The Federal Law That 138 Judges Have Broken - The Journal. - WSJ Podcasts - The Wall Street Journal

For the last year, a team at the Wall Street Journal has been investigating the financial holdings of federal judges across the country. This week, the team reported that more than 130 judges violated U.S. law by overseeing court cases that involved companies in which they or their family had a financial interest. WSJ's James Grimaldi explains the investigation and introduces us to the judge with the most conflicts.

This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.

Kate Linebaugh: Our colleague James Grimaldi has been working on a big investigation, that started with a simple question.

James Grimaldi: Well, it began last year when I was asked to look into the finances of Supreme Court Justice nominee, Amy Coney Barrett.

Kate Linebaugh: James started looking into Barrett's finances. She'd been serving as a federal judge for the US Court of Appeals for the Seventh Circuit. He was looking to see if she'd had any conflicts of interest. To do that, he had to go through all the cases she had heard and keep track of every company involved, every plaintiff, and every defendant. It was taking a lot longer than he expected.

James Grimaldi: And I was putting all of the data into a spreadsheet and I thought, someone, somewhere, must have digitized this. Why am I doing this? So I started asking around, has someone digitized this?

Kate Linebaugh: James started thinking beyond just Barrett's records. He started wondering whether there were any databases with every financial conflict a federal judge might have. Eventually, he found a guy who he thought might have it, but that guy said ...

James Grimaldi: Well, I don't have it. But this guy out in Oakland does. I'm like, what? And he works for this nonprofit called the Free Law Project. And he had this project going on for several years, to obtain from the administrative office of the courts, every financial disclosure for every federal judge, and digitize it. So I immediately called him, and it was like he was waiting for my call. He was ready. And that was the beginning of a year long effort.

Kate Linebaugh: That year-long effort led to an investigation into the cases these judges had handled, and whether they'd handled the cases properly. And now the results of that investigation have been published. More than 100 federal judges across the country broke the law between 2010 and 2018. Meaning they oversaw cases where they had a financial interest.

James Grimaldi: We found it very hard to believe that it was actually true, that so many judges were breaking the law. I mean, these are judges. They're lawyers. Judges interpret the law. They enforce the law. They don't break the law. But judges very rarely receive any kind of scrutiny, federal judges in particular. And they're used to being sort of the king and queens of their own domain.

Kate Linebaugh: Welcome to The Journal. Our show about money, business, and power. I'm Kate Linebaugh. It's Friday, October 1st. Coming up on the show, the federal law that judges have broken. And a closer look at the judge who's broken at the most. James started off reporting on Amy Coney Barrett. But once he got access to that giant database of judges and their cases, he realized he could do much more than investigate one judge. He could use this data to look into conflicts of interest for all federal judges, to see if judges presided over cases where they had a financial interest. But to figure that out, he needed help.

James Grimaldi: I'm not a data dude. So I needed a data dude. So I went to my editors and they say, hey, Coulter Jones is working on something similar. Now he didn't have this data, he didn't know about it. So Coulter and I ended up partnering immediately and started working on it.

Kate Linebaugh: Coulter and James were looking into whether judges violated a specific law. One that passed in 1974 in the wake of Nixon's resignation.

James Grimaldi: So around that time, there were a lot of reforms and a lot of ethics reforms. And Congress created this black and white rule. They had hearings, they had judges testify.

Kate Linebaugh: You use this term, it's a black and white law. What does that mean?

James Grimaldi: Well, it means it's supposed to be very clear cut. It's meant to be a bright line. It's meant to be a case in which, if you do X, you must do Y. If you own X, you must do Y.

Kate Linebaugh: This law says that judges have to recuse themselves from any case where they have a financial interest. So if judges, their spouses, or minor children have any, even a small financial interest in a plaintiff or a defendant in their court, the judges must disqualify themselves from the case.

James Grimaldi: It was mostly trying to protect the integrity of the court. It was trying to protect the confidence that we have in the United States for American jurisprudence. And anything, however small that could cast any doubt or any bias or any appearance of bias by a judge, they wanted to just completely eliminate that.

Kate Linebaugh: And so how does the law work in practice? What is supposed to happen?

James Grimaldi: What they're supposed to do is take all their investments and create a list, a recusal list. And they submit that to the clerk of the court.

Kate Linebaugh: After judges make the list of companies whose cases they should recuse themselves from, the list is uploaded into a database that's meant to flag possible conflicts as they arise. And how often are judges recusing themselves from these cases? Is this a commonplace occurrence?

