On their honor - Judges and their assets graphic
Conflicts disappear in flawed reports

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On Their Honor: Judges and their assets

By JOE STEPHENS - Staff Writer
Date: 08/08/98 21:15

Revelations that federal judges routinely violate ethics laws have the judiciary working to make their financial disclosure reports more available. But that may not solve the problem.

Newly released reports show that judges often leave key assets off the statements. That makes it impossible to identify conflicts of interest -- no matter how easy it is to get the reports.

A Kansas City Star review of 1998 reports filed by 33 judges in four states shows one-third include information that, by law, they should have disclosed earlier.

Several judges belatedly reveal stock holdings. One discloses a loan for the first time. Others report old investments in bonds and mutual funds.

In three instances the belated disclosures show that judges presided over lawsuits against companies in which they had a financial interest.

Why the new openness? Several judges acknowledged making their reports more comprehensive this year as a result of increased scrutiny of their finances.

In April, The Star used reports from earlier years to show that federal judges presided over dozens of lawsuits against companies in which they owned stock, despite laws forbidding such conflicts.

Since the articles, Congress has been pushing for wider distribution of the disclosure reports to help the public identify conflicts. Judicial officials have proposed reforms, too.

No one, however, has tried to determine the accuracy of the reports.

Federal law makes it a crime for a judge to deliberately leave information off the statements. Yet experts say they are unaware of a judge ever being prosecuted for a reporting lapse.

The judges say they are just forgetful. Judge Ancer Haggerty of Oregon, for example, said that for years he simply did not remember to report up to $65,000 worth of investments.

"It's just one of those things," he said.

Critics said judges would never accept such excuses from defendants in their courtrooms. They say judges' financial reports should be as accurate as those they file with the Internal Revenue Service.

"There is really no excuse for not filling them out completely," said Stephen Gillers, a judicial ethicist at New York University. "The disclosure forms are intended to let the public, litigants and the bar know the full financial interests of the judge."

Last year the Administrative Office of the U.S. Courts mailed out 1,800 letters to federal judges, questioning discrepancies and offering help with the forms. But a spokesman pointed out that if a judge never lists a stock holding, the office has no way of knowing something is amiss.

The Star found the missing investments by reviewing the new disclosure forms filed by federal district judges in four cities: Kansas City; Kansas City, Kan.; Pittsburgh; and Portland, Ore. The cities, each in a different judicial circuit, were selected to provide a core sample of judges nationwide.

Some of the just-released reports, which cover calendar year 1997, include notes revealing the previous omissions. In other cases the newspaper identified the omissions only by comparing the new reports with those from earlier years.

Among the findings:

  • For years Judge Fernando J. Gaitan Jr. reported owning stock in just one corporation, AT&T. Shortly after the newspaper series, however, the Kansas City judge amended his latest filing to show he also owned stock in six additional telecommunications companies.

    Gaitan said in a letter to The Star that he never realized he had to report the stock until he read the newspaper articles.

    The judge said he believed, but was not sure, that he received stock in the Baby Bell companies when they separated from AT&T -- which AT&T said occurred in 1984. He called the amounts insubstantial; his report identifies them each as worth up to $15,000.

    "I have always treated them as one, AT&T," he wrote.

    In 1991, Gaitan issued eight court orders in a $10 million lawsuit against a subsidiary of one of the companies, U.S. West Inc. At the time, Gaitan explained, he did not realize he was a U.S. West shareholder and he did not know federal law required him to withdraw if he was.

    "Most of my rulings were perfunctory," Gaitan wrote. "And ultimately the case was transferred to yet another judge."

  • The Star series questioned whether Haggerty had fully disclosed his assets. At the time Haggerty declined to be interviewed or to clarify his investments.

    Three weeks after publication, however, Haggerty wrote to court officials to disclose for the first time that he owned stock in American Express Co. and held an American Funds mutual fund. Together the investments were worth $15,000 to $65,000.

    Haggerty acknowledged in an interview that he presided over a lawsuit against an American Express subsidiary last year and that he eventually threw the case out of court. He said the "disjointed" lawsuit made no actual claims against the company and told court administrators he did not know if his actions violated ethics laws.

  • Judge Donetta Ambrose of Pittsburgh disclosed to court officials for the first time that her husband co-owned an interest in Mellon Bank in 1995 and 1996. In that time Ambrose presided over a million-dollar racketeering lawsuit that named Mellon Bank as a defendant.

    Ambrose said she was unaware of the conflict until questioned by The Star, and she vowed to make fuller disclosure in the future.

  • G. Thomas Van Bebber, chief district judge for Kansas, disclosed that he wrongly reported that his wife closed an individual retirement account worth up to $15,000 in October 1996. The account at New York Life Insurance Co. remains open.

    Van Bebber also disclosed for the first time that in 1996 he and his wife invested in a Glenbrook Life mutual fund worth as much as $50,000.

    Van Bebber called the omissions an accident.

  • Judge Kathryn Vratil of Kansas City, Kan., disclosed that in her 1996 report she failed to list stock worth up to $15,000 in Kansas City Power & Light Co. The investment was made on behalf of her children, she said, and is controlled by her ex-husband.

    Vratil described the oversight as unintentional.

  • Judge Nanette Laughrey of Kansas City reported that in previous years she inadvertently omitted an outstanding loan to her husband and an unpaid medical bill, totaling up to $65,000.

  • Judge Ortrie D. Smith of Kansas City disclosed that in 1996 he sold his interest in a Colonial mutual fund worth up to $50,000 and redeemed another investment worth up to $15,000. He called the omission an accident.

  • Judge Gary A. Fenner of Kansas City sent a letter to court officials reporting that in 1996 he failed to report that he collected cash from a bond trust on four occasions. He said he left out the distributions, worth up to $15,000, because of an oversight.

  • At least three judges, all from western Pennsylvania, disclosed that in earlier reports they left out stock and bond investments or failed to disclose financial transactions.

    Some judges' reports left important questions unanswered. For example, Judge Michael Hogan of Oregon disclosed that he receives 17 percent of capital gains and dividends accrued by the Hogan Family Partnership. Yet he did not disclose which stocks the partnership owns.

    "As far as I know, what I've done is acceptable," Hogan said.

    Some of the most striking information in the new reports comes on their final pages. That is where the judges attest that they performed no judicial function in any lawsuit in which they had a financial interest.

    Three of the judges signed the certification but then appended statements showing that they had, indeed, run afoul of the conflict laws. In previous years none of the reports reviewed by The Star included such a statement -- even reports from judges who had violated the law.

    Haggerty, who threw out the American Express lawsuit, included a note in his 1998 report that explained the conflict. He also altered the standard certification from "I did not ... " to read "I do not believe I" violated an ethical canon.

    Judge Gustave Diamond of Pittsburgh disclosed that since 1995 he had presided over four lawsuits in which his wife owned stock in a litigant. He said the conflicts "escaped detection" until identified by The Star.

    Judge H. Dean Whipple of Kansas City reported that he issued an injunction and other orders in a lawsuit involving a brewery and only later realized he owned stock in one litigant's parent. Whipple sold the stock before taking further action in the lawsuit.

    In contrast, Judge D. Brook Bartlett signed the certification without comment.

    Yet records show that Bartlett last year presided over a lawsuit against the Stryker Sales Corp. Bartlett's report shows he owns stock worth up to $15,000 in the company's parent, the Stryker Corp.

    Bartlett, chief district judge for Western Missouri, said in an interview he was astounded that he overlooked the conflict. He stressed that no one opposed any of his orders but added that he was not making excuses.

    "It's certainly my fault," Bartlett said. "I had not the foggiest idea about it."