Federal judges are mirroring the Supreme Court on financial disclosures

There must be something about life tenure that makes it nearly impossible for federal judges to take responsibility for faults in their financial disclosures. The leading example is Supreme Court Justice Clarence Thomas, who once claimed he had “inadvertently” failed to disclose 20 years of his wife’s employment. 

Perhaps inevitably, the resort to implausible excuses and obfuscations appears to have filtered down to the trial courts. 

Federal judges are required by law to report their own and their spouse’s financial holdings every year, and are legally and ethically bound to keep themselves informed of their “financial interests and make a reasonable effort to keep informed about the personal financial interests of the judge’s spouse.”

Recusal is mandatory if the judge or spouse holds a financial interest, “however small,” in a party to the proceeding. 

The system doesn’t always work. 

In 2021, reporters for the Wall Street Journal conducted an extensive review of disclosure statements and court dockets, which identified 152 federal judges who failed to recuse themselves from a total of 1,076 cases in which they or their family owned stock. 

One case involved Judge Lewis Liman, of the Southern District of New York, who presided over a multi-billion dollar antitrust case even though his wife held stock in Bank of America, the lead defendant.  

In Litovich v. Bank of America, et al,  filed in April 2020, several investor groups sued over a dozen investment banks, claiming they had conspired to fix certain bond pricing. Liman presided for 18 months without recusing himself. 

On Oct. 25, 2021, he ruled in favor of Bank of America and the other defendants, dismissing the case in its entirety, without ever advising the parties of the stock holding. Liman’s eventual disclosure of the financial conflict, coming months after he dismissed the case, was patently inaccurate.  

In February 2022, while the case was on appeal, the Wall Street Journal asked Liman about his non-recusal in 13 cases, including Litovich. Shortly afterward, Liman directed the clerk of court “to file notices to parties in those cases saying he should have disqualified himself.” 

The letter to the Litovich parties, dated Feb. 25, 2022, said that it had been “brought to his attention” that his wife owned stock in Bank of America “that neither affected nor impacted his decisions in this case [but] would have required recusal.” The letter invoked an ethics advisory opinion providing “guidance for addressing disqualification that is not discovered until after a judge has participated in a case.” 

Liman’s letter was at best misleading. The specific wording — it had “come to his attention” and “disqualification that is not discovered” — implied that he had no knowledge of his wife’s Bank of America stock until after he dismissed the Litovich case.  

That is not so.  

On May 29, 2021, Liman filed his disclosure report for 2020 — certified by him as “accurate, true and complete” — clearly listing the Bank of America stock. Thus, Liman had actual knowledge of the Bank of America investment at least five months before he dismissed the claims against all defendants, and nine months before he disclosed the stock holding to the parties. 

Liman’s evasive letter imposed much-wasted effort on the litigants and appellate judges, who had to proceed on the erroneous assumption that he had “no knowledge of the conflict until after it was reported by The Wall Street Journal, which occurred after Judge Liman issued his decision granting the motion to dismiss.” 

Several pages of the court’s opinion, and many more pages of the parties’ briefs, were devoted to an issue that would have been unnecessary if Liman had been forthcoming.  

Although the undisclosed investment was under $15,000, the appellate court held that Liman’s financial conflict required reversal under the mandatory “however small” rule of disqualification. The case was sent back to the trial court, and assigned to a new judge who will have to start from the beginning. 

Liman also sent a second letter to the parties, informing them that his wife had “fully divested” the Bank of America stock several months before the dismissal. The appellate court considered this irrelevant. 

I sent Liman an email requesting an explanation of the discrepancy between his letter and financial report. I received only a curt reply from an administrator, stating that the court declined to comment “on any matters before it.” 

That is a bogus excuse. The Litovich case has not been before Liman for over two years, having been transferred to another judge due to his financial conflict. Moreover, the Code of Conduct for United States Judges specifically allows judges to issue “explanations of court procedures.” 

Also, Justices Thomas and Samuel Alito have made public statements explaining financial disclosure or disqualification procedures.

Liman’s nondisclosure had serious repercussions in a single case. More significantly, it is emblematic of the casual attitude toward disclosure and recusal that is found too often in the judiciary, as the Wall Street Journal reported, from top to bottom.  

I don’t doubt that Liman is a good person and a good judge. Everyone makes mistakes. It would be easy to believe that he sincerely forgot or overlooked the Bank of America investment, although that would require him to admit fault and apologize. 

Instead, he invented an absolving story of belated discovery, which failed the test of candor. The public deserves better.

Steven Lubet is the Williams Memorial Professor Emeritus at the Northwestern University Pritzker School of Law.