When Samuel A. Alito Jr. appeared before the Senate Judiciary Committee 15 years ago as a nominee for the appellate bench, he promised in writing to disqualify himself from "any cases involving the Vanguard companies," a stock and mutual fund firm in which he had substantial personal investments.
That is why several Senate aides said they were wondering yesterday why Alito agreed to participate in 2002 with two other judges in an appellate case in which he ruled in Vanguard's favor, dismissing a complaint that the company had improperly seized some private accounts and blocked the owner's widow from obtaining the funds they contained.
Alito's ruling, issued on April 12, 2002, was withdrawn the following year by Anthony Joseph Scirica, the chief administrative judge for the 3rd Circuit where Alito worked. Scirica acted after the widow complained in a court motion that Alito's participation was "unlawful" under judicial ethics rules.
"It was improper for him to participate in the decision," said retired Northeastern University law professor John G.S. Flym, who helped prepare the court motion on behalf of Shantee Maharaj, then of Wayne, Pa. Her husband had established the accounts that Vanguard froze and then disbursed to others in settling a business dispute with her husband's former partner.
"The law was quite clear," Flym said in an interview, even though some controversy exists among judges about how to interpret the rules. "It's clear that [Alito's] . . . holdings were substantial" in Vanguard company investments.
White House spokeswoman Dana Perino said Alito had become involved in the case because a "computer screening program" at the 3rd Circuit had failed to pick up the potential conflict. She said that "as soon as the matter was brought to [Alito's] attention" by Maharaj's motion, he wrote a letter to Scirica requesting that the ruling be withdrawn and the case presented to a new panel.
Perino said she did not have a copy of Alito's letter, and Scirica did not return a telephone call yesterday evening. "Judge Alito has spent his entire career in public service, and his integrity is unquestioned," Perino said.
The case, as it was presented to the appellate court, specifically names Vanguard Group Inc., Vanguard Fiduciary Trust Co. and Vanguard's Morgan Growth Fund Inc. as some of the litigants. The motion complaining about Alito's involvement, citing Alito's financial disclosure statement for 2002, said he owned shares in 17 Vanguard funds at the time of his ruling, with a total value between $390,000 and $975,000.
Judicial ethics rules require disqualification whenever judges know they have "ownership of a legal or equitable interest, however small" in a company that is party to a legal dispute. While the rule is meant primarily to cover direct holdings in the stock of one company, Flym noted that the Vanguard Fund describes itself as being owned by the "fund's shareholders."
Perino said that after the decision was withdrawn, the case was heard by another panel of 3rd Circuit judges. But Flym and Maharaj said the new panel did not allow the case to be reargued before it issued the same decision with an added footnote.
George Washington University constitutional law professor Mary Cheh said she agreed that "even though these are broadly held funds . . . if you are aware of the holdings, you should recuse yourself because you stand to benefit one way or the other. That would be the ordinary course" for a judge with such investments.
Researcher Madonna Lebling contributed to this report.