Judge: Trump sought to ‘manipulate the judicial process’ with his IRS lawsuit and attempted $1.8B fund

By Tierney Sneed, Holmes Lybrand, CNN

(CNN) — A federal judge on Monday said a controversial lawsuit brought by President Donald Trump against the IRS sought to “manipulate the judicial process” and that he acted in bad faith in bringing it.

US District Judge Kathleen Williams is ordering sanctions for the attorneys involved in the lawsuit, which led to an attempt to create the now-defunct $1.8 billion “anti-weaponization” fund for allies of the president. It was also used to justify a Trump administration order giving the president and his businesses amnesty for any past tax issues.

Williams’ 56-page opinion blasted the behavior of both the Justice Department — arguing that the administration’s response to the case disregarded DOJ policies and potentially the law — and of the private attorneys who brought the lawsuit on Trump’s behalf.

“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,” the judge wrote.

She ordered that her opinion be submitted to attorney disciplinary boards in in New York and Washington, DC, that are reviewing preexisting professional ethics complaints against acting Attorney General Todd Blanche and Associate Attorney General Stanley Woodward.

“In abdicating its responsibility to zealously defend the interests of the United States, the Government entered into a ‘settlement’ that deviated from its litigation posture in similar actions, disregarded DOJ policies, and accomplished objectives beyond those authorized, as well as those specifically prohibited, by law,” Williams wrote.

The judge also referred one of the private attorneys who represented Trump in the case to the Florida Bar for potential disciplinary proceedings and blocked another lawyer who represented Trump from court appearances in the Southern District of Florida for the next year.

Williams’ opinion came in response to a request from a group of retired judges, filed after she dismissed the lawsuit, that she scrutinize the deal. The new order from Williams — who was appointed by President Barack Obama — indicates the retired judges could be entitled to having their legal fees covered.

Attorneys for the former judges called Monday’s opinion a “resounding victory for the rule of law.”

CNN has reached out to the Justice Department for comment.

A spokesman for Trump’s private legal team said: “The IRS wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization to the New York Times, ProPublica and other left-wing news outlets, which was then illegally released to millions of people. President Trump continues to hold those who wrong America and Americans accountable.”

The settlement between the IRS and Trump this year stemmed from a significant leak of tax information on thousands of wealthy individuals, including Trump, by a government contractor six years ago.

The man, Charles Littlejohn, was charged in 2023 with leaking the tax information to media outlets during his time working with a consulting firm with IRS contracts. He pleaded guilty in 2024 and was sentenced to five years in prison.

Trump’s Justice Department announced in May it reached a settlement with the president over the leaked information that included a $1.776 billion fund for those who believed they had been unfairly targeted by the DOJ.

Amid significant backlash from Republicans and Democrats, Blanche told lawmakers last month the fund was dead, but he has refused a federal judge’s request to submit a signed statement saying the fund was no more.

More importantly for Trump, the settlement included a memorandum from Blanche — quietly added to the Justice Department’s announcement of the settlement the following day — prohibiting the IRS from investigating Trump, his family or his businesses for past tax issues, or even other types of claims brought by the federal government for any conduct pre-dating the deal.

Even before Williams’ Monday opinion, it was unlikely that the Blanche amnesty order would have stopped a future Democratic administration from investigating Trump, given the dubious legal ground around the agreement.

But the new order from the judge could undermine any attempt by Trump to use the purported settlement as a defense in court, if a future administration brings a claim against him, his family or his businesses.

Singling out top Trump appointees at DOJ

Williams wrote at length about the Justice Department’s approach to the lawsuit — and how it “remained conspicuously absent and silent when serious questions about this matter have been raised” — to explain why she concluded it was not a legitimate legal dispute.

But she also hinted that Blanche and Woodward specifically may have violated attorney ethics laws, while signing on to a deal that the judge believes to be unlawful.

She suggested the two Justice Department officials should have recused themselves from working on the dispute, because of their work when they were private attorneys representing clients who stood to benefit from the case’s resolution.

Blanche was Trump’s attorney in various criminal cases before the president’s return to the White House, while Woodward represented Capitol riot defendants and a Trump aide who was prosecuted alongside the president in the classified documents case.

The anti-weaponization fund was “premised” on paying out claims from January 6, 2021, and the classified documents case, the judge noted Monday.

“Instead of either recusing because of their previous representations or vigorously defending this lawsuit as required to do so by DOJ policies and procedures, these lawyers agreed to a ‘settlement’ involving a staggering amount of money potentially benefitting former clients,” Williams wrote.

The judge additionally said the second piece of the “settlement” — the tax amnesty order signed by Blanche alone — “directly contravenes” a federal law barring presidents and other executive branch leaders from influencing tax audits.

Williams said the “acquiescing to any such demand is wholly incompatible with the duties of DOJ attorneys (as well as CEO [Frank] Bisignano for the IRS) to enforce the law and protect the public interest,” raising the prospect that the order is unconstitutional as well.

The opinion comes as Blanche is scheduled to appear before the Senate Judiciary Committee on Wednesday for a confirmation hearing to be the permanent head of the DOJ. Williams wrote in a footnote that she was “extremely troubled” by testimony Blanche gave when he was on the Hill in May, when he said the court had no role in reviewing the agreement.

“While temporally accurate, this answer is, at best, misleading and, at worst, disingenuous,” she wrote.

This story has been updated with additional details.

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CNN’s Hannah Rabinowitz and Kara Scannell contributed to this report.