Financial conflict of interest on the federal bench and stock trading by presidents of regional Federal Reserve Banks. Alternate headline – Is there any group of powerful people who bother to follow the rules?
Major investigative effort by the Wall Street Journal revealed 131 federal judges who own stock in one of the firms appearing before them in 685 lawsuits.
The Journal found that about two thirds of all federal judges disclosed ownership in individual stock. Of those who made such disclosure about one fifth had a conflict of interest but did not recuse themselves.
For CPAs, this illustrates the importance of our independence rules, both independence in fact an independence in appearance.
What shall we call judges who were trading stock of litigants who were appearing in front of them? Perhaps a reasonable label would be integrity impaired fools. Even those judges who had a trivial investment and had a mere procedural motion in front of them have a serious appearance of conflict of interest and thus impaired integrity.
It would be wise for CPAs to read this story as a caution to keep a scrupulous eye on their own independence. The same lessons can be drawn by leaders of nonprofit organization.
The story doesn’t end with the federal judges, but we start there. More discussion in a moment about stock trading by presidents of two regional Federal Reserve Banks, who are the ultimate insiders.
Failures to recuse when federal judges have financial conflicts of interest
The investigative report may be found at the Wall Street Journal, published online 9/28/21:131 Federal Judges Broke the Law by Hearing Cases Where They Had a Financial Interest.
A 1974 federal law requires federal judges to monitor their investments, maintain personal awareness of those investments, and then recuse himself of any case in which they have a financial interest, no matter how small their interest may be.
In spite of a 40-year-old law and in spite of software that checks disclosed ownership against parties to the lawsuit, 12% of federal judges completely blew off the ethical obligation. That means one out of eight judges failed to recuse themselves when they had a financial interest in a case before them.
I’m wondering if there’s any group or category of people in this country who have significant power or influence who actually bother to follow the rules
More specific tallies from the article:(more…)