Trump Sued His Own Government for $10 Billion, and His Former Lawyer Struck a Deal

A $10 Billion Demand and No Government Defense

On January 29, 2026, President Donald Trump, his sons Donald Jr. and Eric, and the Trump Organization sued the IRS and Treasury for at least $10 billion over the disclosure of their tax returns.¹ For the 109 days the case was pending, his Justice Department never appeared to defend the United States.²

Todd Blanche, then acting attorney general, had represented Trump in three criminal cases and did not recuse.³² On May 18 his Department announced a settlement, and the next day he signed a release intended to protect Trump's tax affairs.⁴² Judge Kathleen M. Williams later found that the plaintiffs acted in bad faith, that the litigation was collusive and that DOJ abdicated its duty to defend the United States.²

On June 8, six days after Blanche told Congress the fund would not proceed, Trump nominated him to serve permanently as attorney general.² The Senate confirmed him 50 to 49 on August 8.⁵

Trump stood on both sides: he was the lead plaintiff, and Williams found that he controlled the agencies he sued.¹² He also had administrative claims over the Mar-a-Lago search and the Russia investigation, a demand that Representative Jamie Raskin, citing New York Times reporting, put at $230 million.⁶⁷ Discussing the Mar-a-Lago claim on January 31, he described the conflict himself:⁸

Press gaggle aboard Air Force One en route to Palm Beach, Florida (Roll Call Factbase transcript of the White House recording)⁸

I'm supposed to work out a settlement with myself.

He also raised the idea of giving money to charity.⁸ The tax deal later bound the plaintiffs to abandon both administrative claims.⁶

A Billion-Dollar Fund and Protection From Tax Claims

The agreement promised the plaintiffs an apology and no monetary payment.⁶ In return for dismissal and withdrawal of their administrative claims, DOJ committed $1.776 billion from the Treasury's Judgment Fund to compensate other people alleging government weaponization and lawfare.⁴⁶ Blanche would appoint the fund's five members, one in consultation with congressional leadership, and Trump could remove any of them without cause.⁶ The agreement required confidential reports to the Attorney General identifying each recipient, the recipient's address and the nature of the relief.⁶

In a May 26 letter, Senators Sheldon Whitehouse and Richard Durbin said Blanche had testified on May 19 that January 6 attackers, including those who assaulted police officers, could apply to the fund.⁹

Trump described the fund as money he gave up, in a May 22 statement Williams reproduced from Politico reporting:²

May 22, 2026 statement, reproduced from Politico reporting in Judge Williams's July 13 order, footnote 47²

I gave up a lot of money in allowing the just announced Anti-Weaponization Fund to go forward.

On May 19 Blanche signed a separate release covering Trump, his relatives, companies and affiliates, including matters involving tax returns filed before the agreement took effect.² Williams read it as a blanket grant of immunity to the plaintiffs, their families and affiliates, precluding current or possible investigations or actions before any other agency or department.² She found that it purported to bar future IRS audits of Trump, his sons and their entities, directly contravening 26 U.S.C. § 7217, which prohibits executive interference with taxpayer audits.² She identified potentially millions of dollars in tax relief and a potential Domestic Emoluments Clause violation, without entering an emoluments judgment.²

DOJ later narrowed its reading: in an August statement incorporating Blanche's Senate testimony, it said the release applied only to the named parties and bound only the IRS and Treasury, not other agencies. Blanche testified that the settlement ended any past audits, while also describing those audits as potential, 'even if they existed.'¹⁰ Williams left its private enforceability undecided.²

A Court Blocked the Fund; DOJ Revoked Its Funding Order

On May 20 Representative Brian Fitzpatrick asked Blanche to explain the fund's funding source, legal purpose and eligibility for people convicted of federal crimes or associated with violence.¹¹ The next day Fitzpatrick and Representative Tom Suozzi introduced a bipartisan bill to prohibit federal payments on fund claims.¹² Fitzpatrick said, "Taxpayer dollars will not become a discretionary payout fund."¹²

On May 29, 2026, Judge Leonie M. Brinkema of the Eastern District of Virginia barred creation and operation of the fund, including transfers, consideration of claims and payments.¹³ Blanche told Congress on June 2 that DOJ would not proceed.² Brinkema's June 12 preliminary injunction also prohibited appointments and revival under another name.¹⁴

