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Judge in drilling case held stock in oil company affected by moratorium

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By Steven Mufson and Joe Stephens
Saturday, June 26, 2010

The federal judge who presided over a challenge to the Obama administration's six-month moratorium on deepwater oil drilling simultaneously owned stock in an oil company affected by the ban, according to a financial disclosure statement released Friday.

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U.S. District Judge Martin L.C. Feldman sold the stock in Exxon Mobil 14 days after the case was filed in New Orleans by a group of oil service firms -- and less than five hours before he struck down the moratorium.

Feldman said in a statement elaborating on the disclosure that he was unaware of his holdings in Exxon Mobil and a smaller oil company until 9:45 p.m. Monday, the day before he issued his ruling.

"Because he remembered that Exxon, who was not a party litigant in the moratorium case, nevertheless had one of the 33 rigs in the Gulf, the judge instructed his broker to sell Exxon and XTO [Energy Inc.] as soon as the market opened the next morning," according to a statement released by his chambers and reported by Bloomberg News.

Even before this latest disclosure, Feldman was criticized by environmental groups and others for not recusing himself from the case. The groups pointed to his 2008 disclosure form, which showed that he had invested in companies involved in offshore oil and gas exploration.

Feldman's 2009 form, released Friday, shows that he had sold his holdings in offshore drilling service firms but continued to buy and sell energy stocks. They were among the judge's more than 100 investments, most listed in the category of holdings worth $15,000 or less.

One of those stocks was Exxon Mobil, which like other major oil companies has interests in offshore exploration and production projects in the Gulf of Mexico's deepwater areas.

The 2009 form shows that Feldman bought shares of Exxon Mobil on Dec. 28 of that year. In releasing the form Friday, the judge attached a letter saying that he sold those shares "at the opening of the stock market on June 22, 2010, prior to the opening of a Court hearing on the Oil Spill Moratorium case."

In the ruling he issued later that day, Feldman said the Interior Department had failed to show that the oil spill triggered by the Deepwater Horizon rig blowout in April meant that there was imminent danger on all deepwater drilling rigs in the gulf. By contrast, he said, the "blanket, generic, indeed punitive, moratorium" has clearly harmed the industry and region.

Feldman's order lifting the moratorium, if it is upheld, would probably benefit the oil industry.

As it happened, Exxon Mobil shares fell throughout the day, both before and after the ruling, roughly in line with the overall market. With the sale, Feldman lost at least six percent and as much as 10 percent of his investment.

U.S. law requires judges to withdraw from any lawsuit in which they have a direct financial interest, however small. Rules also forbid them from hearing cases in which their impartiality might reasonably be questioned or in which their financial interests would likely be substantially affected.

The judicial canons require that judges be aware of their investments. Judicial ethicists said that, had he been aware of his holdings, Feldman should have disclosed the ownership or recused himself at the case's outset if he thought it posed a conflict or raised questions about his impartiality. The court docket indicates that Feldman signed several orders before the sale.

"I've never heard of a situation like this," said Jeffrey M. Shaman, a judicial ethics specialist and law professor at DePaul University.

The judge may have thought the stock did not create a substantial conflict, legal analysts said, but the fact that he apparently felt compelled to sell the stock and disclose it could be seen as indicating otherwise.

"The fact he sold his holdings in Exxon does not somehow cleanse what he did in the case," Shaman said. "If he made [earlier] rulings in the case, those rulings are subject to question."

The government on Friday appealed Feldman's ruling but made no mention of any potential conflict.

It is unusual for a judge in the midst of a case to announce that he has traded shares in a specific company, especially one that could be directly affected by the judge's decision.

According to his 2008 financial disclosure form, Feldman held shares in, among other companies, deepwater rig owner Transocean, shallow-water drillers Hercules and Rowan, and international rig and tool provider Parker Drilling. Each of those investments was valued at $15,000 or less.

Feldman's latest disclosure form indicates that he had sold his holdings in those four companies by the end of 2008.

The judge remained an active trader in other types of energy stocks in 2009, as he was in 2008. He bought shares of Petrohawk Energy, an independent company active in shale gas. He bought and sold shares of Crosstex Energy, a natural gas transmission company, within one month.

Staff research director Lucy Shackelford contributed to this report.


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