Supreme Court nominee Douglas H. Ginsburg had almost $140,000 invested in a cable television corporation when he "personally handled" a Justice Department effort to have the court extend First Amendment protection to cable operators.
An administration source close to Ginsburg said yesterday that Ginsburg apparently did not raise the possibility of staying out of the case with Justice Department superiors or with agency ethics officers. He said Ginsburg discussed the situation with subordinates.
The Supreme Court, on June 2, 1986, adopted Ginsburg's arguments in a decision that will reduce government regulation of cable operators.
"It is a First Amendment rights case that had economic consequences to it," said a former federal ethics official familiar with the cable case but not with Ginsburg's role in it. ". . . If I'm holding cable stock, that is a good thing for me."
Ginsburg, nominated by President Reagan to succeed retired Justice Lewis F. Powell Jr. on the court, apparently did not violate criminal conflict-of-interest laws because the company in which he invested was not a direct party to the case even though it could benefit from the ruling.
But ethics experts said Ginsburg's actions could be viewed as skirting a presidential executive order forbidding actions that create an appearance of a conflict or of favoritism. Violation of this order carries administrative penalties such as a letter of reprimand or suspension.
Ginsburg declined comment. But speaking on his behalf last night, Justice Department spokesman Terry Eastland said Ginsburg "considered at the time the possibility of staying out of the . . . case" but "decided that he could properly participate because the case before the court did not involve the company in which he had a financial interest.
". . . Mr. Ginsburg determined that the value of his holdings in Rogers would not be financially affected regardless of the outcome of the case," Eastland said.
A former head of the Justice Department's antitrust division and now a U.S. Circuit Court of Appeals judge, Ginsburg, 41, is being scrutinized by the Senate Judiciary Committee in preparation for confirmation hearings.
Ginsburg came before the same committee a year ago, when he was nominated for the appeals court. A Democratic source on the committee said the panel did not notice then that he had worked on the cable case while he had a sizable investment in Rogers Communications Inc. of Toronto, Canada.
Rogers has about 450,000 subscribers in Arizona, California, Minnesota, New Mexico, Oregon and Texas. The firm is about the 20th largest cable operator in the United States.
Ginsburg was assistant attorney general in charge of the antitrust division at the Justice Department when the Reagan administration filed a friend-of-the-court brief in a Los Angeles cable TV case.
During his confirmation hearings last year, Ginsburg wrote the Judiciary Committee that the cable case was among the 10 "most significant litigated matters that I personally handled."
"I was a principal participant in determining the government's position . . . and supervised the drafting of our brief," he wrote of the cable brief, which he signed along with the solicitor general and the counsel to the Federal Communications Commission.
Charles Ruff, who served as an associate deputy attorney general under President Jimmy Carter and as the final Watergate special prosecutor, said, "It would come down to the appearance issue. My instinctive reaction is that I would seek advice from the ethics office on whether I should recuse myself."
The administration source said Ginsburg discussed staying off the cable case with Charles F. Rule, then his deputy in the antitrust division, but "the question didn't go beyond that discussion." Justice Department regulations provide that where disqualification questions arise at Ginsburg's level they should be referred to the deputy attorney general for a written ruling.
The administration source, who asked not to be identified, said of Ginsburg's discussion with Rule: "They noted that Rogers' cable operations in the United States were very small relative to its Canadian holdings and that its U.S. operations were small with respect to the entire U.S. cable market, where the top four or five companies hold more than half of the market."
A Democratic aide on the Senate Judiciary Committee who refused to be identified said, "It would present an appearance problem because this is his major investment, not something in which he holds just a few shares." Moreover, he noted, "cable is the primary business of the company, not one of many things it does."
Financial statements filed by Ginsburg show that at least as early as 1985 and continuing at least until Sept. 17, 1986, Ginsburg's largest investment, other than real estate, was in Rogers.
The case in question involved Preferred Communications Inc.'s challenge to Los Angeles' constitutional right to franchise only one cable system. The firm argued that it had the same First Amendment rights as a newspaper or broadcaster and that it should be allowed to lay its cables over public rights-of-way such as utility poles and underground conduits.
The company lost in the District Court but won in the 9th Circuit Court of Appeals.
Ginsburg argued, and the Supreme Court agreed, that the First Amendment applies to cable television operators but that a trial should be held on the city's claims of a right to regulate the number of operators to reduce construction congestion and to preserve safety and avoid visual pollution on utility poles.