It is risible to suggest there was ever adverseness between the parties.
A federal judge has dismantled a legal arrangement that many observers found difficult to distinguish from self-dealing dressed in judicial clothing. Judge Kathleen Williams voided a settlement that had shielded President Trump from IRS tax audits and created a $1.8 billion compensation fund, ruling that the underlying lawsuit was never a genuine adversarial dispute but rather a mechanism engineered by allied lawyers to deliver immunity to the very officials who negotiated it. The ruling restores the IRS's authority to audit Trump's finances and raises enduring questions about the boundaries between presidential power and the rule of law.
- A federal judge tore apart a May 2026 settlement that had handed Trump audit immunity and a $1.8 billion fund, calling the lawsuit that produced it a legal fiction rather than a real dispute.
- The arrangement's architecture was damning on its face: Trump's former lawyer held a senior DOJ post and negotiated on behalf of the United States against Trump's current lawyers, including his former White House Counsel.
- The anti-weaponization fund had already collapsed weeks earlier after a separate court blocked it and two men sued in Virginia alleging it was discriminatory and designed to exclude them.
- Bipartisan alarm had surrounded the fund from the start, with critics warning it could funnel payments to those convicted of assaulting police during the January 6 Capitol riot.
- The ruling bars Trump and his sons from citing the voided settlement in any future proceedings, clears the IRS to resume audits, and referred one Trump attorney to the Florida bar for disciplinary review.
- Legal experts warn the court's decision, while significant, does not foreclose future attempts at presidential self-dealing — and that only congressional action can fully close the door.
On Monday, a federal judge dismantled what had appeared to be a concluded legal matter. Judge Kathleen Williams voided a settlement between President Trump and federal agencies that had granted him immunity from tax audits and established a $1.8 billion fund to compensate people claiming they were unfairly targeted by the government. Her verdict was unsparing: the lawsuit that produced the agreement was never a genuine legal dispute.
The settlement had emerged from a $10 billion suit Trump, his sons, and the Trump Organization filed against the IRS over the leak of his private tax records by a former IRS contractor. That leak, timed just before the 2020 election, had underpinned reporting that Trump paid only $750 in federal income taxes in 2016 and nothing at all in ten of the fifteen preceding years.
Williams found the arrangement's structure impossible to defend. Trump had not pursued his claims until returning to the White House, at which point his former lawyer — who also represented individuals poised to benefit from the anti-weaponization fund — occupied a senior Justice Department role and negotiated the settlement against Trump's current legal team, which included his former White House Counsel. The judge wrote that it was 'risible' to suggest any genuine adverseness had ever existed between the parties.
The ruling barred Trump and his associates from invoking the settlement in future proceedings and cleared the IRS to resume audits. One Trump attorney was referred to the Florida bar; another was banned from the Southern District of Florida for a year.
The fund itself had already collapsed weeks earlier, abandoned after a separate judge blocked its implementation and two men sued in Virginia alleging it was discriminatory. Critics across party lines had warned from the outset that it could channel payments to those convicted of assaulting officers during the January 6 Capitol riot. Policy experts welcomed the ruling but cautioned that congressional action remains necessary to prevent similar arrangements from being attempted again.
On Monday, a federal judge dismantled what had appeared to be a done deal. Judge Kathleen Williams of the US District Court voided a settlement between President Donald Trump and federal agencies—one that had granted him immunity from tax audits and created a $1.8 billion fund intended to compensate people claiming they were unfairly targeted by the government. In her ruling, Williams was blunt: the lawsuit that produced this agreement was never a genuine legal dispute at all.
The settlement had been announced in May 2026 as the resolution to a $10 billion lawsuit Trump, two of his sons, and the Trump Organization had filed against the Internal Revenue Service. The core complaint centered on a leak of Trump's private tax information by Charles Littlejohn, a former IRS contractor. That leak, which occurred just before the 2020 election, had formed the basis of a New York Times investigation revealing that Trump paid only $750 in federal income taxes in 2016, the year he won the presidency, and paid no federal income taxes in ten of the fifteen years prior.
But Williams saw through the arrangement. She wrote that the lawsuit "was never about a party seeking judicial resolution of a legal issue or a factual dispute" between Trump and the IRS. Instead, she characterized it as an action orchestrated by lawyers with ties to Trump and individuals claiming to be government targets. What made the scheme particularly transparent to the judge was its timing and personnel: Trump had not pursued his claims until he returned to the White House and had appointed his former lawyer—and the former lawyer of people who stood to benefit from the anti-weaponization fund—to prominent positions in the Department of Justice. Those officials then negotiated the settlement on behalf of the United States with Trump's current lawyers, including his former White House Counsel. "It is risible to suggest that there was ever adverseness between the Parties," Williams wrote.
The judge's decision carried teeth. It prevented Trump, his sons, and others involved in the case from referring to the settlement or citing its terms in any future legal proceedings. That ruling effectively cleared the path for the IRS to resume tax audits of Trump's claims. Williams also referred one of Trump's attorneys, Alejandro Brito, to the Florida bar for potential disciplinary action. A second lawyer, Daniel Epstein, was barred from joining cases in the Southern District of Florida for at least one year.
Trump's legal team responded with a statement to the BBC asserting that the IRS had "wrongly allowed a rogue, politically-motivated employee to leak private and confidential information" and that the President "continues to hold those who wrong America and Americans accountable." But the damage was done. The anti-weaponization fund itself had already been abandoned in early June, just a week after another judge temporarily blocked Justice Department officials from implementing it. That order came after two men filed a lawsuit in Virginia alleging the fund was discriminatory and that they would be excluded from filing claims despite claiming to be targets of political retribution by the Trump administration.
The fund had faced fierce bipartisan criticism from the moment it was proposed. Democrats and some Republicans raised alarm that it could result in payments to people prosecuted over the January 6, 2021 Capitol riot, including those convicted of assaulting police officers. Brandon DeBot, policy director at the Tax Law Center at New York University, called the agreement a "sweetheart deal" that had given Trump "unauthorized and unprecedented" exemptions from tax audit rules, undermining "the tax system's protections against political interference." He noted that while the court's decision was important, it did not eliminate the need for congressional action to nullify the entire arrangement and prevent similar attempts at presidential self-dealing in the future.
Notable Quotes
The lawsuit was never about a party seeking judicial resolution of a legal issue or a factual dispute between Trump and the IRS.— Judge Kathleen Williams
The settlement was a sweetheart deal that gave Trump unauthorized and unprecedented exemptions from tax audit rules, undermining protections against political interference.— Brandon DeBot, Tax Law Center Policy Director
The Hearth Conversation Another angle on the story
Why did the judge think this was improper? It looked like a settlement to anyone watching.
Because settlements require actual adversaries. Trump appointed the people negotiating on the government's side. His own lawyers sat across from themselves, essentially.
But he did have a real grievance—the leak of his tax returns.
He did. But he waited until he was back in power to sue. That timing is what made Williams skeptical. If the leak was the injury, why wait years to seek remedy?
What does it mean that he can't cite the settlement anymore?
It means the IRS can audit him without him pointing to this agreement as a shield. The immunity he thought he'd bought is gone.
And the fund—was that always going to fail?
It was controversial from day one. People worried it would pay Capitol rioters. Another judge blocked it before this ruling even came down. This just made it official.
What happens to his lawyers?
One is facing disciplinary review in Florida. The other is banned from federal court in that district for a year. For lawyers, that's serious professional consequence.