When Pamela Bondi was sworn in as the 87th Attorney General of the United States on February 5, 2025, she did not waste a moment. Within hours of taking office, she issued fourteen memoranda reshaping the priorities and policies of the Department of Justice. Among them was a directive with a precise, emphatic title: Reinstating the Prohibition on Improper Third-Party Settlements. It would prove to be the most consequential document of her entire tenure — not for what it prevented, but for what it later condemned.

Fifteen months later, that memo stands as the cornerstone of what may be the most legally significant constitutional challenge of the Trump administration: the creation of a $1.776 billion "Anti-Weaponization Fund," established as the hidden consideration in a settlement of a lawsuit President Trump brought against his own Internal Revenue Service.

What the Memo Said

The language of the February 5th directive was unambiguous. It established that while settlements are legitimate legal tools, their purpose must remain focused on victims and justice — not policy vehicles or financial conduits to outside parties.

From the Bondi Memo — February 5, 2025

"Settlements, including civil settlement agreements, deferred prosecution agreements, non-prosecution agreements, and plea agreements, are a useful tool for Department attorneys, and should be used, first and foremost, to compensate victims, redress harm, or punish and deter unlawful conduct. Except in limited circumstances, however, settlements should not be used to require payments to non-governmental, third-party organizations that were neither victims nor parties to the lawsuits."

The memo went further. It cited the risk of the "improper use of settlements to funnel payments" to third parties — a choice of language that would later prove strikingly self-descriptive. It rescinded two Biden-era memoranda that had permitted such arrangements, and directed the Associate Attorney General to produce a report within thirty days identifying strategies to eliminate improper third-party payment practices already in existence.

In short: the memo was not passive guidance. It was an active, affirmative prohibition, written with precision, aimed directly at the practice of using legal settlements as financial conduits to outside organizations that had no standing in the underlying case.

She used the word 'funnel.' That word — chosen by Bondi herself — is now the most accurate description of what the Anti-Weaponization Fund does with $1.776 billion in taxpayer money.

— The Constitutional Record Analysis

The Case It Would Come to Govern

On January 29, 2026, President Donald Trump, along with his sons Donald Jr. and Eric, and the Trump Organization, filed suit in the Southern District of Florida against the Internal Revenue Service and the Department of Treasury. The lawsuit sought a minimum of $10 billion in damages, alleging that the agencies had failed to protect the plaintiffs' confidential tax returns from unauthorized disclosure by a former contractor, Charles "Chaz" Littlejohn, who had since pleaded guilty and been sentenced to federal prison.

The case attracted immediate legal scrutiny for a reason that was not subtle: the President of the United States, who exercises direct authority over both the IRS and the Treasury Department — including the power to fire their leadership — had filed suit against those very agencies as if they were adverse parties. Judge Kathleen M. Williams of the Southern District of Florida raised the question directly, questioning whether Trump and the agencies he controls were "sufficiently adverse" to satisfy Article III's requirement of a genuine case or controversy.

That question was never formally answered. On May 18, 2026, plaintiffs moved to dismiss the case. The court dismissed it with prejudice. And simultaneously — outside the courtroom, with no documentation filed before Judge Williams — a settlement agreement was executed and a $1.776 billion fund was announced.

The Settlement That Was Never Filed

Judge Williams' dismissal order, issued the same day, is a remarkable document. It noted that the Notice filed by plaintiffs made no reference to any settlement, and included no stipulation of settlement. It observed that the Defendants — federal agencies represented by the Department of Justice — had neither submitted settlement documents nor filed any documents ensuring that settlement was appropriate, particularly given the unresolved question of whether a genuine case or controversy had ever existed between the parties.

The court cited the DOJ's own regulations — specifically 28 C.F.R. §§ 50.9 and 50.23 — which impose on the government an independent obligation to uphold the public's interest in knowing about the conduct of its government and the fair administration of justice. In citing those regulations, the court was documenting, in real time, their violation.

What the court did not know — because it had not been told — was that a settlement agreement had in fact been executed. That agreement, signed by Acting Attorney General Todd Blanche, established the following terms: the plaintiffs would receive a formal apology from the United States but no monetary payment of any kind; in exchange, the DOJ would create "The Anti-Weaponization Fund," capitalized at $1,776,000,000 drawn from the Treasury Department's Judgment Fund, to compensate individuals who claimed they had been wrongfully targeted by the prior administration's "weaponization" of the legal system.

