Sens. Elizabeth Warren, D-Mass., and Tom Coburn, R-Okla., introduced legislation Wednesday that aims to provide the public with more accurate and detailed information about settlements between companies and federal agencies.
The Truth in Settlements Act would require public announcements that cite settlement amounts to explain whether the penalty is tax-deductible or will be partially offset by credits, according to a Wednesday press release from the senators' offices.
The bill would oblige companies to file reports with the Securities and Exchange Commission when they deduct settlement payments from their taxes. Federal agencies would be required to explain the kinds of conduct that counts as credits toward settlement amounts.
The provisions are part of an effort to increase transparency about agreements like the $25 billion national mortgage settlement, which "included $17 billion in credits, much of it for routine conduct," the senators said in a fact sheet.
"Since agencies are not currently required to disclose the financial structure of government settlements, too often the true value of those settlements is not known because often companies are allowed to deduct part of the payment," Coburn said in the release.
The legislation takes aim at confidentiality agreements, requiring federal agencies to explain their reasoning when they classify settlements as confidential and provide annual reports to Congress on the number of confidential agreements reached each year. The bill also would direct the Government Accountability Office to investigate confidentiality procedures and require federal agencies to post basic information about settlements over $1 million online.
"When government agencies reach settlements with companies that break the law, they should disclose the terms of those deals to the public," Warren said in the release. "Anytime an agency decides that an enforcement action is needed, but it is not willing to go to court, that agency should be willing to disclose the key terms and conditions of the agreement."
The announcement comes one day after regulators reached a $2.6 billion settlement with JPMorgan Chase (JPM) over the company's role in the Bernie Madoff Ponzi scheme.
"Increased transparency will shut down backroom deal-making and ensure that Congress, citizens and watchdog groups can hold regulatory agencies accountable for strong and effective enforcement that benefits the public interest," Warren said in the release.