James Grimaldi: Well, we don't know. Why? Because they have this computer system that may screen it before they ever get assigned the case. Or they may get assigned it and they reject it because they have the stock. So there's no record of this. It's not available online. Now, there are cases where a judge will accidentally get assigned it, they'll realize they have a conflict, and they will notify the court. But it's our understanding that most of the cases that are screened out, we never know about.

Kate Linebaugh: James and Coulter wanted to see if they could actually identify if these judges had been involved in potential conflicts of interest. So they went through all the documents and research they received from the nonprofit in Oakland, plus more. They had one database that identified judges' assets, and another database of court records. They wanted to use these two to identify potential conflicts, but they needed a reporter who had extensive experience in the legal world.

James Grimaldi: And that's when we needed Joe Pallazolo as well. Because we had a long list of potential conflicts, and the only way to confirm that these were really conflicts was to go through them in a laborious, painstaking case by case review.

Kate Linebaugh: The team did this work for months.

James Grimaldi: Looking at the case and looking at the case docket and seeing, did the judge actually hold this stock, hold this interest in this company at the same time that the company was a plaintiff or a defendant in the case. We literally had to look at timelines to make sure that we actually had them. And then, of course, we reached out to every judge.

Kate Linebaugh: The team of three worked with one another to write and build computer programs that would scrape this data and present it in different graphs and tables so they could understand the conflicts. And what they found was that out of roughly 700 federal judges they investigated around the country, between the years of 2010 and 2018, over 130 judges had inappropriately heard cases. More than 680 cases.

James Grimaldi: It was more of a like, are you really seeing what I'm seeing? Are these judges really doing this? Is this really happening? Are these judges really violating the law over and over again? I mean, we didn't really believe it at first. I mean, for a long time, it's like, is there something we don't understand about this?

Kate Linebaugh: Judges gave James and the team a range of explanations for their errors. Several blamed court clerks. Others blamed misspellings on forms. Some said they only took minimal action in the cases. But the law doesn't make many exceptions. And James says that in many cases, judges owned thousands of dollars of stock in companies that appeared in their courtrooms.

James Grimaldi: I can't get into the mind of a judge and know why they own 15 to $50,000 in stock in Exxon. And then approves a $25 million settlement in favor of Exxon, and then adds on $8 million in interest. I don't know. Does he know, and remember when he's making that decision, that he owns Exxon? I don't know about you, Kate, but if I own between 15 and $50,000 stock in Exxon, I'd know it. But other people's portfolios are handled differently.

Kate Linebaugh: The judge in that case was unaware of his violation, according to an official in the New York federal court. The official said the screening software failed to identify the judge's conflict. And after James and the team reached out, the court clerk notified the parties in the case. But even when judges are unaware of the violation, the law doesn't really care.

James Grimaldi: I mean, I interviewed one judge and he said, well, I deliberately don't even know what's in my holdings. My wife handles it all. And I said, well, judge, you know the law requires you to know what you own. And he said, well, that's news to me. And I'm like, you're a judge. You're supposed to know the law. But the law you don't know about is the law that applies to you. He didn't really have much of an answer. And he later conceded that he had been in error.

Kate Linebaugh: Was that a frequent occurrence when you reached out to judges? That they said they were unaware of the law and later conceded their error?

James Grimaldi: We had that in a couple of cases. There was another case of a judge in the Southern district of California. And she initially said, well, my spouse's trust does not apply here. And we said, well, judge, yes, it does. And then she said, and we're not going to talk about it anymore. And we said, well, we're going to write about it. And she filed notices in all of her cases where she had conflicts regarding that trust, that essentially admitted that she was wrong and that she should have disqualified in those cases.

Kate Linebaugh: After the break, the judge who had the most conflicts. According to The Journal investigation, one federal judge failed to recuse himself dozens more times than any other judge. His name is Judge Rodney Gilstrap, and he presides in Texas.

James Grimaldi: He is an Eagle Scout. He's a beekeeper who likes to hand out jars of his honey, which he has labeled Sweet Justice. He's active in his community, he's involved in a couple of nonprofit organizations. And I think he's relatively prominent, well-respected. He's married to Sherry Gilstrap, who owns a flower shop in Marshall, Texas. And Mrs. Gilstrap had a trust that was created in her name by her parents, that ended up becoming a part of this story.

Kate Linebaugh: And when did Judge Gilstrap become a federal judge?

James Grimaldi: Judge Gilstrap was appointed by President Barack Obama. He took the bench in 2011.

Kate Linebaugh: Okay. So can you tell us what your investigation found related to Judge Gilstrap?

James Grimaldi: Sure. So Judge Gilstrap had 138 conflicts by our count, where he owned stock in companies or his wife's trust owned stock in companies, or his or his wife's investment account owned stock in companies that appeared before Judge Gilstrap.

