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Wells Fargo settlement could test lame-duck law on attorney general power

December 29, 2018

An $8.6 million settlement the Wisconsin Department of Justice reached with Wells Fargo could be one of the first tests of the state’s lame-duck law limiting some authority of the attorney general.

The signed agreement, part of a $575 million settlement the bank reached with all 50 states over its opening of fake accounts without notifying customers, allows the attorney general to allocate the money to essentially any lawful purpose, but a provision in the lame-duck law requires settlement funds be deposited into the general fund.

A DOJ spokesman did not immediately respond to a request seeking clarification on when Wells Fargo plans to distribute the settlement funds, or whether it would be Republican Attorney General Brad Schimel or Democratic Attorney General-elect Josh Kaul who would be tasked with distributing them.

It is unclear to what extent the lame-duck law provision requiring all settlement funds be distributed to the state’s general fund will apply given the wide authority provided to the attorney general in the settlement agreement.

The agreement stipulates the attorney general can use the funds to recover costs of any investigation undertaken by DOJ in relation to the settlement, for consumer protection, “or for any lawful purpose, at the sole discretion of the Attorney General.”

An analysis of the lame-duck laws produced by the Legislative Fiscal Bureau explains it could potentially take an act of the Legislature for settlement funds to be distributed according to the terms of a settlement.

Rick Esenberg, president of the conservative Wisconsin Institute for Law and Liberty, said it’s likely the attorney general would be required to distribute the funds within the limits provided by state law, meaning the settlement funds would need to go directly into the general fund.

Lester Pines, a prominent Democratic lawyer, said the state generally needs to honor agreements reached with third parties for how settlement funds should be spent.

“You can’t enter into an agreement with a third party and then not do it,” Pines said.

He suggested conflicts could arise if future settlement agreements give the attorney general authority not addressed in statute.

“They’re going to run into problems,” he said.

A spokesman for Joint Finance Committee co-chairman Rep. John Nygren, R-Marinette, declined comment.

Because a DOJ official signed the settlement agreement Dec. 21, it appears a separate provision in the lame-duck law requiring the Joint Finance Committee to approve settlements did not apply.

The lame-duck law applies that legislative oversight to civil action prosecuted by the state, whereas the Wells Fargo settlement did not arise from any direct legal action from Schimel.

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