As for the 131 federal judges mentioned in the Wall Street Journal report, judges holding stocks in companies affected by cases before them are required to recuse themselves. It’s likely that some judges aren’t watching their portfolios or their spouses’ portfolios or aren’t aware that many larger publicly traded companies have multiple subsidiaries. The identify of those subsidiaries is unknown to the many investors who don’t read the parent company’s annual report.
Some judges may think that, when the occasion arises, they can sell a stock so they can participate in a case. Not so fast. If the judge has any inside information from the court about how the case might come out, selling the stock while in possession of that information could expose the judge to prosecution under federal criminal insider trading laws. The judge who has a conflict of interest in a case may be stuck with a stock by the time the conflict is noticeable.
Matters get worse on the Supreme Court. At least three justices — Chief Justice John Roberts and Associate Justices Stephen Breyer and Samuel Alito —, and all three have recused themselves from cases because of their stock holdings. The problem is, unlike on the lower federal courts, there are no replacement justices to take their place. A case could be decided by eight justices or seven justices because of recusals.
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