The Wall Street Journal did parties in federal court as well as ethics professors a magnificent service. Through what must have been painful research, reporters James V. Grimaldi, Coulter, Jones, and Joe Palazzolo combed through federal judges’ financial disclosure statements and then compared the judges’ case dockets with the companies listed in their disclosures. As it turns out, 138 judges had conflicts, i.e., they or their family owned (or in some cases traded in) the stock of companies that had cases before the judges. “Federal Judges Heard Cases Despite a Financial Interest,” Wall Street Journal, September 29, 2021, p. A1.
These conflicts were not close calls. The rule is, from 1792 to the present, federal judges may not preside over cases in which they stand to benefit. For example, one federal judge from New Jersey, traded Wells Fargo stock while presiding over a case in which Wells Fargo was the defendant in a foreclosure recovery case brought by the homeowner who had lost his property. Judge Brian Martinotti granted Wells Fargo’s motion to dismiss in July 2019, denied the plaintiff’s motion for reconsideration in March 2020, and did not disclose his Wells Fargo stock trades until after the Wall Street Journal notified him of the conflict on August 11, 2021. One federal judge in Texas presided over 138 cases in which he or his family owned stock in one of the parties. He wins the prize for the most failures to either check or disclose his stock holdings.
If any of these judges have ever worked in a law firm, they know the drill. You never take on a new client without going through the firm’s records to check for conflicts. Federal judges have clerks, staff, law clerks, and data bases. Their annual financial disclosure forms list all their stock holdings and those of their family members. If you have those companies on just a simple Word chart or Excel spreadsheet, it will take 30 seconds to type in a party’s name and see if it matches anything in your holdings.
The judges have their rationalizations: “I have preferred to stay unknowledgeable about it,” “A judge has to be on her toes, and obviously I was not,” and one humble judge, “I just blew it. I regret any question I’ve created or appearance of impropriety or a conflict of interest.” The judge needs help with sentence structure as well as conflicts. There was a grateful judge, “I dropped the ball. Thank you for helping me stay on my toes the way I’m supposed to.” FYI — Ballerina postures are not necessary — just check the list.
Judges checking for share ownership in the parties before them is not difficult nor should it slip from their minds. It is possible to not have the memory capacity to recall all of your stock holdings. Hence, the list and search functions. The funny thing is that federal judges are the ones throwing the book at companies such as McKinsey & Company for their failures to disclose their conflicts in federal judicial matters such as bankruptcy. Funnily enough, McKinsey offered the same defenses as the judges, “Who knew?”
That “Who knew?” is one of two possible answers when someone is caught with an ethical/legal lapse. The “I was stupid defense,” which is “Who knew?” is one CEOs use all the time. Even if they did actually know they roll the dice with a “Prove it” sort of attitude. The other option is to confess incompetence. There was a split decision in the courts on which one each judge opted to cling to as a defense.
The sad part is that the parties to these cases are lost in the headline hoopla. The judges could talk themselves blue explaining that their share ownership “would never affect their decisions.” That’s because federal judges are above all conflicts. They have super-human powers to resist those kinds of temptations. Doctors taking money from pharmas for favorable-results research make the same argument and assume the same saintly posture. Politicians, well, they are above all others. Just donate, sell me land at a discount, remodel my house, and/or buy my son’s paintings and fuhgeddaboudit! In a world of conflicts only those who lose out because of them have the skill to spot them.