Covering the Front and Back Pages of the Newspaper
November 1, 2005
LAW: Smearing Judge Alito
Given the difficulty of persuading the American people that they would be justified in filibustering Samuel Alito based solely on his judicial philosophy, it's not surprising that some on the Left are looking to smear him instead with bogus ethical charges. Witness this latest attempt, from AmericaBlog:
Another ethically challenged Bush appointee according to the Washington Post:Three years ago Alito drew conflict-of-interest accusations after he upheld a lower court's dismissal of a lawsuit against the Vanguard Group. Alito had hundreds of thousands of dollars invested with the mutual fund company at the time. He denied doing anything improper but recused himself from further involvement in the case.
Supreme Court nominee Samuel J. Alito and Justice Antonin Scalia share more than just ideology; they also share a resistance to removing themselves from cases where they have a conflict of interest.
Now, my first reaction was that this was a case of economic illiteracy by these critics. After all, a mutual fund isn't like another company; mutual funds are managed by an investment advisor, and so an investor in the fund is more in the position of a client or customer of the advisor. Normally, if the investment advisor gets sued, therefore, it's of no direct concern to the fund investor, who has invested with rather than in the fund company.
I went and did some digging, though, and it turns out that the charge isn't illogical, just silly. The original Philly Inquirer story explains why the unusual nature of the Vanguard funds made this different from the usual claim against a mutual fund company:
Alito said he believed his Vanguard holdings did not constitute a conflict because they were investments in mutual funds. As such, he said, he was merely an investor in Vanguard, not an owner of the company.
Now, it appears that Judge Alito may well have forgotten that fact, as I did. But the notion that the case involved any kind of malfeasance is nonetheless absurd. Even if the plaintiff had won her case, the economic impact on Vanguard would be negligible, and certainly not enough to affect the judgment of a shareholder of one of its many funds; the case involved a dispute over $170,000, compared to hundreds of millions of dollars in the Vanguard funds, barely a blip on Vanguard's radar screen. And even leaving aside the fact that the recusal standard is not as clear-cut as the critics suggest, the case fit the classic profile of a losing battle where a plaintiff with no case on the merits tries to gin up something like an ethical complaint against the judge to keep the case going:
Maharaj contended in her suit that Vanguard had improperly released funds from her late husband's retirement account in 1998 to pay a Massachusetts judgment. Vanguard said it was ordered by a Massachusetts judge to release the money.
Acting as her own lawyer, Maharaj, 48, has spent the last seven years, since her husband's death in 1996, battling unsuccessfully in the courts in Philadelphia and Massachusetts.
The article goes on to note that the litigation initially arose from a business dispute involving Maharaj's husband and a Massachusetts court's conclusion that the husband had fraudulently transferred assets to the couple's Vanguard account to avoid paying a judgment. The lower court decision notes that the Massachusetts court had enjoined Maharaj from further litigation. The United States Court of Appeals for the First Circuit had upheld an order compelling Maharaj to pay attorneys' fees as far back as 1997. After Judge Alito recused himself in an excess of caution, the plaintiff lost again before the new panel. In short, the ethics complaint falls under the heading of "grasping at straws".
Nobody's perfect, and judges do make small oversights. But Alito had no actual conflict of interest - the amount of money involved, in proportion to the size of the Vanguard Funds' holdings generally, meant that the case could not have affected a Vanguard investor, regardless of how large or small the investor's stake in Vanguard Funds was. Nor was it unreasonable for him to act as if Vanguard was covered by the general policy of the federal courts regarding mutual funds, although this assumption turned out to be incorrect. Nor, as it turned out, was there any merit whatsoever to the underlying lawsuit, brought by a litigant who'd spent years trying to avoid paying a legitimate judgment. In short, the critics are all wet.
UPDATE: The Washington Post says Alito had been asked about Vanguard issues 12 years earlier at his hearing, and promised to recuse himself, and that the White House ascribes the non-recusal to a failure to flag the case on the Third Circuit's computerized conflicts system. I still fail to see why this is anything but an honest and very minor mistake, given the fact that this was a routine slam-dunk case with no possibility of affecting Alito's finances.