Bressler Risk Blog

“PwC advised DWS on sustainability while investigating greenwashing claims” —

• “PwC was advising DWS [the mutual fund arm of Deutsche Asset Management] on sustainability at the same time as the accounting firm was investigating and dismissing whistleblower allegations of large-scale greenwashing at the asset manager, raising questions over the independence of the probe.”
• “The allegations were made in mid-March by DWS’ former head of sustainability Desiree Fixler. Shortly after being sacked, she accused DWS of misrepresenting how it used environmental, social and governance metrics to analyse companies across its investment platform.”
• “DWS denies all wrongdoing and mandated PwC to investigate the allegations days after the firm received the dossier.”
• “At the same time, a different PwC team led by partner Nicole Röttmer was advising the asset manager on how to meet its goal of net zero emissions by at least 2050. DWS paid about €300,000 for PwC’s net-zero consulting, which has been concluded, according to people with direct knowledge of the matter.”
• “Fixler told the FT she ‘would like to know how PwC managed the potential conflict of interest between its commercial ESG engagement and the audit in the same area’ and pointed out that she was not contacted at any point during the investigation.”
• “In an executive summary of the investigation, PwC on May 21 stated that ‘no further data collection (eg via outreach to Ms Fixler) is necessary at this point”, arguing the “context and facts related to her allegations can be established in our view by available data items provided by DWS.'”

“McKinsey Never Told the FDA It Was Working for Opioid Makers While Also Working for the Agency” —

• “Since 2008, McKinsey & Company has regularly advised the Food and Drug Administration’s drug-regulation division, according to agency records. The consulting giant has had its hand in a range of important FDA projects, from revamping drug-approval processes to implementing new tools for monitoring the pharmaceutical industry.”
• “Yet McKinsey, which is famously secretive about its clientele, never disclosed its pharmaceutical company clients to the FDA, according to the agency. This year ProPublica submitted a Freedom of Information Act request to the FDA seeking records showing that McKinsey had disclosed possible conflicts of interest to the agency’s drug-regulation division as part of contracts spanning more than a decade and worth tens of millions of dollars. The agency responded recently that ‘after a diligent search of our files, we were unable to locate any records responsive to your request.'”
• “Federal procurement rules require U.S. government agencies to determine whether a contractor has any conflicts of interest. If serious enough, a conflict can disqualify the contractor from working on a given project. McKinsey’s contracts with the FDA, which ProPublica obtained after filing a FOIA lawsuit, contained a standard provision obligating the firm to disclose to agency officials any possible organizational conflicts. One passage reads: ‘the Contractor agrees it shall make an immediate and full disclosure, in writing, to the Contracting Officer of any potential or actual organizational conflict of interest or the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.'”
• “Asked for comment, McKinsey did not assert that it disclosed potential conflicts to the FDA. But a spokesperson for the firm, Neil Grace, nonetheless maintained that ‘across more than a decade of service to the FDA, we have been fully transparent that we serve pharmaceutical and medical device companies. McKinsey’s work with the FDA helped improve the agency’s effectiveness through organizational, resourcing, business process, operational, digital, and technology improvements. To achieve its mission, the government regularly seeks support from additional experts who understand both the government’s mission and the industries’ practices. We take seriously our commitment to avoid conflicts and to serve the best interests of the FDA.'”

“Alleging Conflict of Interest, DOJ Seeks to Disqualify Ex-Trump Official From Texas Immigration Lawsuit” —

