The Constitution grants Congress exclusive control over federal spending—an essential check on the executive branch. But a recent wave of settlement agreements between the Trump administration and major law firms marks the latest in a growing pattern of executive maneuvers that erode this safeguard. By redirecting valuable resources toward White House-aligned initiatives without congressional approval, the administration has effectively created a shadow appropriation.
This controversy began in February 2025, when President Donald Trump issued a series of executive orders targeting major U.S. law firms that the administration perceived as hostile. These orders revoked security clearances, terminated federal contracts, and imposed other sanctions. Firms responded in two ways: some challenged the orders in court on constitutional grounds (and have thus far prevailed), while others negotiated settlements committing, in the aggregate, nearly $1 billion in pro bono legal services to administration-approved causes.
While the executive orders themselves have raised a host of constitutional questions and ethical problems (and may have also violated federal corruption laws), the resulting settlements pose a distinct and unexamined legal problem: they likely violate the Miscellaneous Receipts Act, a statute requiring that funds received by the government be deposited into the Treasury and thus managed by the congressional appropriations process. Even more striking, the Trump administration’s own Justice Department recently reaffirmed this legal restriction—only for the administration to ignore it in these very agreements.
Constitutional and Statutory Framework
The Appropriations Clause of the U.S. Constitution provides that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” To safeguard this power, Congress enacted several fiscal control statutes. Two are especially relevant here:
- The Anti-Deficiency Act prohibits federal employees from obligating funds beyond what Congress appropriates. It also specifically bars the government from accepting voluntary services without compensation, a crucial check on executive discretion in using non-congressional resources.
- The Miscellaneous Receipts Act (MRA) mandates that government officials promptly deposit all funds received by the government into the Treasury unless otherwise authorized by Congress. This statute ensures all government revenues are accounted for through the appropriations process, effectively blocking any attempt by the executive branch to redirect funds outside of the legislative control over federal spending.
Through these laws, Congress codified the “anti-augmentation principle,” which prohibits agencies from augmenting their “appropriations from outside sources without statutory authority.”
Violations of these fiscal statutes carry serious consequences. For example, federal officials who violate the MRA may be removed from office and required to forfeit any portion of the funds they hold and would otherwise be entitled to. While the MRA does not specify criminal penalties, officials’ conduct may still trigger criminal liability under other federal statutes prohibiting misappropriation of government resources. These enforcement mechanisms reflect Congress’s intention that the separation of fiscal powers be strictly maintained—not merely as a procedural formality, but as a fundamental constitutional safeguard.
The Doctrine of Constructive Receipt
Settlements present a potential loophole to the MRA. This is because agencies entering into a settlement with private party defendants might require them to send money or services to unrelated third parties rather than the Treasury, effectively augmenting agency appropriations without congressional input.
To close this loophole, DOJ’s Office of Legal Counsel (OLC) developed the doctrine of constructive receipt: if the government could have accepted funds and retains control over how they are used, the MRA applies—even if the services are routed through a third party. This doctrine looks to the function, not the form, of the settlement.
For a settlement directing money or services to a third party to comply with the MRA, OLC has set two conditions:
- The settlement must be finalized before any admission or finding of liability. This is because such an admission or finding would establish the government’s legal entitlement to penalties, triggering the obligation to deposit them in the Treasury.
- The government must not control how settlement funds or related projects are used after the settlement is finalized, except making sure the parties follow the terms of the settlement.
The Law Firm Settlements
On March 14, 2025, Trump issued an executive order targeting Paul Weiss. Six days later, the administration announced a deal to rescind the order in exchange for Paul Weiss committing to:
- Provide $40 million in pro bono legal services supporting administration initiatives, including veterans, antisemitism, “fairness in the Justice System,” and “other mutually agreed projects.”
- Implement “merit-based hiring” and eliminate diversity, equity, and inclusion (DEI) policies.
- Take on pro bono matters representing both liberal and conservative viewpoints.
Over the next month, four additional law firms entered similar agreements, each committing $100 million in pro bono services—even though no executive orders had been issued against them. While the agreements did not include explicit commitments from the administration to refrain from future executive action, that understanding appeared to underlie the arrangements.
Separately, on March 17, the Acting EEOC Chair sent letters to 20 large law firms expressing concern that their DEI policies might violate Title VII of the Civil Rights Act. These letters do not appear to be part of official EEOC investigations, which by law require confidentiality. Trump and the EEOC announced settlements with four more large firms on April 11. In exchange for the EEOC withdrawing its inquiries and agreeing not to pursue related claims, the firms agreed to the same essential terms as the others, collectively committing $500 million in pro bono services for “causes that President Trump and the Law Firms both support and agree to work on,” including assisting law enforcement, veterans, members of the military, Gold Star families, and first responders; “ensuring fairness in our Justice System,” and “combatting antisemitism.”
Violations of the Miscellaneous Receipts Act
Though serious questions remain about their enforceability, these settlements likely violate the second prong of OLC’s constructive receipt test, which bars the government from retaining post-settlement control over resources.
