Judge reopens Trump's $10B IRS lawsuit over claims of 'deception'

WASHINGTON, DC: A federal judge has reopened President Donal Trump's $10 billion IRS lawsuit after raising concerns that the settlement process may have involved “deception” and possible fraud on the court.

Judge Kathleen M Williams said she wanted to examine “grievous allegations” surrounding the abrupt settlement agreement announced by Trump's Justice Department last week. She also questioned whether the case was structured to bypass normal judicial scrutiny.

Judge questions settlement process

The ruling marks a sharp reversal after the lawsuit had been voluntarily dismissed following a deal that created a $1.8 billion compensation fund tied to claims of alleged government “weaponization” under Democratic administrations.

Williams, an appointee of former President Barack Obama, said she would investigate whether the court “was the victim of fraud” and whether the settlement process improperly cut the court out of oversight.

She ordered Trump’s legal team to respond by June 12 on whether the case should formally be reopened.

The judge also questioned whether Trump coordinated with his own administration to settle the lawsuit before the court could fully review it.

Before the dismissal, Williams had already expressed doubts about whether the lawsuit even presented a valid legal dispute, noting Trump was effectively on both sides of the settlement through his administration.

“At the time, she said there was no settlement of record,” the filing noted, though DOJ later released documents finalizing the agreement.

Former judges push investigation

The renewed scrutiny came after 35 former federal judges filed court papers urging Williams to reinstate the case and investigate the settlement.

They argued the deal raised serious concerns about Trump’s “candor toward the court” and accused him of manipulating the judicial system for private gain.

“The judges and their counsel greatly appreciate the seriousness with which the court is addressing these grievous allegations,” said Norman Eisen, who represents the group through the Democracy Defenders Fund. “We stand ready to work with the court as it investigates this matter.”

The former judges, alongside law firms Platkin and Susman Godfrey, argued Trump used the lawsuit to secure “unlawful private benefits” while creating a taxpayer-funded compensation structure without congressional approval.

They also accused Trump of trying to “short-circuit judicial oversight” by rushing the settlement.

Williams referenced reporting from the New York Times that said the IRS had prepared a detailed 25-page defense memo that was never used in court despite possible legal arguments against Trump’s claims.

The judge also flagged provisions that allegedly granted audit protections to Trump, his businesses, and family members, questioning whether those terms exceeded DOJ authority.

Trump originally filed the lawsuit in January alongside family members and business entities, claiming at least $10 billion in damages tied to leaked tax records disclosed by former IRS contractor Charles Littlejohn.

The suit argued the IRS failed to stop the disclosure of records later published by the New York Times and ProPublica.

But legal experts cited in the filings questioned whether the IRS could legally be held liable for an independent contractor’s actions and pointed to possible statute-of-limitations issues.

The $1.8 billion compensation fund tied to the settlement has already been temporarily blocked by a federal judge in Virginia, while lawmakers from both parties have raised concerns about the legality of the program.