Trump’s IRS Settlement: One Month Later, Three Federal Judges Signal Growing Distrust of the Government’s Story

Update July 13, 2026

Judge Kathleen Williams vacated the Trump-IRS settlement, issuing a scathing 56-page order finding that President Trump controlled both sides of the litigation. The court concluded there was never a genuine case or controversy and government lawyers never contested the case or advanced any position contrary to the president: “There was never adverseness between the parties; there was never a case or controversy; and there was never a question as to who would prevail.” The ruling tracks the concerns raised in our May report and by 35 former federal judges who intervened, and it legally nullifies the settlement. Invoking language from a prior ruling in the district, Williams observed, “this case is part of Mr. Trump’s pattern of misusing the courts to serve political purposes.”

Background

The Trump administration’s $1.776 billion so-called anti-weaponization fund emerged from a deeply problematic and legally questionable process. A sitting president sued an agency he controls, settled with his own Department of Justice, which then withdrew the case before a federal judge could scrutinize it. The settlement created a five-member commission authorized to distribute taxpayer dollars to supposed victims of lawfare weaponization, including 1,600 individuals charged in connection with the January 6 attack on the U.S. Capitol. The settlement also included a sweeping one-page addendum that on its face shields Trump, his family, and his businesses from current and future IRS audits and releases them from other liabilities, including investigation or prosecution by “other agencies or departments” in addition to the IRS and DOJ.

Public backlash was immediate. Watchdog groups, including Democracy Defenders Fund, filed multiple lawsuits to block the fund. During a congressional hearing on June 2, 2026, Acting Attorney General Todd Blanche announced that the fund is “not moving forward.” Yet the administration has yet to formally rescind the May 18 order establishing the fund, leaving real concerns over whether the administration will find a different way to disburse the money. 

Over the past month, three separate federal judges have weighed in on challenges to both the settlement itself and the $1.776 billion slush fund it established. The courts have questioned not merely the legality of the agreement but the credibility of the government’s representations about it. 

Judge Williams Reopens the Case Over Possible “Fraud on the Court”

The most dramatic development came on May 29, 2026, when Southern District of Florida Judge Kathleen Williams—the very judge who was poised to scrutinize the lawsuit—reopened Trump’s IRS case after it had already been voluntarily dismissed. 

The judge’s decision came in response to an amicus brief filed by Democracy Defenders Action, Susman Godfrey LLP, and Platkin LLP, on behalf of 35 former federal judges. The brief explained that although there was no settlement on record, the dismissal of the case was premised on a backroom agreement evidenced by public documents and announcements that created the fund and delivered substantial tax benefits to Trump and his businesses. The brief raised the extraordinary possibility that the court itself was a victim of fraud. 

Judge Williams described allegations surrounding the settlement as “grievous” and signaled concern that the dismissal may have been used to shield the settlement from judicial review.  She indicated that she intends to investigate whether the lawsuit was settled in a way that benefited Trump and his allies while evading court scrutiny. 

The language in the order is remarkable. Courts do not casually reopen closed cases, and Judge Williams’ questioning whether Trump’s dismissal of the case was “premised on deception” resulting in the court being “the victim of a fraud” raises serious allegations of misconduct. 

In response to the court’s invitation, the plaintiffs—Trump, his sons Don Jr. and Eric, and the Trump Organization—submitted a brief on June 12, 2026, arguing that the court lacks jurisdiction to investigate because the case was already closed. On June 23, 2026, a coalition of 23 state attorneys general submitted an amicus brief arguing that the litigation was “colored by fraud from the beginning” and urging the court to void the “collusive settlement” intended to “benefit the Trump family and enrich President Donald Trump’s political allies, in an end-run around constitutional limits on executive power.”

Judge Brinkema Demands Sworn Assurances the Fund is Dead

A parallel challenge to the slush fund in the Eastern District of Virginia has also been escalating. 

Two weeks after Judge Williams reopened the SDFL case, EDVA Judge Leonie Brinkema issued a sweeping preliminary injunction on June 12, 2026, barring officials from taking virtually any action to create or operate the fund. The injunction prohibits transfers of money, processing claims, appointment of fund managers, creation of operations procedures, destruction of related documents, or the reconstitution of the fund under a different name. The breadth of the order suggests the court worries not only about what the government has done but about what it might continue to do if left unconstrained. 

Judge Brinkema also ordered Acting Attorney General Todd Blanche, Associate Attorney General Stanley Woodward, and Treasury Secretary Scott Bessent to file declarations under penalty of perjury that the fund would not proceed “in any manner, or under any name.” 

The administration refused to comply. On June 19, 2026, senior DOJ counsel Andrew Block argued that compelling sworn testimony from senior government officials violates the separation of powers. Instead, Block offered the Acting Attorney General’s recent congressional testimony that the fund “is not going forward, period.”

Apparently unpersuaded by these representations and the administration’s refusal to prove the requested declarations, Judge Brinkema declined to dismiss the case as moot and ordered discovery to proceed. 

Judge Leon Warns DOJ, “Don’t Play Possum With Me”

Judge Richard Leon of the U.S. District Court for the District of Columbia expressed similar sentiments in another challenge to the slush fund. 

Following a hearing on June 10, 2026, Judge Leon declined to issue an immediate restraining order after DOJ lawyers represented that the fund was no longer moving forward. He agreed that the fund was already effectively blocked by the EDVA injunction. But despite siding with the government in his order, he repeatedly pressed their counsel about inconsistencies in the administration’s position. 

The administration’s public messaging is difficult to reconcile. Acting Attorney General Blanche told Congress that the fund was being abandoned. Yet President Trump subsequently stated that he believed the fund was “a great idea” and would be disappointed if it were not implemented. 

Judge Leon accepted the government’s representations for the moment but not without a warning. Emphasizing that the courts have authority to sanction lawyers who make false statements, he cautioned the Justice Department: “Don’t play possum with me.” 

His questioning revealed similar concerns about whether the government’s actions matched their assurances. He repeatedly asked why the Justice Department had not formally rescinded the directive establishing the fund’s procedures, but Government counsel did not provide an answer.

Judicial Skepticism

While each ruling is significant when viewed individually, the full picture reveals something even more telling. 

Judge Williams reopened a dismissed case to investigate possible deception and fraud on the court. Judge Brinkema demanded sworn assurances from senior officials and imposed a sweeping injunction designed to prevent the fund from reemerging in another form. Judge Leon openly warned the Justice Department that he is watching for gamesmanship and reserves the right to act if the government’s representations prove unreliable. While their concerns arise in different cases and procedural contexts, they all point to a distrust of the administration.

Our earlier issue brief outlined the legal and constitutional questions underlying the case itself and the settlement: possible domestic Emoluments Clause violations, statute of limitations problems, lack of congressional authorization, and the dangerous incentive structure it creates for future presidents to file meritless lawsuits against their own agencies. While those concerns have not gone away, the central issue with the slush fund is no longer only its legality. It is whether the administration has been forthright with the courts about what it intended to do, what it has already done, and whether the fund has truly been abandoned. But one thing is clear: the courts are not just going to take the administration’s word for it. 

President Trump has refused to concede that the fund is dead, leaving concerns over whether his administration will wait for the public to shift its attention, allow the litigation to fizzle out, and then quietly revive the fund. The American public deserves binding, legal assurances that taxpayer dollars will not fund payouts to January 6’ers and other Trump loyalists, and they deserve answers about the more obscure parts of the settlement that seem to forgive the Trump family of liability for tax avoidance in perpetuity.