It is theorized: special-interest groups friendly to the administration sue the government. There is a kabuki dance of litigation, and then a wink-wink settlement where the government agrees that the special-interest group is a "prevailing party," and thus entitled to fees under the Equal Access to Justice Act. Taxpayers pay the bill, and the executive branch is able to funnel money to its friends without Congressional oversight.
How big a problem is this? No one knows, because Congress stopped requiring the tracking and reporting of payments in 1995. One Wyoming law firm has tracked 14 environmental groups obtaining $37 million in fees, but many settlements and fees are sealed from public view. A Virginia Tech study made a FOIA request on two agencies that simply didn't compile any data on how much they were spending: settlement money below a certain amount comes from the Treasury without the need for Congressional budgeting or allocation.
Maybe this is a big problem; maybe it's a small one. But no one can dispute that transparency is likely to make it less of a problem. Rep. Cynthia Lummis has proposed HR 1996, the Government Litigation Savings Act, which caps fees going to a single entity in a calendar year, and requires the Administrative Conference of the United States to compile data on EAJA awards. (Senator John Barrasso has proposed the parallel S. 1061.) The bill would also prohibit attorney awards in cases seeking injunctive relief; it's unclear to me why this doesn't create more problems than it solves. Compare the testimony of Jeffrey Axelrad with that of Brian Wolfman. [Oct. 11 House hearing; BLD; Freddoso; Lummis]