US judge nullifies Trump deal to resolve IRS lawsuit in scathing ruling

Kathleen Williams sanctions president’s lawyers and says $10bn suit against IRS was brought for ‘improper purpose’

A federal judge on Monday nullified an agreement the government reached with Donald Trump and his sons over the leak of his tax returns. The judge lambasted the government and president’s lawyers for using the judicial process to try to concoct a beneficial arrangement for the president.

The ruling from US district judge Kathleen Williams in the southern district of Florida blocks a widely criticized arrangement the government and the president’s attorneys reached earlier this year to resolve a $10bn lawsuit by Trump and his sons over the leak of the president’s tax returns. The government never responded to the lawsuit and then announced it was settling the suit by creating a $1.8bn slush fund to compensate victims of “government weaponization” and giving the president, his family, and related entities immunity from tax audits.

Amid bipartisan backlash, the acting attorney general, Todd Blanche, announced the justice department was scrapping the fund, but the tax immunity provisions remained in place.

In her ruling on Monday, Williams, who was nominated to the bench by Barack Obama, said there had never been a genuine controversy in the case – a requirement for any lawsuit – since Trump controlled the treasury department. She also sanctioned Trump’s lawyers for their conduct before the court.

“The nature of the suit itself and the conduct of the parties and counsel from its filing make plain that this was an attempt to use the court 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,” she wrote.

“The court finds that this matter was brought for an improper purpose – to gain the imprimatur of judicial legitimacy for a ‘settlement’ that had no viable basis in law or fact,” she added.

Her ruling blocks both Trump, his sons, and business, and the government from “using, offering, admitting, or citing” anything from the so-called settlement agreement in any kind of proceeding.

The ruling on Monday comes after Williams took the extraordinary step of reopening the case at the urging of a group of retired federal judges. She previously closed the case after Trump voluntarily withdrew his claims when the agreement was reached.

In her 56-page ruling, Williams offered evidence for why it was clear the lawsuit was filed in bad faith and the result was collusive.

For example, one of Trump’s lawyers, Daniel Epstein, never tried to seek permission to appear in the case in the southern district of Florida – something he had done in other cases – and which Williams took as a sign he never intended to pursue the case.

She also noted that the justice department had never attempted to answer obvious questions about whether such an agreement ran afoul of the emoluments clause of the constitution or a law blocking the president from ordering or ending an audit of a particular taxpayer. And Williams said the fact that the government was able to unilaterally end the slush-fund portion of the agreement suggested the parties were not actually adverse.

“Acting Attorney General Blanche’s apparent capacity to speak for both plaintiffs and defendants, sign a ‘settlement’ document on behalf of all parties to this action, and then repudiate part of that agreement, demonstrates that there was only one party whose interests were being represented throughout this case.”

Williams referred one of Trump’s lawyers, Alejandro Brito, to the Florida bar for potential disciplinary action. And she blocked Epstein from appearing on behalf of clients in the southern district of Florida for a year.

The plaintiffs, she said, should have known the statute of limitations had run out on their claim and that the amount of money they were seeking was “unsupported by facts or law”.

“This lawsuit was not brought to vindicate rights; it was brought to manipulate the judicial process to pursue benefits unavailable in litigation because the parties were not adverse,” she said.

She also criticized Blanche and associate attorney general Stanley Woodward, close allies of Trump, for their conduct in the case, and referred them to the bars in New York and District of Columbia, where there are ongoing disciplinary proceedings against them.

Williams also ordered the parties to pay the legal fees of the retired judges and other third parties who had filed friend of the court briefs.

Blanche is expected to be asked about the settlement when he faces lawmakers on Wednesday in a confirmation hearing to become the permanent attorney general.

Critics still want Congress to act to prevent the settlement from ever taking effect.

“The court’s decision is 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,” said Brandon DeBot, policy director at the Tax Law Center.