A number of federal appellate judges have ruled on cases involving companies in which they own stock, despite a federal law designed to prevent judges from taking part in any case in which they have a financial interest.
An examination of financial disclosure reports and federal court records shows that in 1997 eight appeals court judges took part in at least 18 cases in which they, their spouses or trusts they helped manage held stock in one of the parties. The stock ownership ranged from a few thousand dollars to as much as $250,000.
In interviews, the judges acknowledged that they should not have participated in the cases but stressed that their stock interests did not affect their rulings. The judges, who include some of the nation's best-known jurists, attributed their participation in the cases to innocent mistakes or memory lapses about their financial portfolios.
"It's embarrassing; I should have been more alert," said Judge Alex Kozinski of the 9th U.S. Circuit Court of Appeals in California. "I certainly am going to try to be more careful."
Some of those involved in the cases also were upset to learn about the stock. Judge Alice Batchelder of the 6th Circuit in Ohio improperly sat on a case involving Wal-Mart Stores Inc. even though her husband held up to $50,000 worth of stock in the company. Batchelder and two other judges ruled the discount-store chain could not be held responsible for selling Wayne Brashear's 19-year-old son a .357 Magnum revolver, which he later used to commit suicide.
"It leaves a pretty bitter taste," Brashear said of the judge's actions.
Batchelder explained that, until contacted by a reporter, she did not realize her husband's retirement account owned stock in Wal-Mart and other companies. She said she should have withdrawn from Brashear's appeal and four other cases.
"I'm extremely chagrined to discover it," she said. "The error is mine."
The conflicts were uncovered by Community Rights Counsel, a public-interest law firm that concentrates on land-use issues. The group reviewed 1997 personal financial disclosure reports, the most recent available at the time, filed by the approximately 150 active federal appeals court judges, and checked the holdings against computerized records of cases in which the judges participated. It provided the material to The Washington Post.
"Our findings represent the tip of the iceberg, and there are likely hundreds of similar cases to be found throughout the federal judiciary," said the group's executive director, Doug Kendall.
But David Sellers, a spokesman for the Administrative Office of the U.S. Courts, said the conflicts involved a surprisingly small percentage of the roughly 52,000 cases that passed through the nation's appeals courts in 1997. He also questioned why seven of the eight judges cited by the group were named by Republican presidents.
Kendall said he scrutinized all judges equally. He said his study understated the probable number of conflicts because it did not include cases handled by judges who have taken retired status and did not include an exhaustive search of corporate subsidiaries.
In interviews, the judges said their rulings in the cases were unlikely to affect their stock values. In some cases, in fact, the judges ruled against the companies' interests. Even so, they acknowledged that they should have withdrawn from the lawsuits to prevent a conflict.
"I accept the responsibility. I shouldn't have sat on those cases," said Judge Morris Arnold of the 8th U.S. Circuit in Arkansas. "I regret the mistake happened and I'm going to work to see it doesn't happen again."
Arnold took part in one lawsuit involving General Electric and another involving a General Electric subsidiary while his wife owned company stock worth up to $50,000. He said he overlooked one conflict because the case had dozens of litigants. In the other, he said, he did not recognize that General Electric Capital Corp. was a subsidiary of General Electric.
Some judges said their spouses or investment managers bought the stocks without immediately notifying them. Others said the companies' names became lost in a long list of litigants or that they were confused by the names of subsidiaries and affiliated corporations.
Federal appeals court rules require corporations to provide a list of all parent companies and related entities in order to prohibit precisely such conflicts.
Federal law requires that judges remove themselves from any case in which they know they or their spouses have a financial interest, no matter how small. Even a $1 investment violates the statute. Federal law also directs judges to keep abreast of what they own so that they may immediately resolve any conflicts that arise.
Evidence of the conflicts was not news to one judge, Laurence Silberman of the U.S. Circuit Court of Appeals for the District of Columbia.
Silberman said he identified a series of conflicts in early 1998 and sent letters reporting the problem to the lawyers in three cases. At the same time, Silberman withdrew from hearing an appeal in one of the most closely watched cases in recent years -- the U.S. Justice Department's antitrust lawsuit against Microsoft Corp.
