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Documents:  Judge Took Black/Bank Matter Second Time,
Supporters’ Defense of Troubled Nominee Undercut

February 20, 2002

CONTACT: Doug Kendall 202-296-6889

WASHINGTON - Newly available documents undercut claims by supporters of federal Judge D. Brooks Smith that the controversial nominee to the Third Circuit exercised an "abundance of caution" in avoiding illegal stock conflicts in a historical financial fraud case.

Smith came under fire today when newspaper accounts indicated he ruled in a high-profile 1997 fraud case involving a bank in which he held large amounts of stock, then failed to notify the public about his conflicts.  The judge cast two rulings that advanced the bank's interests.

Smith's defenders say he took himself off the case when he realized after a month of actively ruling on the case that his wife worked at the bank involved in the case. However, new public documents provided today to the Senate Judiciary Committee (available free to the public at show that Smith chose to again involve himself in the controversy by presiding for an additional five months over a related case involving the same bank and a massive school district fraud scheme.

In 1997, in a case called SEC v. Black, Judge D. Brooks Smith issued several important and apparently illegal rulings in the heavily covered case.   Federal judges must know their investments and avoid ruling in cases in which their financial interests are at stake.
In the words of preeminent legal ethics expert Steve Lubet of Northwestern University School of Law, Judge Smith's rulings constitute "an inexplicable lapse, because the facts are clear and the law is clear and there isn't any question that [Smith] is disqualified, but he continued to sit on this case for 30 days."

Yesterday, a senior Bush Administration official, (who asked to remain anonymous), defended Judge Smith's actions as "proper" and described Judge Smith as having exercised "an abundance of caution," because he ultimately disqualified himself from the case.

Judge Smith's rulings in the 1999 case, USA v. Black, came two years after Judge Smith had recognized that he was disqualified in the earlier, related, SEC v. Black.  Smith still issued several orders including a detailed trial scheduling order.  By this point, Mid-State Bank, ­where Judge Smith's wife was a high-ranking officer and in which the Smiths owned a large amount of stock, ­had been sued in state and federal fraud cases, including a case brought by former U.S. Attorney General and former Pennsylvania Governor Richard Thornburgh for its role in the fraud.  Nonetheless, Smith sat on the case and disqualified himself only after a party filed a motion seeking his recusal.

In disqualifying himself, Judge Smith again relied entirely on his wife's status as a Vice President of Mid-States Bank, failing again to disclose his large financial stake in the Bank.  Smith also admitted in the recusal statement that he considered recusal at the outset of U.S. v. Black, yet failed even to inform the parties of the basis for seeking his recusal.   

Judge Smith blatantly violated the judicial ethical rule that "a judge should disclose on the record information the parties or their lawyers might consider relevant to the issue of disqualification, even if the judge believes there is no real basis for disqualification.”

According to Community Rights Counsel Executive Director Doug Kendall, "It’s hard to fathom how Judge Smith could sit on the second case for even a day.   It clearly violates federal recusal law and raises serious questions about Judge Smith's fitness for a seat on the appellate bench.”


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