• “The U.S. Attorney’s Office for the Northern District of Texas filed a motion Wednesday asking a federal judge to disqualify Gene Hamilton, a former counsel to the attorney general in the Trump administration, from the case. Hamilton now works for a conservative legal group, America First Legal, which was founded by former Trump senior adviser Stephen Miller in an attempt to stymie the Biden administration’s agenda in the courts.”
• “The DOJ alleges Hamilton’s participation in the case presents a conflict of interest and violates ethics rules designed to prevent lawyers from ‘switching sides’ and using information gleaned from their government service to benefit private clients.”
• “‘Hamilton’s prior work in his capacity as a U.S. Department of Justice (DOJ) attorney creates a conflict of interest that precludes him from representing Texas in this action in a position adverse to the government on those same issues,’ the motion states. ‘The government has discussed this matter with Mr. Hamilton and other counsel for Texas in this lawsuit, but he and his firm have declined to withdraw from the case.'”
• “The Justice Department is also seeking to have Hamilton’s group, America First Legal, booted from the case because it alleges that the conflict implicates other attorneys at the organization. Another attorney for the group, former Acting Attorney General Matthew Whitaker, is also representing Texas in the case.”
• “The motion, signed by assistant U.S. attorney Brian Stoltz, alleges that Hamilton’s involvement in the case violates two Texas bar rules: one that prevents attorneys from representing private clients in matters that they were personally involved with while in government, unless they get permission from their former agency. The second bars attorneys who obtain ‘confidential information’ about a person or legal entity while working in government from representing a client adverse to the same person or legal entity.”
• “While working as counsel to the attorney general, Hamilton was sent several documents, some of which were marked ‘law enforcement sensitive’ about the implementation and enforcement of the CDC’s order, according to the motion.”
• “The DOJ also alleges that Hamilton, while in government, was involved in discussions about legal strategy to fend off lawsuits challenging the legality of the restrictions. He was given copies of CDC documents discussing the ‘pros’ and ‘cons’ of continuing the order and was sent draft copies of legal briefs that were to be used by the Trump administration in defense of the order, according to the motion.”

Via Ballard Spahr: “The ENABLERS Act Seeks to Impose BSA/AML Requirements on an Array of ‘Middlemen’ Professionals” —

• “Motivated by revelations contained in the recently-released Pandora Papers, on October 6, 2021, four U.S. Representatives – Tom Malinowski (D-NJ), Maria Elvira Salazar (R-FL), Steve Cohen (D-TN), and Joe Wilson (R-SC) – introduced House Resolution 5525, named the Establishing New Authorities for Business Laundering and Enabling Risks to Security (“Enablers”) Act.”
• “The Enablers Act targets the so-called ‘middlemen’ in the United States who allegedly assist with those bad acts. In a press release, Representative Wilson stated bluntly who he believed to be the ‘U.S. enablers of kleptocracy’: “unscrupulous lawyers, accountants, and others” that allegedly fail to conduct adequate due diligence in international transactions.”
• “The Act, if passed, would amend the Bank Secrecy Act (“BSA”) to require the Treasury Department to promulgate due diligence requirements for the “middlemen,” which include investment advisors, art dealers, attorneys involved in financial activity, accountants, third-party payment providers, and others.”
• “The Act is nascent proposed legislation that is still subject to refinement as it winds its way through the House Financial Services Committee. Suffice to say, however, there are some initial questions about the bill’s scope and function that give us pause. The details are catalogued below.”
• “The Act amends the BSA’s definition of financial institutions to add seven new types of businesses and individuals: (1) investment advisors; (2) art and antiquities dealers; (3) an attorney, law firm or notary involved in financial activity or related administrative activity on behalf of another person;”
• “The nature of two of the newly proposed professions, attorneys and CPAs, could make compliance with the BSA/AML remarkably difficult. Those professionals hold fiduciary relationships with their clients, and attorneys are also bound by the attorney-client privilege. he Act’s proposed imposition of SAR reporting requirements on attorneys places attorneys in an untenable position: they must maintain client confidences, but the Act would require them to report to the federal government suspicious transactions. Further, the proposed definition of attorneys covered by the Act – attorneys and law firms ‘involved in financial activity or related administrative activity on behalf of another person’ – is both exceedingly broad and vague. Conversely, the Act makes no distinctions regarding CPAs, who perform a broad array of different functions and services.”

