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Judges keep quiet about conflicts
State Supreme Court justices rule on scores
of cases in which they have a financial stake
By GREG B. SMITH and BOB PORT
DAILY NEWS STAFF WRITERS
The Supreme Court building in Manhattan.
Justice Herman Cahn
Justice Carla Moskowitz
Justice Helen Freedman
One-third of state Supreme Court justices who hear Manhattan's big-money civil lawsuits have failed to disclose their personal conflicts of interest in recent cases, a Daily News investigation has found.
A dozen judges ruled in favor of companies in which they, or their families, owned stock.
Others did not disclose connections to former law partners, expert witnesses, or their own personal lawyers appearing before them -- all possible violations of state law and judicial ethics.
The News findings are based on financial disclosures from 2000 through 2002 for New York County judges compared with computer records for all 46,826 civil cases they heard.
The News tracked down parties in 101 cases to confirm that 16 out of 47 judges who hear commercial civil disputes had not disclosed a potential conflict.
Told what The News had learned, state Chief Administrative Judge Jonathan Lippman said jurists are obligated to avoid anything that might cast doubt on their impartiality.
But he said, "Despite their huge case-loads, judges in New York County are overwhelmingly adhering to among the most stringent ethics rules in the country."
Informed that a judge's personal interest could have tainted their case, most lawyers shied away from denouncing the judges involved. But a few were shocked.
"Aren't we assuming that the people making these decisions are totally unbiased?" asked lawyer Daniel Solin, who filed suit against the Salomon Smith Barney brokerage before Justice Herman Cahn.
"That's what we assume -- that's the foundation of our judicial system," said Solin.
Cahn maintained a Salomon Smith Barney margin loan while ruling in three lawsuits involving the firm.
In a 2002 case, he rejected a suit filed by Solin on behalf of a 60-year-old Manhattan woman, who charged Salomon misled her into investing $75,000 in Worldcom just as its value plummeted in an accounting scandal.
Cahn ordered her to take her claim to arbitration, which Solin argued was biased in favor of Wall Street firms. He charged that the arbitration clause in the investment contract had been breached.
Cahn never mentioned his margin loan account, which enables him to borrow $60,000 to $100,000 from the firm for investments.
The case is on appeal. Cahn was unapologetic.
"Most of my cases are fact-based and I follow the law," he said. "If I'm wrong, the Appellate Division lets me know." Similarly, Justice Edward Lehner defended his handling of a 2001 case involving American Express, though he did not reveal his wife owned 200 shares in the firm.
"I can't believe anybody may want me to recuse because I own a couple of hundred shares of a company," said Lehner, who ruled in favor of Amex. "Maybe they would."
While Lehner's wife's Amex shares represent a minuscule interest in the firm, the public has no way of knowing the extent of a judge's holdings. Disclosure forms available to the public censor the number of stock shares and their value.
Some judges acknowledged their mistakes and vowed to change.
"It has not been at the forefront of my attention," said Justice Paula Omansky, who failed to disclose conflicts in 20 cases cited by The News. "Certainly, disclosure is a legitimate and valid requirement for judges."
Of the 20 cases in which Omansky admitted she failed to disclose relevant stock investments, some were settled before she played a significant role and some were dismissed.
In nine cases she ruled in favor of a party in which she owned stock.
In 2000, for example, Salomon Smith Barney sued a stockbroker who took a job at a competitor after handling $16 million worth of Salomon accounts.
Omansky issued a temporary restraining order that prevented the broker from working with former clients.
Omansky owned stock in Salomon Smith Barney.
In 2001, a man sued Johnson & Johnson claiming Propulsid, a drug used to treat heartburn, contributed to the sudden death of his college-age daughter from heart failure.
The case is pending before Omansky, who owns stock in Johnson & Johnson.
"The next time that case comes before me," Omansky said, "I'm definitely going to disclose it."
Justice Shirley Kornreich, facing election to her second 10-year term on the bench this year, said she may have missed such conflicts in 11 cases.
Kornreich vowed that she and her husband will sell all their stock and buy mutual funds, which are exempt from conflict-of-interest rules.
"My reputation is more important," she said. "I have chosen to sell my small amounts of stock rather than have to deal with the onus of following what stock I own on each and every case."
Judge Karla Moskowitz recalled that lawyers in a Citibank case years ago advised her the bank had no connection to Citigroup, in which her husband owned stock.
For years she heard Citibank cases. Citigroup is a holding company that owns Citibank.
"I have since learned that that advice was incorrect, and I am troubled by any appearance of conflict," she said. "No one has questioned my impartiality.
"My husband has divested himself of the Citigroup stock so I can avoid any possible issues of conflict in the future," said Moskowitz, who is president of the National Association of Women Judges.
New York's court rules say judges must excuse themselves from cases if they have any financial interest, "however small."
That includes relationships with lawyers, especially if they are former law partners or personal counsel.
Justice Charles Ramos named his high school chum, attorney Michael Miller, to a foreclosure on a luxury condo. Miller collected rent -- and took a percentage of interest and fees. Through November 1997, Ramos okayed $176,000 in payments to his friend.
Two years later, Miller provided the judge with free legal representation when Ramos and his wife obtained three parking spaces in a garage near their upper Manhattan apartment. A Dec. 21, 1999, deed lists Miller as their attorney.
