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FTC Sour on Judicial Inclusion in the Congressional Stock-Trading Bill

Seems like a tactic aimed at slowing down or stopping the whole project

“Judicial officers” — i.e., Supreme Court justices, district and circuit judges and a handful of federal judges of other designations — have been included in the congressional stock-trading bill, the Combatting Financial Conflicts of Interest in Government Act, a draft of which was released yesterday. Unfortunately, such inclusion raises more questions than answers.

“There’s no doubt that in an ideal world, judges and justices would not own individual stocks,” FTC’s Gabe Roth said. “But this bill is not the best way to make that happen.”

FTC has laid out the following reasons as to why the bill is not what’s needed now:

1. The bill fails to take into account the transparency and accountability implications of a different judicial stock bill, the Courthouse Ethics and Transparency Act (CETA), which, signed into law this past spring, will soon require judges and justices to post their annual financial disclosures online within 90 days of the due date and post their stock transactions within 45 days of a sale or purchase. Currently, the judiciary is years behind in making judges’ disclosures (which include dates and amounts of stock transactions) available. This bill will fix that, and we expect a disclosure/trades database to go live within the next six weeks. Advocates believe this increase in transparency will compel many judges to sell off their stocks. What’s more, the Wall Street Journal investigation that led to the bill’s creation and passage — which, released a year ago today, found 131 judges failed to recuse in 685 cases in which they owned stock in a litigant — might already be causing a judicial stock selloff.

2. The bill requires judges and justices either to sell or donate their stocks or place them into a blind trust, but it’s unclear whether it’s legal for members of the third branch to create a blind trust, seeing as how there’s a federal law (28 U.S.C. 455(c)) that requires a judge to “inform himself about his […] financial interests, and [those of…] his spouse and minor children,” and it’s hard to know about something if you are blind to it.

What’s more, right now, there’s an open case — 22-246, Centripetal v. Cisco — before the Supreme Court that may determine the legality of judicial blind trusts. Here’s the backstory: a U.S. district court judge found out toward the end of litigation that his wife owned about $5,000 in Cisco stock. Since the judge was about to enter a $2.75 billion judgment against Cisco, he felt that selling that stock would be the poor ethical choice, since his ruling might impact the stock price. So the judge directed his financial adviser to place the stock into a blind trust. The appeal courts (Federal Circuit) then said the blind trust move was not consistent with 28 U.S.C. 455(c). Now, Centripetal is appealing to SCOTUS, which in its ruling might tell us once and for all if judicial blind trusts are consistent with federal law. We’ll know more after Cisco’s reply brief is filed in mid-November.

3. The bill authorizes the Judicial Conference to create the parameters of a blind trust, and advocates do not trust the Judicial Conference to do that. The Conference comprises two dozen federal judges, who, consistent with this bill, might create a blind trust for their colleagues that’s not truly blind. (Loophole!) Given the Conference’s history of questionable ethical decisions, I wouldn’t put it past them.

4. In authorizing the Judicial Conference to create the parameters of a blind trust for all of judicial officers, including Supreme Court justices, the bill might be unconstitutional, since the Conference (comprising lower court judges) has zero say in the policy or regulations of the Supreme Court.

Roth added: “Given where we are in America today, where every major piece of legislation ends up in the courts for years, if not longer, the wiser tack here would be to wait to see if CETA leads to stock divestments in the coming years and to see what SCOTUS says on the constitutionality of judicial blind trusts. Then, armed with that information, we can determine if a new judicial stock bill is needed. But until that time, the inclusion of Article III seems like a tactic aimed at slowing down or stopping the whole project.”

More information:
It is estimated that between 25 and 50 percent of the federal judiciary owns individual stocks. The last full year of judges’ disclosures that have been released to the public are the 2019s, and they’re posted on the Free Law Project database at this link. The justices’ financial disclosures are here, and their stock ownership (only Roberts and Alito own stocks among the nine) are here.

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