SRA AML Report and Commentary: “Our anti-money laundering work” —

• “As the gatekeepers to purchasing property, setting up companies, providing tax advice and other key activities, the solicitors and firms we regulate have an essential role in making sure the proceeds of crime are kept out of our economy. There is no doubt, in my view, that the legal sector plays a key part in this fight against crime.”
• “I know from our discussions with local law societies this year that meeting their anti-money laundering (AML) obligations is something that matters a lot to the profession. The overwhelming majority want to do the right thing, but there is still a small but nonetheless significant proportion of firms that are just not doing enough to prevent money laundering. As well as allowing criminals to profit from their actions, they undermine the trust consumers place in the profession, damaging confidence in the rule of law and the administration of justice.”
• “The additional resources have allowed us to step up our supervision in this area to directly engage with more firms through 85 visits and 168 desk-based reviews. This increased engagement allowed us greater insight into how firms we supervise are working to prevent money laundering and meant we could bring more firms into compliance. Of those 85 firms visited, 45 were initially only partially compliant.”
• “Solicitors and law firms are attractive to criminals because they process large amounts of money, are trusted, and can make the transfer of money or assets appear legitimate. Most law firms work hard to prevent and to spot money laundering and take necessary action, but some get involved unknowingly. A very small number may even knowingly cooperate or work with criminals to launder money.”
• “In this report we have set out some findings from our supervisory work by theme, such as customer due diligence, and the steps we have taken. We often identify more than one issue at a firm, so some firms are included in the figures for several themes throughout the report. This is particularly relevant for matters referred for disciplinary investigations where firms are often referred for investigation due to multiple breaches.”
• “We have seen some deficiencies in CDD and broken this down into specific requirements that make up CDD, such as matter risk assessments and source of funds checks. We have addressed these elements of CDD separately and provided statistics on what we are seeing below.”
• “We continue to see firms struggling with independent audit and screening requirements with 49 out of 69 firms not carrying out an independent audit, and the same number requiring steps to be taken by the AML team to bring firms into compliance. In addition, 60% of policies, controls and procedures reviewed under our new process were either not compliant or only partially compliant. More detail on these areas is provided below.”
• “Fifty-five per cent of the policies we reviewed required steps to be taken. After the implementation of the 2019 amendment regulations, we found nearly half of the policies we reviewed (29) had not been updated to reflect the changes this required.”
• “The number of firms failing to implement an independent audit function remains high (49 out of 69 firms visited in the period). We continue to engage with firms where an audit is required due to their size and nature, to ensure they implement an independent audit function and review the results once it has been carried out.”
• “Overall, our analysis shows firms are better at screening new employees, but still falling short in relation to ongoing screening measures for existing employees. We are starting to see an improvement in this area and our refined approach enables us to better capture the types of checks being carried out.”

Time for another BRB experiment. This time I’m conducting a quick (5 minute) reader poll on everyone’s favorite topic: OCGs.

Last week an old friend and director of risk at an Am Law 100 firm reached out, looking for insight into law firm trends on managing outside counsel guidelines. Specifically, he wanted to understand how many firms have created a dedicated position on their NBI/conflicts teams (or on another team) to manage OCGs.

I pointed him at a few examples I’ve seen in the wild, but it sparked a discussion resulting in this quick poll.

So if you have a role like this at your firm – or if you’re planning or hoping to create one – please take five minutes to: Take the survey here. [Ed: Survey Now Concluded] (And if you don’t have one and care to share why, that would be helpful context to collect as well.)

Let’s see what we learn…

“Hogan Lovells Accused Of Conflict Of Interest In Tycoon’s Suit” —

• “Lawyers for Vadim Shulman [bio, via Organized Crime and Corruption Reporting Project, noting Paradise Papers] alleged in the High Court that breaches by Hogan Lovells International LLP cost him the chance of securing a settlement against Igor Kolomoisky and Gennadiy Bogolyubov in London in connection with an allegedly fraudulent loan scheme concerning a defunct Ohio steel plant… Shulman says Hogan Lovells was actively pursuing a retainer with Ukrainian-based PrivatBank while still contracted to him.”
• “Shulman and PrivatBank were racing for ‘the same pool of assets’ belonging to Kolomoisky and Bogolyubov, said Jonathan Marks QC, counsel for Shulman. Hogan Lovells owed Shulman a ‘duty of undivided loyalty,’ which would have been breached by the law firm’s discussion with the lender, he added.”
• “Marks told the court that Hogan Lovells “preferred the interests” of PrivatBank, helping the bank obtain its own $2.6 billion freezing order against the two men in December 2017. Shulman wants to add claims that the law firm must have begun work on the order before their relationship ended. Hogan Lovells says it did not begin working for PrivatBank until August 2017. By this time, Shulman’s $500 million fraud suit had been dismissed. An English court ruled it did not have jurisdiction on the claims in April 2017.”
• “But Shulman now alleges that Hogan Lovells’ discussions with PrivatBank about its much larger claim overlapped with its obligations to him. Shulman’s lawyers also want to be able to cross-examine partners at the law firm over evidence concerning the retainer date.”

