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Austin J. Wishart, Associate Member, University of Cincinnati Law Review
In February 2021, the Survey Center on American Life released results from a bipartisan poll of American citizens. The poll found two particularly problematic statistics: First, roughly a third of all Americans believe violence is an appropriate remedy when elected leaders refuse to protect the country. This belief has manifested in violent events such as the 2017 Congressional Baseball Shooting, nationwide riots following the peaceful protests of the George Floyd murder, and the political violence seen at the January 6th Capital Insurrection.
Second, the poll found seven in ten Americans believed American democracy only serves the wealthy and powerful. With seventy percent of Americans believing their political system is corrupt, are these respondents wrong? This article will examine the flagrant violations of conflict of interest laws by judges, legislators, and administrative agents. First, the article will review the laws governing judges, legislators, and administrative agents, particularly Board members of the National Labor Relations Board. Then, this article will address recent high-profile violations of those laws.
Federal judges, as citizens, are free to engage with financial investment. However, they are uniquely limited in their ability to preside over a case if their financial investment creates a conflict of interest. Under 28 U.S. Code § 455, a judge must recuse themselves from presiding over any proceeding in which they, their spouse, or their minor children residing in their household have a financial interest in the subject matter in controversy or in a party to the proceeding, or any other interest that could be substantially affected by judge’s decision. Under this law, judges have a duty to inform themselves about their personal and fiduciary financial interests, and make a reasonable effort to inform themselves about the personal financial interests of their spouse and minor children residing in their household. Further, financial interest under the law is defined as ownership of a legal or equitable interest, however small. This means a federal judge is obligated to know of any interest they or their loved ones has in a proceeding and recuse themselves if they find a conflict of interest.
While judges are prevented from presiding over cases where a financial conflict of interest exists, no such law exists for federal legislators in Congress. Federal legislators are not prevented from writing, debating, and voting on legislation where they have a financial conflict interest. Instead, members of Congress are bound by the Stop Trading on Congressional Knowledge Act of 2012, or the “Stock Act”. Under the Stock Act, members of Congress may not use nonpublic information derived from their position as a member of Congress or gained from the performance of their official responsibilities as a means for making a private profit. Further, the Stock Act requires members of Congress to report on their financial transactions, such as buying or selling stocks, within a set period of time. After those reports are filed by members of Congress, the reports must be made available to the public on the respective official websites of the Senate and the House of Representatives not later than 30 days after such forms are filed. While this does not prohibit members of Congress from trading stocks or, trading stocks based on information members are privy to based on their position within government, it increases transparency for the public.
C. Administrative Agents
Finally, an often overlooked group in the political system is the administrative agents. While conflict of interest restrictions vary in the different federal administrative agencies, the National Labor Relations Board (“NLRB”) serves as an administrative agency that exemplifies the financial conflicts at interest in this article. The National Labor Relations Board is led by a body of administrative agents known as “the Board”. Members of the Board are appointed and are tasked with leading the NLRB and standing as the ultimate authority in determining disputes between organized labor and employers. Members of the Board have a duty to withdraw from cases where they have a financial conflict of interest by 18 U.S. Code § 208. Failure to do so, without satisfying one of few statutory exceptions, can lead to imprisonment, fines, civil penalties, and court orders forbidding further work in the administrative agency.
As the elected and appointed avatars of justice in the American political system, judges are expected to abide by their 28 U.S. Code § 455 duty to avoid financial conflicts of interest with utmost care. A judge’s failure to recuse themselves from a case where they possess a financial interest could devolve to a crisis of faith in the justice system, notwithstanding the injustice caused to the losing party in the case the judge illegally presided over. If the justice system is presided over by individuals who are not impartial and have conflicts of interest, it is unsurprising that individuals conclude that political violence is an appropriate remedy to injustice and that judges are serving economic interests, not the interest of justice.
A recent study reported in the Wall Street Journal found that not one, not two, but one hundred and thirty one judges presided over cases where they had a 28 U.S. Code § 455 duty to recuse themselves between the years of 2010 and 2018. These judges knew that they had an obligation to recuse themselves under the law and failed to do so when they or a family member owned equity of a party in the respective suit. Of the judges that failed to disqualify themselves, six hundred and eighty five cases were improperly heard and judges have directed clerks to notify parties in three hundred and twenty nine cases that they should have recused themselves. While the sheer volume of judges and cases is staggering, the most important statistic uncovered is that two-thirds of the rulings on motions that were contested in these cases came down in favor of the judge’s or their family’s financial interests.
Not to be outshone by members of the judiciary, members of the federal legislature have also made headlines in the recent past for their financial conflicts of interest. As has been discussed, members of Congress are required under the Stock Act to report their financial interests, and those interests are made public record after a short period of time. That public information led to a social media firestorm when users of the popular social media app TikTok found that they could perform above the market average in the stock market by copying what members of Congress do. These TikTokers are not without an abundance of data to go off: in 2021, members of Congress filed more than four thousand financial trading disclosures, with at least three hundred and fifteen million dollars’ worth of stocks and bonds bought or sold. This high volume of stock trading is not without financial gain; by calculating the raw data that is publicly reported, members of Congress are found to outperform the market averages. Further, large legislative events, such as the passing of the 2021 Infrastructure Bill by the Senate, were often preceded by members of Congress trading equity in the economic sectors affected by the legislation.
