Two of the biggest financial fraud cases in history that targeted big banks are being undermined by a Justice Department-inspired "slush fund" that allows the banks to reduce their financial obligations by hundreds of millions of dollars while funding left-wing charities and nonprofits.

It's a complex system that should be illegal – except it isn't, thanks to DoJ's decision to ignore the letter of the law to allow the banks to give money to their political allies.

Washington Examiner:

In a little-noticed November report, Bank of America announced that it had donated more than $60.1 million to various charitable funds and nonprofit groups.

The donations were a good deal for Bank of America. For every dollar the bank gives, an independent monitor for the deal credits the bank with $2 toward the record $16.6 billion settlement with the Justice Department on financial fraud charges it signed in August 2014. To date, the donations have reduced that penalty by $138 million.

Ordinarily, this practice would be illegal. Not on the bank's part, but on the government's.

Federal law says that any funds obtained by a government official, such as a Justice Department prosecutor, must be deposited with the Treasury Department. Officials cannot instruct anybody making a payment to direct the funds anywhere else, much less offer them a deal if they do.

Yet President Obama's Justice Department has found a legal workaround to do just that in two of the biggest financial fraud settlements the government has ever obtained. Left-leaning nonprofit groups who would be eligible for the donations lobbied for this, according to Republican critics.

How does the Justice Department do this? By arguing that these are "voluntary" donations by the banks and therefore not funds that would otherwise go to the Treasury. Never mind that the banks would violate their plea agreements with the department if they did not make the payments.

"It's a cute lawyer's trick," said Paul Larkin, senior legal research fellow with the conservative Heritage Foundation. "Rather than take the money and then hand it out, which they cannot do, they tell the bank to give it directly. It's really an effort to funnel public money to private parties."

The DoJ built these "donations" into the plea agreements signed by the banks.

Under the $7 billion settlement Citigroup signed with the Justice Department in 2014 on financial fraud charges, the bank is obligated to pay at least $10 million in "community relief" to housing-related nonprofit groups from a list the government maintains, many of which are Democratic-friendly. It must also pay $15 million to legal aid funds and $25 million to public or private community development funds.

Bank of America must pay at least $20 million to housing groups, $30 million to legal aid groups and $50 million to public or private community development funds.

Not only do both banks get double credit toward their overall penalties for each donation, but there is also no explicit cap on the amount of credits they can get. They could erase potentially hundreds of millions of dollars in federal penalties in this way.

In effect, the taxpayer is funding left-wing social justice organizations secretly and without the authority of Congress.

So how did all this come about?  Liberal groups lobbied the Justice Department for it.

The lawmakers point to a February 2014 email from the nonprofit group Virginians Organized for Interfaith Community Engagement to the department as proof. Prior emails to DOJ showed that the group had been working with the Leadership Conference on Civil and Human Rights, a major coalition of civil rights groups, liberal nonprofits and labor organizations, on housing issues.

The VOICE group sought a meeting with DOJ's West to "make the case that the Department of Justice should make 'grants to capitalize community equity restoration funds' mandatory in all future settlements."

It's nice to have friends in high places – especially if you're a liberal Democrat.