Kate Linebaugh: In one example, McDonald's was a defendant in a patent case. Judge Gilstrap says he initially recused himself because he owned shares in the company, and the case was taken by another judge. And then another judge. And eventually, months later, it boomeranged back to Judge Gilstrap. But this time he decided to take the case. McDonald's was no longer a defendant in the suit. But James and the team discovered that in this case, there were still five other companies that Judge Gilstrap had an interest in.

James Grimaldi: Of the more than two dozen companies that were parties, Judge Gilstrap's disclosure forms showed investments in five. Home Depot, JP Morgan, plus Microsoft, Target, and Walmart.

Kate Linebaugh: Judge Gilstrap said he didn't need to recuse himself in this case because the stocks in question are held in his wife's trust. He said he checked the trust characteristics against ethics guidance provided to other federal judges. And he believes that the structure of his wife's trust means recusal isn't required.

James Grimaldi: But he has not said, well, she has no interest in the trust, despite our asking him several times. He has not said she has no equitable interest in the trust. He's just saying that she didn't basically own title to the trust. But the way trusts work, you have a trustee and then you have a beneficiary. And the interpretation of the law has been, if you are a beneficiary, then you're going to benefit from it. And if you're going to benefit from it or your wife's going to benefit from it, then you can't hear that case.

Kate Linebaugh: What's interesting is you described the origins of this law as black and white. It was a black and white law. But it feels like in your investigation, you found all of this gray.

James Grimaldi: Oh yeah. There's some gray in there. Over the past 47 years, investments have gotten complicated. So we have all kinds of investment vehicles that didn't exist in 1974. The bare bones of the law and the code have been left to the judges themselves to interpret whether or not these various investment vehicles apply.

Kate Linebaugh: What's the status of Judge Gilstrap's cases where you identified a conflict of interest?

James Grimaldi: Judge Gilstrap, at this point, has not gone into court and notified parties that he should have disqualified, that I know of.

Kate Linebaugh: Judge Gilstrap said in many cases, his role was so minimal that recusal wasn't necessary. In other instances, judges responded differently. After James and the team alerted them to violations, 57 judges acknowledged they should have recused themselves. And they directed court clerks to notify parties in more than 300 lawsuits. What happens next? The judges have notified the clerks in more than 300 cases. What is the impact of that?

James Grimaldi: Well, if you are a plaintiff or a defendant in a case where a judge had a conflict and you've already settled, you've put that check in the bank. You've moved on. You've resolved your difference. It's highly unlikely, in those cases, you're going to go in and ask to reopen. However, we have cases that are pending. And we have a lot of people ... in many cases, they're people who represented themselves and felt like they got a raw deal. Or a case involving Exxon, and TIG Insurance immediately went to the court of appeal and asked to put everything on hold, and the court of appeal agreed. And it's on hold, and now back into the judges court, in order to decide what to happen.

Kate Linebaugh: What does this investigation say about the judicial system?

James Grimaldi: It says, about the judicial system, that very rarely are judges scrutinized for their financial disclosures. Maybe once a decade. And part of that is because there's not a lot of vision into that. They just don't get that kind of accountability or scrutiny because it's difficult to see into these cases. I mean, sure, judges are challenged when they have a ruling and they go to a court of appeal. And they're used to being challenged on a ruling on the law that may go to the court of appeal or the Supreme Court. But they're definitely not accustomed to being asked about their personal finances.

Kate Linebaugh: That's all for today, Friday, October 1st. The Journal is a co-production of Gimlet and the Wall Street Journal. Your hosts are Ryan Knutson and me, Kate Linebaugh. The show is produced by Priscilla Alabi, Catherine Brewer, Pia Gadkari, Brendan Klinkenberg, Annie Minoff, Laura Morris, Afeef Nessouli, Rikki Novetsky, Enrique Perez de la Rosa, Sarah Platt, Willa Rubin, Matthew Sherman, Kayla Stokes, and Annie-Rose Strasser. Our engineers are Griffin Tanner, Nathan Singhapok, and Sam Bair. Our theme music is by So Wiley. Additional music this week from Peter Leonard, Bobby Lord, So Wiley, Emma Munger, and Blue Dot Sessions. Fact-checking by Nicole Pazulka. Also, look out for part six of The Facebook Files in your feed Sunday night. Thanks for listening. See you Sunday.

source: https://www.wsj.com/podcasts/the-journal/the-federal-law-that-138-judges-have-broken/9ef532f9-7f94-4193-8b4f-62b49f3e524c

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