judge Brinkema's preliminary injunction, and no money was ever paid out under it; the commission to administer it was never formed. The audit-and-prosecution immunity, which Blanche had maintained was unaffected by the fund's collapse, is the piece Williams's ruling now unwinds. Legal experts had cautioned that her power to undo the deal might be limited—that even if she found the settlement collusive, she likely could not stop money or benefits from changing hands once the parties privately agreed—but her order's bar on invoking the settlement in future proceedings appears to have reached the audit immunity regardless. Whether Trump's legal team appeals, and whether the IRS actually reopens any audit of the family, remained unclear as of this ruling.

A Parallel Departure at Treasury

A shake-up at the top of the tax bureaucracy surfaced the same day. On July 13, 2026—as Williams voided the settlement—the administration announced that Kenneth Kies, the Senate-confirmed assistant Treasury secretary for tax policy who had also served as acting IRS chief counsel since November 2025, would leave both posts within weeks. Outlets including Bloomberg Tax, Punchbowl News, and Forbes reported the exit, most describing it only as a departure. The Wall Street Journal, citing people familiar with the matter, reported that Kies was forced out after warning that the White House risked violating 26 U.S.C. § 7217—the same post-Nixon statute noted above, which bars the president and executive-branch officials from involving themselves in IRS audits of specific taxpayers. That account rests on the Journal's anonymous sourcing and the administration did not confirm it, but if accurate it describes the mirror image of the immunity at issue here: where the addendum sought to shield the Trump family from scrutiny, the clash that reportedly cost Kies his job involved pressure to point the agency's enforcement powers outward. Either way his exit deepens a leadership vacuum at the IRS, which by mid-2026 had gone roughly a year without a Senate-confirmed commissioner or chief counsel and had seen its workforce cut by more than a quarter; the administration has nominated James Gadwood, a lawyer who previously represented the Trump Organization, for the permanent chief counsel post.