A 2006 OLC opinion found no MRA violation where settlement funds were directed to various initiatives because they were fully defined before execution and no federal official controlled their implementation. The current settlements, however, establish an ongoing role for presidential oversight by directing pro bono services to “causes that President Trump and the Law Firms both support and agree to work on.” While the agreements mention examples like supporting law enforcement and “ensuring fairness in our Justice System,” the language creates a mechanism requiring White House approval for how these legal resources are deployed.
The Paul Weiss and EEOC settlements present the clearest applications of the doctrine, as they include explicit government commitments: rescinding an executive order in the case of Paul Weiss, and foregoing potential legal claims for the EEOC firms. But the other agreements also fall within the doctrine’s scope to the extent that: they were negotiated under threat—not merely of litigation, which at least affords due process—but of punitive executive action that arguably constitutes a bill of attainder, with the firms implicitly securing a commitment from the government not to invoke that power.
Evidence of intended presidential control is substantial. On April 28, 2025, Trump issued an executive order directing DOJ to establish a mechanism to provide legal support to law enforcement officers sued for actions taken on the job. The order stated that the mechanism “shall include the use of private-sector pro bono assistance for such law enforcement officers.” While the executive order doesn’t name the settling law firms, all of the settlements (except Paul Weiss’s) identify “law enforcement” as a potential recipient of their pro bono work, which strongly suggests that the Trump administration intends to involve the settling firms.
Trump had already signaled plans to direct pro bono services from the other law firms toward initiatives far removed from the listed examples, including international trade negotiations and coal industry revitalization. In a Cabinet meeting, he remarked, “I have a lot of legal fees I could give to you people, and we might as well use them.” These statements directly contradict some settling firms’ attempts to downplay White House influence over their pro bono commitments.
Post-settlement control places these arrangements squarely within the MRA’s scope under the doctrine of constructive receipt. The government has effectively “received” valuable legal services because it retains discretion over their allocation and use. That the services may flow to third parties rather than directly to the government does not exempt them from the Act’s requirements. The President himself characterized the situation bluntly: the law firms “give me a lot of money.”
Shifting DOJ Standards
In addition to these statutory violations, the settlements stand in stark contrast to the Justice Department’s own standards for settlement practices. While DOJ’s approach to third-party settlements has varied across administrations, the agreements violate even the Trump administration’s own newly reinstated restrictions.
The Biden Administration permitted such payments only if they satisfied OLC’s criteria and met additional safeguards, such as ensuring that payments or services to third parties were closely connected to the alleged legal violation. In February 2025, Attorney General Pam Bondi reversed course, “reinstating the prohibition on improper third-party settlements.” This much stricter approach barred nearly all settlements that required payments to third parties not directly harmed or involved in the case.
While these policies formally apply only to DOJ—and not to agencies with independent litigation authority like the EEOC—they set benchmarks for proper executive branch conduct across agencies and reflect the administration’s principles about appropriate use of settlement power. So even accounting for this jurisdictional distinction, the current agreements fall dramatically outside established norms. The law firm settlements may be used to channel valuable services toward political priorities, like trade negotiations, that are completely unrelated to the underlying Title VII concerns. This violates the spirit of the DOJ standards and demonstrates the unprincipled nature of the administration’s approach, which ultimately serves as another mechanism to circumvent Congress’s constitutional control over federal resources.
Next Steps for Congress and the Law Firms
These settlements are not mere technical violations of appropriations law—they mark another step in the erosion of Congress’s power of the purse. By using regulatory pressure to extract nearly $1 billion in legal services and then steering those resources toward favored political causes, the Trump Administration has created a parallel budgeting mechanism, operating outside both the appropriations process and congressional oversight.
If left unchallenged, this tactic sets a dangerous precedent. This administration—and those that follow—could look beyond law firms to other private parties, converting regulatory pressure into unappropriated funding without ever asking Congress. This isn’t just fiscal improvisation; it’s a blueprint for executive self-financing, a fundamental threat to Congress’s most important power in resisting executive tyranny and preserving constitutional checks and balances.
Congress should not wait to act. Members of either party can request that the Government Accountability Office (GAO) review these settlements for violations of the Miscellaneous Receipts Act, and Democrats should proceed independently if Republicans abdicate their constitutional oversight duty. Federal officials involved in these settlements may already face liability under the MRA, but a GAO finding would eliminate any plausible deniability—making clear that continued enforcement of these agreements, or the execution of similar future arrangements, is unlawful. While the doctrine is clear in this context, Congress could codify and expand it—adding prophylactic measures like those found in the Biden administration’s regulations and Justice Manual.
Settling law firms also have an opportunity to mitigate the damage caused by their agreements. The Miscellaneous Receipts Act provides these firms with a legal basis to resist the administration’s attempt to dictate their client selection and pro bono priorities. By invoking these fiscal law concerns, firms could argue that the government’s attempt to control client selection post-settlement is unlawful, making the agreements void and unenforceable.
At its core, this is not about the merits of the causes these services might support. It’s about whether the president can sidestep Congress and reallocate public resources by fiat. The answer must be no.
FEATURED IMAGE: Close-up shot of U.S. money and flag (via Getty Images)