On August 2 Blanche formally rescinded the May 18 funding order.¹⁰ His signed order states that no members were appointed, no funds transferred, no claims process established and no claims paid.¹⁰ The fund failed to compensate anyone despite DOJ's announced purpose.⁴¹⁰

The rescission did not withdraw the May 19 release or the settlement agreement, which commits the Attorney General to create a fund and requires the parties' written agreement for modification.¹⁰⁶ The release's private enforceability remains undecided.² The Virginia challenge remained pending as of October 10, 2026.¹⁵

DOJ won one interim ruling, in a separate case: on June 23 Judge Richard J. Leon denied CREW's requested stay and preliminary injunction, finding the challenge likely moot and alternatively unripe after assurances that the fund would not operate.¹⁶ That ruling did not approve the fund's legality.¹⁶

Williams Sanctioned Trump and His Lawyers

The plaintiffs had dismissed the tax suit with prejudice on May 18, before the government filed an answer or summary-judgment motion, and Williams had closed the case, stating that there was no settlement of record.¹⁷¹⁸ Thirty-five former federal judges asked her to reopen it.² On July 13 she found that there had never been genuinely opposing parties, because Trump controlled the agencies he sued.² She cited his own Executive Order 14215, which makes the President's and the Attorney General's legal opinions controlling on executive-branch employees, including in litigation.² No sitting President, she wrote, had ever sued federal agencies completely under his control for benefits to himself, his family and associates.² She concluded:

Order, ECF 106, Trump v. Internal Revenue Service, No. 1:26-cv-20609-KMW (56 pp.)²

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.

The sanctions reached Trump as a plaintiff.² Williams barred the parties from presenting the agreement in official proceedings as a settlement reached in this lawsuit; they remain free to describe a private agreement and its terms.²¹⁹ She found monetary sanctions appropriate against the plaintiffs and their lawyers; what fees, if any, to award remained undecided.²¹⁹

She also sanctioned two lawyers individually, referring plaintiffs' attorney Alejandro Brito to the Florida Bar and barring Daniel Epstein's future applications to practice in her district for one year or until further order.² She sent her order to the bars overseeing Blanche and Associate Attorney General Stanley Woodward.²

On September 29 a unanimous Eleventh Circuit panel that included Trump appointee Kevin Newsom denied a stay.²⁰²¹ It left the two lawyers' individual sanctions in place because it had significant doubts about its jurisdiction over them.²⁰ On the settlement restriction, it found no strong showing that Williams clearly erred in finding collusion and bad faith and noted that the appellants offered no evidence to rebut those findings.²⁰ The appeal and fee proceedings remained unresolved as of October 10, 2026.²⁰²²

The Tax Leak Did Not Justify This Deal

The underlying injury was real. IRS contractor Charles Littlejohn admitted illegally disclosing tax information, and the federal district court in Washington, D.C., sentenced him to five years in prison.² Williams acknowledged Trump's right to sue, but found that the plaintiffs knew or should have known their claims were time-barred and their damages demand lacked support in facts or law.²

Trump's lawyers argued that DOJ could settle administratively without a lawsuit, that dismissal ended the court's authority and that his sons and company supplied independent private claims.² Williams rejected their asserted independence: they shared counsel and interests with the President, who controlled the other side.² She retained authority to sanction misconduct even after dismissal.²

Blanche testified on July 15 that he had not discussed the settlement with Trump or Trump's outside counsel, saying others in his office handled it; he said his only discussion with Trump came when DOJ decided not to proceed with the fund.¹⁰

DOJ cited the Obama administration's $760 million Keepseagle settlement and emphasized that unused money in the new fund would revert to the government.⁴ Williams answered that Keepseagle involved a decade of contested litigation, defined class claims and judicial fairness review, while this case ran 109 days without a government appearance.² She also contrasted Ken Griffin's tax-leak suit, which DOJ defended for two years before giving him an apology.²