Silberman said he had no ownership in Microsoft or the companies involved in the other cases. But after his brother-in-law died suddenly in 1997, Silberman explained, he became a trustee of the Gaull Marital Trust, which owned a variety of stocks, including up to $100,000 in Microsoft.
In his letters, Silberman noted that his "participation was in violation" of federal ethics laws.
In 1997, Silberman received $15,000 for teaching at Georgetown University Law Center and was one of three judges who ruled in Georgetown's favor in a case accusing the university hospital of medical malpractice. Silberman said it was "absurd" to think he should remove himself in that situation, noting the hospital and law school are separate entities. Legal ethics experts said he was not required to disqualify himself.
In cases handled by the other judges, lawyers and litigants were not warned about the conflicts. For example, attorney Paul Bennett of San Francisco said he was surprised to learn that Judge Kozinski owned General Motors stock.
Bennett represented eight railroad workers who claimed their hearing was damaged by noise from locomotive engines manufactured by General Motors. Kozinski led a three-judge panel that rejected his argument, which Bennett said could have led to a national class-action suit against General Motors if it had been successful.
"It's disturbing that people say they don't know what they own," Bennett said. "If I had a different panel of judges, who knows if I would have won?"
Kozinski explained that midway through the case his wife bought 95 shares of stock, worth less than $15,000. The judge learned of the purchase later, he said, and never connected it to the lawsuit.
"We will try harder from now on," Kozinski said. "We do take this very seriously."
Some members of Congress argue that, to help the public quickly identify such conflicts, lists of stocks held by federal judges should be easily available to the public. In March the Judicial Conference rejected a plan to have judges post "recusal lists" at local courthouses, citing security and privacy concerns. Judges also said that such lists already are available to anyone willing to fill out a request and wait several weeks.
Kendall and other critics point out, however, that each request results in a warning to the judge about who is examining his finances. They said few lawyers and litigants would risk angering the judge who will decide the outcome of their case.
The Environmental Working Group, an environmental watchdog organization, wrote to Chief Justice William H. Rehnquist last week urging him to improve the disclosure process, including posting the forms on the Internet. "Litigants and citizens' faith in the judicial process is severely eroded by these conflicts," said the letter by vice president Mike Casey.
Judge Arnold called it a good idea to make judges' financial disclosures more readily available to the public.
"I understand why some people would be reluctant" to check the reports if they know their inquiries will be reported to the judge, Arnold said. "If it's a matter of public record, it's a matter of public record, and people ought to be able to look at it."
Taking Stock on the Bench
Federal appeals court judges with conflicts of interest:
Morris Arnold of the 8th Circuit in Arkansas
* Took part in one lawsuit involving General Electric, and another involving a General Electric subsidiary, while his wife owned company stock worth up to $50,000.
Alice Batchelder of the 6th Circuit in Ohio
* Took part in five lawsuits involving Wal-Mart Stores Inc. and Bristol-Myers Squibb Co. while her husband's retirement account held up to $50,000 stock in those companies.
Edward Becker of the 3rd Circuit in Pennsylvania
* Said his clerk overlooked his stock ownership in one case involving Hercules Inc. In a second, said he mistakenly believed he had already sold the stock, worth up to $15,000.
Alex Kozinski of the 9th Circuit in California
* Ruled for General Motors in a case brought by railroad workers who claimed hearing damage from GM engines. Said his wife bought GM shares midway through the case and that he only learned of the purchase later.
Sandra Lynch of the 1st Circuit in Massachusetts
* Married a man who owned up to $100,000 in Monsanto Co. stock a few weeks before joining a ruling in a case involving Monsanto. Said she did not learn of her husband's stock until later, and did not realize the problem with the case until called by a reporter.
Daniel Manion of the 7th Circuit in Indiana
* Participated in a lawsuit involving Lucent Technologies while holding company stock worth up to $15,000. Manion pointed out that early in the appeal the litigant's name was listed as AT&T. Later, it was changed to Lucent.
Bruce Selya of the 1st Circuit in Rhode Island
* Participated in three cases while owning stock worth up to $15,000 in a litigant's or a litigant's parent company. Said the problems arose because his investment manager bought stocks for his portfolio and only later supplied him with the names of the companies.
Laurence Silberman of the D.C. Circuit
* Participated in three cases involving companies in which a trust he administered held stock. Wrote letters to the parties saying his involvement violated federal ethics rules.