Settlement Terms vs. Bondi Memo Requirements
Memo Requirement
What Occurred
Settlements must first and foremost compensate victims
Plaintiffs received a formal apology and zero monetary compensation. Violated
No payments to non-governmental third parties
$1.776 billion directed to a new commission for distribution to outside claimants. Violated
Recipients must be victims or parties to the suit
Fund recipients — Jan. 6 defendants, political allies — were neither victims of the IRS leak nor parties to Trump v. IRS. Violated
Prohibition on using settlements to "funnel payments"
Settlement structured specifically to route $1.776B through the Judgment Fund to politically preferred recipients. Violated

The Constitutional Dimension

Beyond the internal DOJ policy violation, the settlement raises a more fundamental constitutional question: whether the Judgment Fund — a permanent Treasury appropriation established by Congress to pay legitimate court judgments and settlements — can legally be used to fund a program Congress never authorized.

Article I, Section 9, Clause 7 of the Constitution provides that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." Congress did not appropriate $1.776 billion for an Anti-Weaponization Fund. Congress did not establish the commission overseeing that fund. Congress did not authorize the Attorney General to create a new compensatory program through the mechanism of settling a lawsuit the President brought against his own agencies.

Legal experts who reviewed the arrangement were not reserved in their assessment. Paul Figley, who spent 32 years at the Department of Justice, described the Judgment Fund as a "huge loophole" in Congress's power of the purse — one that the settlement exploits in a manner without precedent. Ninety-three House Democrats filed an amicus brief in federal court the same day the settlement was announced, arguing that the arrangement created a "specter of corruption unparalleled in American history."

The Blanche Complication

The settlement was not signed by Bondi, who had been removed from office on April 2, 2026 — six weeks before the agreement was executed. It was signed by Acting Attorney General Todd Blanche, who had served as President Trump's personal criminal defense attorney before joining the Department of Justice.

That background is legally significant. A senior DOJ ethics official formally briefed Blanche on his recusal obligations in early 2025, advising him that his prior representation of Trump required him to recuse from all DOJ matters involving the President. That briefing, and the recusal advice it contained, was memorialized in documentation copied to the Department's Office of Professional Responsibility and its Inspector General.

Blanche nonetheless signed a settlement agreement that directly benefited his former client — a settlement that simultaneously resolved the President's personal lawsuit, issued him a formal government apology, and established a billion-dollar fund for individuals the President has publicly identified as his allies.

The Timeline That Proves Coordination

  • February 5, 2025 AG Bondi issues memo prohibiting improper third-party settlement payments, citing risk of "funneling." Memo remains in force and is never rescinded.
  • January 29, 2026 President Trump, his sons, and the Trump Organization file suit against the IRS and Treasury Department, seeking $10 billion in damages.
  • April 2, 2026 AG Bondi is removed. Todd Blanche — Trump's former personal defense attorney — becomes Acting Attorney General.
  • May 18, 2026 — Morning Plaintiffs file notice of voluntary dismissal. No settlement referenced. No documentation filed with court.
  • May 18, 2026 — Same Day Judge Williams issues dismissal order noting the absence of settlement documents, citing DOJ transparency violations.
  • May 18, 2026 — Same Day DOJ simultaneously announces the Anti-Weaponization Fund. Settlement agreement signed by Blanche is made public. The agreement had never been filed with the court.

The simultaneity of these events is not incidental. A settlement negotiated in advance, executed on the same day as the dismissal, and deliberately withheld from the court is not a coincidence of timing. It is a coordinated sequence — one that the court's own order inadvertently documented by recording, in real time, the absence of what was, in fact, present.

Why the Memo Matters Most

In any legal proceeding that scrutinizes this arrangement — whether a congressional investigation, a civil challenge by taxpayer organizations or state attorneys general, a bar discipline proceeding, or a criminal referral — the Bondi memo is not merely relevant. It is dispositive on the question of intent.

To establish willful misconduct, one must prove that the actors knew their conduct was prohibited. The February 5th memo eliminates any possible claim of ignorance. Its author studied the subject, found existing policy insufficiently strict, tightened the rules, and put them in writing under her own name. The official who ultimately signed the violating settlement had been personally briefed on his recusal obligations by DOJ ethics staff. The agency whose regulations were cited by the court for violation had published those regulations in the Code of Federal Regulations for decades.

There is no version of events in which the parties to this settlement did not know it was prohibited. The memo was the prohibition. The settlement was the violation. The court order was the contemporaneous record.

The February 5th memo will likely be remembered as one of the most consequential self-defeating documents in the history of the Department of Justice — not because of what it accomplished, but because of what it proved.

Bondi wrote a prohibition against funneling settlement payments to outside organizations. That prohibition remained in force, unrescinded, on May 18, 2026, when a settlement was executed that directed $1.776 billion in taxpayer funds — through a mechanism the memo's own language describes with precision — to organizations and individuals who were never parties to the underlying case.

The memo did not prevent the conduct it prohibited. But it did something arguably more consequential: it documented, in the author's own words, exactly why that conduct was wrong — and exactly what it was called when it happened.