Congress considers stricter judge disclosure law

Recent reports of financial conflicts of interest by federal judges have hit the U.S. court system when public trust was already waning, panelists told U.S. House subcommittee on Tuesday.

The testimony came a day after a bipartisan group of Congress members introduced two bills to strengthen financial disclosure requirements for judges. Both the House and Senate versions would require federal judges to report stock trades over $1,000 within 45 days, mirroring requirements placed on members of Congress in 2012.

Fifth U.S. Circuit Court of Appeals Judge Jennifer Walker Elrod told the committee the Administrative Office of the U.S. Courts has encouraged judges to use conflict screening software and to become more familiar with what assets they and their family members hold. The agency has also been working to "develop and implement" a faster financial disclosure system.

Some politicians have boasted about how they have avoided conflicts by placing their assets in a "blind trust" or "managed account." But Elrod said this approach would conflict with existing canons requiring judges "stay informed" about their financial holdings, said Elrod, who chairs the Committee on Codes of Conduct of the Judicial Conference of the United States. Instead, she suggested judges could buy mutual funds that invest in a wide variety of companies but have a limited stake in any one firm.

"My goal today is to make the case for a cultural change within the federal judiciary," said another speaker before the committee, Renee Knake Jefferson, according to written testimony posted online. "The primary source of the judiciary's authority and power is its reputation."

Jefferson, the Doherty Chair in Legal Ethics at the University of Houston Law Center, testified before the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet. The hearing came in the wake of a Wall Street Journal report that 131 federal judges had presided over 685 cases between 2010 and 2018 involving companies in which they had a financial interest. The story and subsequent reporting by other news organizations appears to have set off a wave of recent recusals, including in California's four federal districts.

The bills introduced Monday would also require the Administrative Office of the U.S. Courts to publish a searchable online database of judges' financial transactions within 90 days of when they are filed. Currently, judges must report annually, but it can be difficult for the press and members of the public to get this information. For example, the Free Law Project, a nonprofit that cooperated with The Journal on its story, has posted the financial disclosures of federal judges on its website, but these only go up to 2018.

Judge Roslynn R. Mauskopf, the director of the Administrative Office of the U.S. Courts, has also asked for recommendations for improving judicial financial disclosures, the agency said on its website this week.

Recusal serves two related purposes, Jefferson told the committee: preventing "actual bias" and "the appearance of bias." "At least some" of the judges named in the September Journal article appeared to have "no idea they held stocks in a party before them," Jefferson said, and probably were not influenced to rule a particular way. But changes are still needed, she said.

"Nevertheless, these judges violated a bright line federal law, and I believe reform is needed for both the substance of that law and for the recusal process as a whole," Jefferson said.

The current financial disclosure system grew out of the Watergate era, she continued. This includes the Ethics in Government Act of 1978, the law that requires judges to file the annual financial disclosure statements that reporters used to discover the past conflicts.

Jefferson identified four major flaws with the current system. The law carries "no explicit penalty for noncompliance," she said. It also has no de minimis standard, meaning it is very easy to violate inadvertently. This combination often means judges have often not taken the law seriously, she said News reports also showed many judges were unfamiliar with the rules, sometimes confusing them with the "more liberal approach" outlined in the American Bar Association Model Code.

Finally, Jefferson said, judges may recuse without identifying what kind of financial conflict they had.

Berkeley attorney Richard E. Flamm, who specializes in judicial ethics matters, told The Daily Journal this month that judges rarely say why they are refusing a case. This omission, he said, has led to a lack of the kinds of precedents and scholarship that might make it clearer when a judge should recuse.