“SRA wants to see evidence gathered from Pandora papers leak” —

• “The Solicitors Regulation Authority has said it wants to see documents released as part of the Pandora papers to establish whether any law firm has breached anti-money laundering rules.”
• “Several firms have been named this week as part of the ongoing coverage from leaked files of companies that specialise in creating offshore companies and trusts. The Guardian reports today that London firm Farrer & Co took instructions from a client called Abubakar Bagadu, a Nigerian politician accused of involvement with a corruption scheme through which billions of dollars were stolen from the state.”
• “Farrer & Co, renowned as legal advisers to the Royal Family, told the newspaper it carried out extensive due diligence on Bagadu and there is no suggestion of wrongdoing on the firm’s part.”
• “The SRA has specific requirements of firms to carry out proper checks on clients before taking them on, as part of regulations to prevent money laundering. Firms need to risk assess relevant clients, identify and verify their identities and identify their sources of funds and wealth. Where relevant to the size and nature of the business, firms must also undertake an independent audit, screen their staff and appoint a money laundering compliance officer.”
• “There is no suggestion that any firm named in the Pandora papers is in breach of these rules, but the SRA wants to see details of what information has been released to check if it needs to be involved.”

From Shari L. Klevens, partner at Dentons US: “Pay Attention to Conflict Issues in Hiring Nonlawyer Staff” —

• “The potential for conflicts of interest is not limited to attorneys. As the ethical rules recognize, the same considerations regarding the disclosure of a former client’s confidential information are present where a paralegal, legal assistant, or other nonlawyer moves from one firm to another. For that reason, firms and attorneys can be subject to some of the same restrictions based on the prior work of a nonlawyer as they would for a conflicted lawyer.”
• “California courts have also weighed in on the issue. In Kirk v. First Am. Title Ins. Co., the California Court of Appeals observed that when a tainted non-attorney employee of a law firm, possessing confidential case information, moves to an opposing law firm, vicarious disqualification of the opposing law firm is not necessary if the employee is effectively screened… Kirk further applied the same rule to a non-retained expert, which is another area that can give rise to potential conflicts but often is overlooked.”
• “The majority of states that have addressed this issue have similarly found that appropriate ethics screens may avoid an imputed conflict of interest when a nonlawyer brings a conflict to a new firm. For example, in Hodge v. Urfa-Sexton, LP, the Georgia Supreme Court held that the screening of nonattorney staff ‘is a permissible method to protect confidences held by nonlawyer employees who change employment.’ 295 Ga. 136 (2014). The court explained that a nonattorney’s conflict of interest may be remedied if the law firm employing that nonattorney uses effective and appropriate screening measures and promptly discloses the conflict.”
• “Conflicts can be an important consideration prior to the actual hiring of nonattorney staff. Some firms use a written application that inquires about the candidate’s prior legal employment, relationships with attorneys, and legal experience. If the conflicts system reveals that the prospective nonattorney staff hire has worked for, has experience with or is related to matters involving clients of the firm, then the hiring firm can conduct further inquiry.”
• “Indeed, the definition of ‘screened’ in the California Rules of Professional Conduct refers to the “timely imposition of procedures” to protect against the disclosure of information, which can be easier to accomplish if the firm has knowledge of potential issues in advance of hiring.”
• “The comments to Rule 1.10 further suggest that the obligation to identify potential conflicts among nonlawyers and to implement screening measures is part of an attorney’s responsibilities in managing or supervising nonlawyers pursuant to Rule 5.3.”

“New ABA ethics opinion clarifies obligations for language access in lawyer-client relationships” —

• “Attorneys often must take affirmative steps to ensure that they can communicate effectively with clients with limited English proficiency or with those with noncognitive physical disabilities, such as a hearing or a speech impairment.”
• “This may require the lawyers to engage an interpreter, translator or other assistive or language-translation technology, according to an ethics opinion released Wednesday by the ABA’s Standing Committee on Ethics and Professional Responsibility.”
• “The bulk of the opinion explains that when confronted with clients with language barriers, lawyers must obtain a qualified, impartial interpreter or translator who can understood and explain the law and legal concepts in the language of the clients.”
• “Lawyers may use ‘a multilingual lawyer or nonlawyer staff member within the firm to facilitate communication with a client.'”
• “The opinion adds that sometimes a friend or family member of the clients may function as the interpreter. But in these instances, lawyers must take particular care to ensure that such a friend or family member is not biased by a personal interest.”
• “If lawyers cannot obtain such an interpreter or translator without incurring ‘an unreasonable financial burden’ on the attorneys or the clients, then the attorneys should either decline or withdraw from representation.”
• “Finally, the opinion explains that attorneys must be cognizant of ‘social and cultural differences that can affect a client’s understanding of legal advice, legal concepts, and other aspects of the representation.’ The lawyers cannot assume that an interpreter or translator understands these social and cultural differences simply because the person can interpret and knows the client’s language.”