This reality has prompted many to ask whether members of Congress are truly abiding by their Section Three Stock Act duty to not use nonpublic information as a means for making a private profit. When questioned about the ability of Congressional members to trade stocks, in light of this concern, Speaker of the House Nancy Pelosi was quoted as saying, “We are a free market economy. [Congress] should be able to participate in that.” Much in the way that a judge’s failure to recuse themselves in light of a conflict of interest, the openness in which members of Congress outperform the market through trading of stocks is liable to devolve to a crisis of faith in the legislative system. A failure to divest interest in stocks of a company is likely to raise concerns as to a legislator’s intent if they draft legislation in favor of that company, regardless of whether that information is publicly available. When a member of Congress or their spouse is able to outperform the entirety of the market, it serves the interests of the wealthy.
It is important to note that the political response to this sentiment has moved towards amending or replacing the Stock Act. Members of the House of Representatives indicated a total ban on Congressional stock trading would be appropriate, while others have indicated that stricter reporting requirements could be the solution. Others still have gone as far as to introduce legislation that would ban Congressional members and their families from holding or trading individual stocks while in elective office. While this does not currently solve the issue of conflicts of interest amongst the legislators, it is a step towards limiting financial conflicts of interest.
C. Administrative Agents
With members of the National Labor Relations Board having a duty to withdraw themselves from cases where they have a financial conflict of interest by 18 U.S. Code § 208, recent decisions made under Board member William Emanuel have spawned serious ethics concerns. The NLRB’s decisions in ExxonMobil Research & Engineering Company, Inc., Marathon Petroleum Co., d/b/a Catlettsburg Refining, and CVS/Pharmacy have all been marked for vacating and re-deciding due to Emanuel’s failure to recuse himself. After an investigation into Emanuel’s finances, it was found that he held multiple mutual funds containing shares of the companies involved in each of the Board’s cases. Prior to these cases, the NLRB voted to undo its decision for similar reasons in the Hy-Brand I case. In this case, Emanuel failed to recuse himself when he had conflicts of interest and, as such, the decision was nullified.
The February 2021 poll results, while disturbing, are unfortunately unsurprising. Judges, legislators, and administrative agents are all bound, both in law and in the spirit of the law, with a duty to prevent their financial conflicts of interest from interfering in their necessary public work. With judges, legislators, and administrative agents all engaging in open corruption and financial conflicts of interests, it is unsurprising that Americans feel the remedies available to them are insufficient. Americans are justified in believing that judges, legislators, and administrative agents serve the wealthy when they are presiding over cases that they have financial ties in, are outperforming private sector investors, and publicly refuse to adopt tighter regulations on themselves. While this is disheartening, some attempts are being made to remedy the outright disregard for conflict of interest law and this author encourages all readers to follow them closely. Readers should diligently follow cases being retried by judges without conflicts of interests, legislation being proposed to limit or eliminate legislator’s trading of stocks, and cases being reheard by administrative agents after agents who disregarded their conflicts of interest were removed. While the seventy percent of Americans may be justified in their belief, it is also justified to believe that the system is moving in a more just direction.
Daniel A. Cox, After the ballots are counted: Conspiracies, political violence, and American exceptionalism, Survey Center on American Life (Feb. 11, 2021), https://www.americansurveycenter.org/research/after-the-ballots-are-counted-conspiracies-political-violence-and-american-exceptionalism/.
28 U.S. Code § 455(b)(4).
28 U.S. Code § 455(c).
28 U.S. Code § 455(d)(4).
126 Stat. 292.
126 Stat. 293.
126 Stat. 295.
49 Stat. 449.
18 U.S. Code § 208 (a).
18 U.S. Code § 216.
James V. Grimaldi, Coulter Jones, and Joe Palazzolo, 131 Federal Judges Broke the Law by Hearing Cases Where They Had a Financial Interest, The Wall Street Journal (Sept. 28, 2021), https://www.wsj.com/articles/131-federal-judges-broke-the-law-by-hearing-cases-where-they-had-a-financial-interest-11632834421.
Tim Mak, TikTokers Are Trading Stocks By Copying What Members Of Congress Do, NPR Investigations (Sept. 21, 2021), https://www.npr.org/2021/09/21/1039313011/tiktokers-are-trading-stocks-by-watching-what-members-of-congress-do.
Brian Slodysko, Pelosi defends lawmaker stock trades, citing ‘free market’, AP News (Dec. 15, 2021), https://apnews.com/article/business-nancy-pelosi-congress-8685e82eb6d6e5b42413417f3d5d6775.
Deirdre Walsh, A push to ban members of Congress from trading individual stocks gains momentum, NPR Politics (Jan. 19, 2022), https://www.npr.org/2022/01/19/1073865837/a-push-to-ban-members-of-congress-from-trading-individual-stocks-gains-momentum.
John L. Dorman, Sen. Jon Ossoff set to introduce bill barring members of Congress from trading individual stocks: report, Business Insider (Jan. 9, 2022), https://www.msn.com/en-us/news/politics/sen-jon-ossoff-set-to-introduce-bill-barring-members-of-congress-from-trading-individual-stocks-report/ar-AASBbNG.
Ian Kullgren, Labor Board Moves to Scrap Rulings Over Ex-Member’s Conflict, Daily Labor Report (Jan. 7, 2022), https://www.bloomberglaw.com/product/blaw/bloomberglawnews/daily-labor-report/BNA%200000017e-35fd-d39c-adfe-fdff27030001?bwid=0000017e-35fd-d39c-adfe-fdff27030001 (quoting ExxonMobil Research & Engineering Company, Inc., 370 N.L.R.B. No. 23, Marathon Petroleum Co., d/b/a Catlettsburg Refining, LLC, 366 N.L.R.B. No. 125, and CVS/Pharmacy, Case 13-UC-266228 (Unpublished).