In this op-ed in The Hill, FTC’s Gabe Roth argues that the justices should shed their tech stocks ahead of a major case – U.S. v. Microsoft, to be argued on Feb. 27. Intentionally or not, some of the nine may be profiting from how they vote in these types of cases.
A few Supreme Court justices may be profiting from their decisions [LINK]
Supreme Court justices famously prohibit cameras from filming the 70 or so arguments they hear each year. Yet when they leave their marble palace in Washington, some of the nine are more than happy to mug for smartphones, TV crews and university A/V departments. Others shy away from the spotlight – or simply hold events closed to press.
It’s not surprising, then, that the justices have conflicting views on a range of institutional guidelines, from how best to enter to their building to what to serve in the cafeteria. This becomes a problem when differences in personal policies impact how the court rules in certain cases – as is the case with how three of them choose to invest.
Take this example: the justices will hear a suit later this month on whether the government can legally use a warrant to search a foreigner’s e-mail stored by a U.S. company (Microsoft) on an overseas server. The case raises questions about privacy and sovereign immunity that Congress may not have envisioned in 1986 when it wrote the relevant statute and is the sort of issue one would expect the Supreme Court to resolve.
A victory for Microsoft (i.e., that the U.S. can’t execute the warrant) would be a win for the entire tech industry, which, in a series of briefs – including one submitted by the likes of Amazon, Apple, Cisco, Facebook and Google – has urged the justices to side with their brother in binary. Such a ruling could positively impact Microsoft’s share price and the price of other tech securities – and three justices own a fair amount of those.
Intentionally or not, these justices may be profiting from how they vote.
In fact, Justice Stephen Breyer owns up to $100,000 in Cisco shares. Chief Justice John Roberts and Justice Samuel Alito also own securities, across the technology, retail and finance sectors. The other six justices, on the other hand, own no individual stocks and have instead invested their money in real estate, fixed income and retirement accounts.
By law, justices are required to recuse themselves from cases in which a company whose shares they own is a named litigant. But they are not required to step aside when that same company files a brief supporting one side or the other – even though it may look improper to vote on such a case. (Lower court judges are advised against ruling on these types of suits, but no such proscription exists at the high court.)
Luckily, this problem is one that’s fixed rather simply through divestment. Over the last few years, that’s beginning to happen – in 2016 Roberts sold up to $500,000 in Microsoft shares so he could participate in a different case involving the company, and Alito shed up to $250,000 in ExxonMobil shares three year ago – though I’d argue not quickly enough.
At the end of the 2016, the last year for which data is available, the three stock-owning justices still held positions in more than four dozen publicly traded companies: Boeing, Caterpillar, DowDuPont, Johnson & Johnson, Sirius XM, Texas Instruments, Time Warner and United Technologies, among them – all of which find themselves in dozens of lawsuits each year, any of which could reach the high court. Many of these companies sign on to briefs that clearly indicate a preferred outcome.
What’s more, the justices are eligible to defer capital gains taxes on stocks they sell in order to sit on a case. So what’s stopping them? There’s enough intrigue, confusion and flouting of conflict-of-interest laws and customs in Washington these days; it would be nice if the one branch of government seemingly above board would do all it can to stay that way.
I’m not pining for a monochromatic bench. The nation’s top judges should have different life experiences, different judicial philosophies and different personalities.
If and how they play the markets, however, should not be.