“Eckert Can’t Dodge Conflict-Of-Interest Suit, Game Maker Says” —

• “A Georgia-based game machine maker has urged a Pennsylvania federal court to deny a partial motion to dismiss its amended complaint against its onetime law firm, Eckert Seamans Cherin & Mellott LLC, which it accuses of breaching a fiduciary duty by working both for and against the company in different jurisdictions.”
• “Pace-o-Matic Inc., which refers to itself as an amusement machine supplier, on Friday accused the Pittsburgh-based law firm of knowingly engaging in a conflict of interest by representing Greenwood Gaming & Entertainment Inc. — which does business as Parx Casino — in litigation against the game maker. It further alleges that Eckert falsely denied involvement in the litigation and ‘surreptitiously’ worked through Hawke McKeon & Sniscak LLP ‘to conceal its breaches of fiduciary duty.'”
• “Pace-o-Matic had hired Eckert Seamans to represent it in a lawsuit in Virginia in 2016, where the firm argued that Pace-o-Matic’s game machines required the use of skill and therefore weren’t illegal gambling machines. But in 2018, when Pace-o-Matic filed two lawsuits in Pennsylvania over the removal of its games, Eckert Seamans took the opposite position and argued in an amicus brief for the casino operator that Pace-o-Matic’s products were gambling machines and should be barred, the game maker says.”
• “In April, the court denied the law firm’s argument against Pace-o-Matic’s motion for a preliminary injunction as moot, saying that Eckert Seamans’ declarations that it had withdrawn from representing Parx Casino weren’t enough to guarantee that it wouldn’t resume that representation, likening it to ‘pinky promises.'”
• “Regarding Eckert’s motion to dismiss, Pace-o-Matic said the firm echoed arguments made in its failed motion for a preliminary injunction, specifically that declaratory relief was unavailable because the issue occurred in the past.”
• “Further, Pace-o-Matic asked the court to dismiss Eckert’s argument that punitive damages were not available because the amended complaint did not allege ‘outrageous’ conduct. The game maker argued that federal and Pennsylvania courts have consistently held that intentional misrepresentations and knowing breaches of fiduciary duty are sufficient to support a demand for punitive damages.”

“Kirkland, KWM on Evergrande Group’s ‘Lehman Scale’ Crisis” —

• “Top global law firms are already involved in the debt crisis surrounding China Evergrande Group, the real estate company whose unwieldy debt has prompted concern around the globe about China’s financial system.”
• “King & Wood Mallesons has been appointed by the Chinese government to investigate the financial indebtedness of the company, according to a Bloomberg report. Kirkland & Ellis has been engaged to represent a group of bondholders to advise it on the potential restructuring of Evergrande.”
• “According to Eversheds Sutherland debt restructuring partner Kingsley Ong, Evergrande now faces a myriad of legal issues, including how much time will creditors indulge in the company, claims from employees, applications for insolvency protection of on- and offshore assets, for starters. The long list of creditors will also need strong legal representation for claims.”
• “Many top law firms have previously acted for Evergrande. As recently as this past May, Baker McKenzie advised Evergrande on its US$1.36 billion sale of shares. Last December, Sidley Austin represented Evergrande subsidiary, Evergrande Property Services Group Ltd., on its US$1.4 billion Hong Kong initial public offering. Last August, Sidley also advised Evergrande on a US$3 billion strategic investment from 14 investors.”
• “The potential conflicts, given the long list of Evergrande creditors, most of whom are based in Asia, are far-reaching. Firms such as Clifford Chance and Linklaters have also declined to comment. Akin Gump Strauss Hauer & Feld, Latham & Watkins, Fangda Partners and Zhong Lun Law Firm all did not respond to requests for comment.”

“McGuireWoods Faces DQ Bid In BofA Foreclosure Bias Fight” —

• “Keith Thomas told the court on Friday that McGuireWoods is violating the state’s legal ethics rules by representing itself, Bank of America NA and mortgage database company Mortgage Electronic Registration Systems Inc. in the case. Thomas, who is representing himself, cited a 1987 Georgia Supreme Court case known as Cherry v. Coast House that found that attorneys who are parties to a case should not represent co-parties in a matter, according to Friday’s motion.”

