WASHINGTON — When a federal fund for crime victims’ services was running low on cash several years ago, lawmakers thought they had come up with a financial fix.
A law signed by President Joe Biden in 2021 opened up a new source of money for the fund: criminal penalties and fines paid by companies through out-of-court settlements. The fund had previously been limited to fines and penalties from guilty plea agreements.
“This is going to enable us to provide more help and support to victims of domestic violence, sexual assault, child abuse, trafficking, and other crimes all across America,” Biden said when he signed the legislation.
But the so-called fix has proved to be anything but.
The Congressional Budget Office had estimated that an extra $7.5 billion would flow into the fund over 10 years as a result of the new revenue source. Instead, annual fund balances have continued to dwindle, from a peak of $13 billion in fiscal 2017 to an estimated $1.5 billion this year, according to the Justice Department, which manages the program.
“We were hopeful that it was going to have a faster and more substantial impact,” said Monica McLaughlin, senior director of public policy for the National Network to End Domestic Violence. Now, facing cuts of roughly 40% to victim assistance grants this fiscal year, she said, local agencies fighting domestic violence “are having to cut staff and serve fewer survivors, so it’s really terrifying.”
Missing money
The funding crunch has baffled some lawmakers who are demanding answers from the Justice Department over where all the new revenue is going.
Spearheading the probe is Iowa Sen. Charles E. Grassley, the ranking Republican on the Senate Budget Committee, who fired off a letter to Attorney General Merrick B. Garland last December seeking an explanation.
The Crime Victims Fund, created in 1984, was designed to help victims meet the costs of medical care, mental health counseling, lost wages, temporary housing and more, without relying on taxpayer dollars. Revenue was to come from the federal fines and penalties paid by criminal defendants.
The Justice Department has defended its handling of the fund, saying more than $775 million from out-of-court settlements has been deposited since the 2021 law was enacted. It also provided five years of data showing where criminal fines and penalties from both guilty plea agreements and settlements have been sent.
But not all of that revenue is making its way into the Crime Victims Fund, as the new data make clear.
And in a letter to Garland this month, Grassley and three other GOP senators made clear they found the department’s explanation unsatisfactory.
They said the data show the Justice Department “has allowed hundreds of millions of dollars in criminal fines and penalties” from out-of-court settlements to be offset by penalties paid to foreign governments instead of being deposited in the Crime Victims Fund.
And millions more dollars that should have gone to crime victims, they said, were deposited instead in the Justice Department’s Working Capital Fund, a separate account that helps pay for department operating expenses. They said they had “no indication that criminal fines and penalties are a legally authorized financing source” for the Working Capital Fund, which is supposed to generate revenue from the sale of goods and services.
Penalties vs. forfeitures
What’s more, senators said, the data show that more than $1 billion in fines and penalties from corporate guilty plea agreements never made its way into the Crime Victims Fund. They cite the case of Copenhagen-based Danske Bank A/S, which pleaded guilty to money laundering in December 2022. While U.S. sentencing guidelines would call for a criminal fine of more than $285 million, the Justice Department forgave the criminal penalty, according to the plea agreement.
Instead, the department imposed a $2.059 billion criminal forfeiture penalty, of which $672 million went to Danish authorities, $178.6 million went to the Securities and Exchange Commission, and the remainder went to the Justice Department’s Assets Forfeiture Fund, a separate account used to pay for property seizure and disposal operations, and some investigative expenses.
Since the penalty was composed of a property forfeiture, not a fine, there was no money to funnel into the Crime Victims Fund.
The Danske case and others suggest the Justice Department has wide discretion in deciding the nature of criminal penalties and, consequently, how much money from fines can be made available for the Crime Victims Fund.
For example, the Crime Victims Fund reaped a windfall through last year’s settlement with Binance Holdings Ltd., the world’s largest cryptocurrency exchange, which pleaded guilty to money laundering and other crimes.
The agreement called for a total of $4.3 billion in fines and forfeitures. Of that figure, $1.6 billion in forfeitures were offset by payments made to the Treasury Department and Commodity Futures Trading Commission, while a $898 million forfeiture for sanctions violations was set aside for possible deposit in a separate fund to compensate victims of state-sponsored terror.
Of the remaining $1.8 billion criminal penalty, $1.5 billion would go to the Crime Victims Fund, with the remainder offset by payments Binance made to Treasury, according to the Justice data.
But the senators, in their letter, said the original plea agreement of Nov. 21, 2023, called for the entire criminal fine to be offset, with no money going into the Crime Victims Fund. A modified agreement on Dec. 11 allowed for the $1.5 billion Crime Victims Fund transfer with no explanation, they said.