Carroll Would Lose Her Judgment, Not Gain a Government Payer

The second case concerns money Trump owes.²³ A jury in a separate civil case found that he sexually abused E. Jean Carroll in 1996 and defamed her in 2022.²³ Based on that verdict, the judge ruled him liable for his 2019 defamation; the January 2024 trial determined damages only.²³²⁴ Those 2019 statements came in a White House press release and a press gaggle.²⁴

The jury awarded $83.3 million against Trump personally: $11 million for reputation repair, $7.3 million in other compensation and $65 million in punitive damages.²³ Carroll testified about death threats, lost income and her inability to afford stronger personal security despite fearing for her safety.²³

On April 11, 2025, after the trial and while Trump's appeal was fully briefed, the Attorney General's delegate certified his statements as official conduct.²⁴ Trump and DOJ jointly asked to substitute the United States as defendant.²⁴ Because the government is immune from defamation suits, substitution would extinguish the case.²⁴

Opinion of August 8, 2025, quoting the court's earlier decision in the same litigation, reprinted as Appendix B to the certiorari petition in United States v. Carroll, No. 26-142²⁴

So substituting the United States in place of Trump means the failure of Carroll’s defamation lawsuit.

Carroll would lose the case; the Treasury would not simply inherit a bill for $83.3 million.²⁴

The Appeals Court Rejected the Defense; DOJ Asked the Supreme Court

The Westfall Act protects federal employees from personal liability for official work, subject to a court's review of whether the conduct fell within their employment.²⁵²⁴ DOJ argued that presidential statements about fitness for office qualified and that, because this case had been moved to federal court on time, the Act imposed no deadline for certifying again.²⁴

That defense has substantial authority. In Ballenger, the D.C. Circuit held that a congressman's allegedly defamatory press remarks about a personal matter fell within his employment and barred the suit.²⁶ It placed the burden on the challenger to rebut the government's certification with specific facts.²⁶ Judge Steven Menashi likewise favored certification for Trump, in a dissent from denial of rehearing joined by Judge Michael Park and, except for one punitive-damages section, Chief Judge Debra Ann Livingston.²³

DOJ's position had changed with its leadership: Barr certified in 2020, Garland withdrew certification in 2023 before trial, and Bondi recertified after the verdict in April 2025.²⁴ The Second Circuit denied substitution on June 18, 2025 and explained that the statute, waiver and equitable considerations barred it after years of litigation and Carroll's victory.²⁴ The court did not decide whether Trump's statements were part of his job; the earlier trial-court ruling on that question had been vacated.²⁴²³

The Second Circuit affirmed the judgment and denied rehearing.²³ As of October 10, 2026, the judgment stood, issuance of the appeals court's mandate was stayed, and DOJ's July 28 Supreme Court petition remained undecided.²⁷²⁸ The effort to cancel Trump's liability continued.²⁴²⁸

The Charge Is Self-Dealing

Trump was the lead plaintiff seeking money from agencies he controlled, and his former defense lawyer used DOJ's authority to sign the release intended to protect him.¹² In Carroll's case, he joined DOJ's request to replace him and end her suit.²⁴ The cost: 109 days without a defense of the United States in one case, and a continuing effort to cancel Carroll's $83.3 million judgment in the other.²²⁴²⁸

The failed fund and unpaid demand limit what he received; they do not erase what he and his government tried to obtain.¹⁰¹²⁴ That is self-dealing: public power used for the officeholder's own financial protection.²²⁴

The President is excluded from specified federal criminal conflict-of-interest statutes.²⁹ The Supreme Court recognizes absolute criminal immunity for acts within his exclusive constitutional authority and at least presumptive immunity for other official acts, with no immunity for unofficial acts.³⁰ Neither protection decides Congress's judgment: impeachment is its constitutional remedy for abuse of public trust.³⁰³¹³²

One precedent cuts the other way. In 1974 the House Judiciary Committee rejected, 26 to 12, a Nixon article that bundled tax fraud with an emoluments charge, under the same compensation clause Williams raised here, over government spending at his private properties.³³² Congress must judge this conduct on its own facts.³¹

This belongs in an impeachment case because Trump used the government he ran to pursue his own financial relief.²²⁴³¹

Related: [DOJ's separate $1.25 million settlement agreement with Michael Flynn](profit_split_flynn.md).³⁴