Plenty being written about these new revelations. Have had an eye out for interesting law firm angles in: “Pandora Papers: An offshore data tsunami” —

• “The Pandora Papers investigation also reveals how banks and law firms work closely with offshore service providers to design complex corporate structures. The files show that providers don’t always know their customers, despite their legal obligation to take care not to do business with people who engage in questionable dealings.”
• “ICIJ analyzed 109 so-called suspicious activity reports to financial authorities filed by the Panamanian law firm Alemán, Cordero, Galindo & Lee, or Alcogal, and learned that 87 of the anti-money-laundering forms were written only after authorities or journalists had publicly identified the firm’s clients as involved in alleged wrongdoing.”
• “ICIJ also read through several thousand publicly available employees’ profiles and found out that more than 220 lawyers associated with the giant law firm Baker McKenzie in 35 countries had previously held government posts in agencies including justice departments, tax offices, the EU Commission, and offices of heads of state.”

“BILLIONS HIDDEN BEYOND REACH” —

• “Executives at a politically connected Panama City law firm, for example, mentioned in a 2016 email ‘numerous requests from clients to confirm the security of our information systems’ after the Panama Papers stories, according to documents. The executives scrapped plans to convert paper records to digital storage, hoping to reassure wary clients.”
• “Executives at a politically connected Panama City law firm, for example, mentioned in a 2016 email ‘numerous requests from clients to confirm the security of our information systems’ after the Panama Papers stories, according to documents. The executives scrapped plans to convert paper records to digital storage, hoping to reassure wary clients.”
• “The trove, dubbed the Pandora Papers, exceeds the dimensions of the leak that was at the center of the Panama Papers investigation five years ago. That data was drawn from a single law firm, but the new material encompasses records from 14 separate financial-services entities operating in countries and territories including Switzerland, Singapore, Cyprus, Belize and the British Virgin Islands.”
• “The revelations include more than $100 million spent by King Abdullah II of Jordan on luxury homes in Malibu, Calif., and other locations…. The disclosures come as Abdullah is facing political turmoil, including an alleged coup plot this year, in a kingdom that depends on billions of dollars in aid from the United States and other countries. DLA Piper, a law firm representing Abdullah, said that ‘any implication that there is something improper about [his] ownership of property through companies in offshore jurisdictions is categorically denied.”

Hat tip to an extended, longtime reader for sending in the following via electronic pony express: “131 Federal Judges Broke the Law by Hearing Cases Where They Had a Financial Interest” —

