The much misunderstood Miscellaneous Receipts Act (Part 1)
Monday, September 29, 2014 at 7:18AM
Andy Spalding in Financial Fraud Enforcement Task Force, Miscellaneous Receipts Act, Remediation, U.S. Treasury

We’ve heard it so many times:  the Miscellaneous Receipts Act prohibits federal enforcement agencies from doing anything with settlement money other than depositing 100% of it in the U.S. Treasury.

But that simply isn’t true. And we know this because the DOJ itself has told us so. Allow me to spend a series of posts explaining how.

The premise is right: the Miscellaneous Receipts Act is a federal statute which provides that a government official “receiving money for the Government from any source shall deposit that money with the Treasury.” 31 U.S. § 3302(b). And it’s an important statute, reflecting a very important principle of constitutional law.

In our constitutional scheme, the executive branch obviously has the power to negotiate settlements. But Congress wields the power of the purse. This means that federal agencies must settle enforcement actions without encroaching upon Congress’ discretion to allocate federal money. The MRA is designed to ensure exactly that: when a federal enforcement agency receives settlement money, it may not divert that money to augment congressional budget decisions.

Let’s illustrate with an example. Say the DOJ settles a financial fraud case for $100 million. Someone over in the agency feels that some of this money should be spent on providing educational programs for the public on how to detect financial fraud. So he deposits $90 million in the U.S. Treasury, and gives the remaining $10 million to a local community organization. Yes, this would violate the MRA.

Why? Because once that money is placed in the federal government’s hands, it’s Congress’ to spend. The statute makes this unmistakably clear: if the government “receives” the money, it’s to go to the Treasury and allocated as Congress sees fit. For an executive agency to receive money and then turn around and spend it would be to usurp Congress’ power of the purse. It violates the separation of powers. It violates the MRA.

This much is true. But if it is, then how could settlement money ever be used for anything else? How could the DOJ use a portion of settlement money to fund community programs without violating the MRA?

Let me restate the question: how does the DOJ do so? How does it use a portion of the settlement money to fund community programs while fully complying with the MRA? Why isn’t the MRA the absolute bar that so many people think it is?

I will show you. Stay tuned. But here’s the teaser. The answer lies in the “R” in MRA: RECEIPTS.

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Andy Spalding is a senior editor of the FCPA Blog. He is an Assistant Professor at the University of Richmond School of Law.

Article originally appeared on The FCPA Blog (https://www.fcpablog.com/).
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