Rachel Abrams: In a move that shocked lawmakers on both sides of the aisle, President Trump is dropping his $10 billion lawsuit against the IRS. Democrats and others are crying foul over what his administration plans to do instead. Justice Department announced an almost $2 billion fund of taxpayer money to compensate people that the administration claims have been victims of quote "weaponization and warfare." Among those who could apply for payouts the nearly 1,600 rioters charged in connection with the January 6th Capitol insurrection.

Andy Duran: This is reimbursing people that were horribly treated, horribly treated. It's anti-weaponization they made.

Rachel Abrams: He's setting up a $1.7 billion political slush fund for the Proud Boys and the Oath Keepers and his political lieutenants and hangers-on. I think that there are a lot of questions that the administration is going to have to answer.

Rachel Abrams: You, Andy, have been covering all of this and I just want to start with you explaining where did this fund even come from?

Andy Duran: So, yeah, this story really starts the first time that President Trump ran for office in 2016. He was unique among presidential candidates at that time and this was something of a scandal in that he did not release his tax returns. It was standard practice for presidential candidates to put out some of their tax information as a way to understand their finances, and Trump didn't do that, and this was a topic of wide interest throughout his first term. There were various attempts to see his tax returns, and that didn't happen until the New York Times in 2020 published a series of stories describing what Trump had been doing on his taxes, and revealing that for many years Trump had been paying little in federal income taxes. Fast forward about 6 months to a year after that, and ProPublica, a separate news organization, they start releasing a series of stories about the tax strategies and tax situations of some of the world's wealthiest people. And so, at that point it became clear that given the tax information of so many different people, that somebody within the IRS and with access to internal IRS records must have been the source of these stories. Put another way, it became clear that the IRS had a leaker. Yes, that there was somebody in their systems who was providing this information to the press and in the fall of 2023, somebody was eventually caught, a man named Charles Littlejohn, a former IRS contractor and he played guilty to having provided this information about Trump and then all these other wealthy individuals to the Times and ProPublica and then he was sentenced to prison in the beginning of 2024.

Rachel Abrams: The difference here, though, is that he's not just a private citizen, he is suing a government that he oversees.

Andy Duran: Yes, I mean, this was and is an extremely unusual situation, if not unprecedented entirely. I mean, not only does the president control the leader of the Internal Revenue Service, the agency that he is suing, and the Treasury Department, which was also named in the suit, you know, he chooses many of the people who lead those agencies and is involved in their decision-making. He has also played an enormous role in reshaping the Justice Department and kind of molding it in his image in a variety of ways. And the Justice Department is supposed to be the IRS's lawyer in this case. But, you know, there have been all sorts of things that the Justice Department has done in Trump's second term that are far beyond what historically independent Justice Department would do. Exactly. And the idea that this Justice Department, which is now led by Todd Blanche, the acting attorney general, who was also President Trump's personal lawyer before he returned to the White House, would be making decisions about how to defend a lawsuit that the president had brought immediately just raised all sorts of questions about the conflict of interest inherent in such a situation.

Rachel Abrams: Okay, so Andy talked to us about this gigantic pot of money. What do we know about it? How is it supposed to work?

Andy Duran: Yeah, so we don't know everything yet, but what we do know is that this will be $1 billion $776 million. 1776, year of our nation's founding. Exactly, which I do not think is a coincidence, obviously. But yeah, this is a huge amount of money that will be drawn from an account called the Judgment Fund, which is basically a pot of money that the Justice Department can use to settle legal claims against the United States. So anytime the government is sued and they want to settle, they can use money from this fund. It's not usually quite this much that's taken out of it at a time, but they will be withdrawing money from that account, depositing it in a separate account, which will be controlled by five people appointed by the Attorney General, and they will consider claims from people who say that they have been victimized by the federal government and pay them for it.