• “More than 130 federal judges have violated U.S. law and judicial ethics by overseeing court cases involving companies in which they or their family owned stock. A Wall Street Journal investigation found that judges have improperly failed to disqualify themselves from 685 court cases around the nation since 2010. The jurists were appointed by nearly every president from Lyndon Johnson to Donald Trump.”
• “About two-thirds of federal district judges disclosed holdings of individual stocks, and nearly one of every five who did heard at least one case involving those stocks. Alerted to the violations by the Journal, 56 of the judges have directed court clerks to notify parties in 329 lawsuits that they should have recused themselves. That means new judges might be assigned, potentially upending rulings.”
• “The Journal reviewed financial disclosure forms filed annually for 2010 through 2018 by roughly 700 federal judges who reported holding individual stocks of large companies, and then compared those holdings to tens of thousands of court dockets in civil cases. The same conflict rules apply to criminal cases, but large companies are rarely charged, and the Journal found no instances of judges holding shares of corporate criminal defendants in their courts. It found that 129 federal district judges and two federal appellate judges had at least one case in which a stock they or their family owned was a plaintiff or defendant.”
• “In New York, Judge Edgardo Ramos handled a suit between an Exxon Mobil Corp. unit and TIG Insurance Co. over a pollution claim while owning between $15,001 and $50,000 of Exxon stock, according to his financial disclosure form. He accepted an arbitration panel’s opinion that TIG should pay Exxon $25 million and added $8 million of interest to the tab.”
• “In Colorado, Judge Lewis Babcock oversaw a case involving a Comcast Corp. subsidiary, ruling in its favor, while he or his family held between $15,001 and $50,000 of Comcast stock.”
• “At an Ohio-based appeals court, Judge Julia Smith Gibbons wrote an opinion that favored Ford Motor Co. in a trademark dispute while her husband held stock in the auto maker. After she and the others on the three-judge appellate panel heard arguments but before they ruled, her husband’s financial adviser bought two chunks of Ford stock, each valued at up to $15,000, for his retirement account, according to her disclosure form.”
• “Judge Ramos, who oversaw the Exxon case, was unaware of his violation, said an official of the New York federal court, because his ‘recusal list’—a tally judges keep of parties they shouldn’t have in their courtrooms—listed only parent Exxon Mobil Corp. and not the unit, whose name includes the additional word ‘oil.’ The official said the court conflict-screening software relied on exact matches.”
• “‘I dropped the ball,’ Judge Babcock said when asked about the recusal violation. He blamed flawed internal procedures. ‘Thank you for helping me stay on my toes the way I’m supposed to,’ he said. A Comcast spokeswoman declined to comment.”
• “Judge Gibbons from the Ford trademark case, appointed to the appeals court by former President George W. Bush, said she had mistakenly believed holdings in her husband’s retirement account didn’t require her recusal. She later directed the clerk of the Sixth U.S. Circuit Court of Appeals to notify the parties of the violation and said that her husband has since told his financial adviser not to buy individual stocks. ‘I regret my misunderstanding, but I assure you it was an honest one,’ she said.”
• “In response to the Journal’s findings, the Administrative Office of the U.S. Courts said: ‘The Wall Street Journal’s report on instances where conflicts inadvertently were not identified before a case was resolved or transferred is troubling, and the Administrative Office is carefully reviewing the matter.’
• “It said the federal judiciary ‘takes very seriously its obligations to preclude any financial conflicts of interest’ and has taken steps, such as conflict-screening software and ethics training, to prevent violations. ‘We have in place a number of safeguards and are looking for ways to improve,’ the office said.”
• “In response to the Journal’s findings, the Administrative Office of the U.S. Courts said: ‘The Wall Street Journal’s report on instances where conflicts inadvertently were not identified before a case was resolved or transferred is troubling, and the Administrative Office is carefully reviewing the matter.’
• “It said the federal judiciary ‘takes very seriously its obligations to preclude any financial conflicts of interest’ and has taken steps, such as conflict-screening software and ethics training, to prevent violations. ‘We have in place a number of safeguards and are looking for ways to improve,’ the office said.”

“Judge Rodney Gilstrap Sets an Unwanted Record: Most Cases With Financial Conflicts” —

• “No federal judge in America has heard more patent-infringement lawsuits in the past decade than Rodney Gilstrap, who presides over a small courthouse in Marshall, Texas.”
• “He also holds another record: Judge Gilstrap has taken on 138 cases since 2011 that involved companies in which he or a family member had a financial interest, more than any other federal judge, a Wall Street Journal investigation shows.”
• “The companies included Microsoft Corp. (53 cases), Walmart Inc. (36 cases), Target Corp. (25 cases) and International Business Machines Corp. (9 cases).”
• “A 1974 federal law requires judges to disqualify themselves from cases if they, their spouse or minor children hold a financial interest in a plaintiff or defendant, including the interest of a beneficiary in assets held by a trust.”
• “Judge Gilstrap, the chief judge for the U.S. District Court for the Eastern District of Texas, also disclosed one of the largest holdings in a conflicted company. He oversaw a patent-infringement case against a Walt Disney Co. unit while he or his wife reported holding between $100,001 and $250,000 of Disney stock. The plaintiff later withdrew its claim.”
• “The 64-year-old Judge Gilstrap, one of America’s most prominent district judges, said he believed he didn’t need to recuse himself from some cases because they required little or no action on his part, and in other cases because the stocks were in a trust created for his wife without her stock-picking input. Legal-ethics experts disagree on both counts.”
• “‘Judge Gilstrap declined interview requests. ‘I take my obligations related to potential conflicts/recusals seriously,’ he said in one of seven emails to the Journal. ‘Throughout my judicial career, I have endeavored to comply with all such obligations, and I will continue to do so.'”
• “Beyond violating law and ethics, the judges’ handling of lawsuits filed by and against companies in which they have financial interests threatens the federal courts’ hard-earned and crucial reputation for fairness, impartiality and objectivity.”
• “An unusually large role in patent litigation has made the Eastern District of Texas a lightning rod for criticism from some academics, corporations and think tanks. These critics say its rules encourage patent holders to bring suits there because they are dispatched swiftly, often with quick settlement payouts to the plaintiffs. A 2016 article in the Southern California Law Review described how it said the court engaged in ‘forum selling,’ a pejorative twist on “forum shopping,” the practice of lawyers seeking out friendly legal venues.”