“Thus, the Justice Department appears to have the ability to retroactively modify corporate resolution agreements to ensure criminal penalties are deposited into the (Crime Victims Fund) that would otherwise be deposited elsewhere,” the senators wrote, while asking if there were plans to modify other plea agreements in similar fashion.
That question may be pivotal in the case of Boeing Co., which the Justice Department announced will plead guilty to a criminal fraud charge stemming from two crashes of 737 Max airplanes that killed 346 people. The plea deal, which awaits a judge’s approval, calls for Boeing to pay a $243.6 million fine.
Foreign payments
The Justice Department did not respond to interview requests. It has yet to respond to detailed questions posed by Grassley and Sens. Joni Ernst of Iowa, Jim Risch of Idaho and Michael D. Crapo of Idaho in their July 2 letter.
But in testimony last December to the Senate Judiciary Committee, a top Justice official defended the department’s practice of offsetting criminal penalties with the money paid to foreign governments.
Grassley raised the case of ABB Ltd., a Swiss-based global technology company that agreed to pay more than $315 million in criminal penalties stemming from a bribery scheme in South Africa. Only $83 million of that money made its way into the Crime Victims Fund, the Justice data show.
Nearly $149 million went to South Africa, $4.3 million went to Switzerland, $11 million went to Germany, and $63 million went to the Securities and Exchange Commission.
Nicole Argentieri, acting assistant attorney general for the criminal division, defended the credits to foreign governments at the hearing, telling Grassley that “it’s important to have cooperation from foreign countries because that’s how we get evidence internationally. We do credit foreign governments.”
The Justice Department data on criminal cases and penalties were part of a letter sent to Grassley in May from Assistant Attorney General Carlos Felipe Uriarte, who addressed the need to credit foreign governments in the ABB case.
“In addition to bearing the brunt of the harm in this case, South Africa also provided significant assistance in the investigation, sharing crucial documentary and testimonial evidence located in South Africa that was necessary to advance the Department’s investigation,” Uriarte wrote.
Uriarte also said that corporate defendants pay their fines to the courts, not to the Justice Department, so it is up to the courts to deposit that money into the Crime Victims Fund and the Justice Department can’t confirm whether or when those deposits are made.
That response did not sit well with the senators, who in their letter called it “a dereliction of duty to ensure adequate resources are available to support victims and survivors of crime.”
‘Severe catastrophe’
Victims advocacy groups, meanwhile, are coping with budget cuts this fiscal year, while holding their breath that Congress can find additional revenue for the Crime Victims Fund.
At nonprofit children’s advocacy centers, which serve as a clearinghouse for assisting in child sex abuse cases, wait times for mental health services have doubled over the last year as staff layoffs hit, said Teresa Huizar, CEO of the National Children’s Alliance, which represents about 1,000 advocacy centers.
Huizar said she remains grateful for the 2021 legislative fix because it prevented even deeper cuts. “It staved off the worst effects, but it hasn’t been sufficient,” she said. “Unless there are additional resources that flow into the fund, victim services are going to experience a severe catastrophe.”
Efforts to shore up the fund once again are underway in both chambers of Congress.
In the House, Rep. Ann Wagner, R-Mo., introduced a bipartisan bill in April that would give the Crime Victims Fund a new source of revenue: penalties imposed on companies that violate the False Claims Act by defrauding government programs.
Grassley and Sen. Catherine Cortez Masto, D-Nev., citing new revenue coming in, sent a letter this month to key appropriators in that chamber seeking to amend this year’s spending law to raise the cap on how much money can be spent from the fund to the “highest possible obligation limit.” The fiscal 2024 cap was set at $1.35 billion, a drop from $1.9 billion in fiscal 2023.
For fiscal 2025, the House Commerce-Justice-Science appropriations bill has proposed a spending cap of $1.5 billion, in line with the White House request. House appropriators used the new receipts from the Binance settlement to beef up other programs funded in the bill, rather than boost the obligation ceiling for crime victims’ services.
The draft Senate Commerce-Justice-Science bill, which the Appropriations Committee approved Thursday, would raise the cap to back to $1.9 billion.
“The Committee remains concerned about the health of the (Crime Victims Fund) and its ability to continue to support compensation to and services for survivors of crime in future years.” the panel said in a report accompanying the bill. It also urged the Justice Department to remind prosecutors of the availability of the fund “as a repository for fines, fees and other penalties.”