When the arrangement came to light, Miller told a court inspector general he could not recall charging Ramos a fee.
Ramos is now on the board of directors of the New York County Lawyers Association, of which Miller is president.
Miller did not return calls seeking comment. Ramos said he told the buyer in the real estate transaction to pay Miller and that he no longer awards Miller court appointments.
Other potential conflicts were uncovered in The News investigation.
Judge Alice Schlesinger accepted a slip-and-fall case where a doctor sued a Chinese restaurant renting the ground floor of the judge's midtown co-op building.
Schlesinger, a stockholder in the co-op like any other resident, benefits from the rent the co-op collects. In this case both the restaurant and the co-op owners were sued. One issue was how much of each's insurance covered the mishap.
Schlesinger's assistant said the judge herself never met with the attorneys. A law clerk handled all preliminary business. Lawyers say they settled before any issue reached the judge.
Their defense
Justice Paula Omansky
Case: Alexis Garraway vs. Verizon Wireless, 2002
An actor who can't afford his own lawyer claims Verizon Wireless failed to pay him for his work as an extra in a TV commercial filmed in Washington Square. Omansky dismisses the actor's do-it-yourself complaint for failing to properly cite the law.
Conflict of interest: Omansky's husband owns shares of Verizon Communications, but the judge fails to disclose his stock ownership in court.
Comment: "I think your inquiry has put us on notice that there is or could be a problem," Omansky said.
Justice Karla Moskowitz
Case: DeMicco Brothers Inc., vs. Consolidated Edison and Empire City Subway Co. Ltd. a Verizon company, 2002
A Queens contractor sues Verizon and other utilities, saying he could not finish a street repair on time because utility cables blocked his equipment. Moskowitz shoots down the suit, citing a "legitimate business reason" not to move the wires. "It was as if we were intruders in this matter rather than legitimate litigants, as in, 'How dare we bother these big people,'" said attorney Frederick Levine. An appeal is pending.
Conflict of interest: Moskowitz's husband owned shares in Verizon, but the judge failed to disclose his ownership in court.
Comment: "Over the last five years, I have heard over 1,500 multiparty cases," Moskowitz said. "No one has questioned my impartiality."
Justice Herman Cahn
Case: Salomon Smith Barney vs. Mendel Kaff, 2001
A private broker fails to repay his $22,000 margin loan from Salomon Smith Barney and the brokerage firm sues. They ultimately settle the case.
Conflict of interest: Cahn has a margin loan with Salomon himself but does not disclose this in court.
Comment: Cahn said he does not believe he violated any ethical rules.
Justice Shirley Kornreich
Case: Brian Coke vs. Citibank, 2001
A Jamaican developer with an office in Brooklyn, acting without an attorney, sues Citibank, alleging the bank has mangled numerous charges to his account processed through an ATM in Kingston, Jamaica, that he uses to pay his workers. The developer settles his case after an unfavorable ruling from Kornreich.
Conflict of interest: Kornreich owns shares of Citigroup but fails to disclose her stock ownership in court.
Comment: Kornreich said she does not believe she violated any ethical rules. "The volume of work is crushing," she said.
Justice Helen Freedman
Case: Joseph Maira vs. Dr. Lance Austen, 2001
A local couple sues a doctor and drug distributor Merck-Medco, a pharmacy chain owned by Merck Corp., over the diabetes drug Rezulin. Freedman dismisses the case against Merck-Medco, ruling that "the pharmacy that sold the drug or filled the prescription cannot be held liable."
Conflict of interest: Freedman owned shares of Merck Corp. but failed to disclose her stock ownership in court.
Comment: "I must have missed it," Freedman said, explaining she did not notice Merck was a defendant. Months later, she sold all her stock. "It makes my life easier," she said.
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JUDGES TAKE STOCK OF HOLDINGS - AND SELL
NEW YORK POST
By BRAD HAMILTON
February 8, 2004 -- Several Manhattan Supreme Court judges have dumped their stocks after conflict-of-interest questions were raised amid an FBI corruption probe, courthouse sources said.
The federal investigation, which focuses on embattled Justice Marylin Diamond, but includes other jurists, is looking into whether judges doled out favorable rulings to friends and firms in which they owned a stake.
Diamond and her husband, former Supreme Court Justice Franklin Weissberg, have owned more than 40 stocks and bonds -- in companies including JP Morgan Chase, Verizon, Time Warner and other firms whose cases she's ruled on, according to Diamond's financial disclosure forms.
But she and other judges have been selling their holdings in the wake of stories about the matter, sources said.
The Post reported last month that the FBI has pored over records and interviewed at least 30 litigants to determine if undisclosed personal interests swayed the judges' decisions.
Under state court rules, judges must disclose all their personal holdings worth more than $1,000 -- including stocks, real estate and retirement accounts -- along with the financial interests of their spouses and minor children.
They are required to be fully informed about their finances and disclose in court any ties they have to the parties appearing before them, the rules say.
Manhattan Supreme Court Judge Shirley Kornreich, who in an interview with The Post denied being aware of the stocks she had listed on her disclosure forms, said she was going to unload her holdings.
"I told my broker to sell it all and put everything in a mutual fund," she said.
One of Diamond's lawyers, Harold Tyler, told The Post last year that her stocks weren't selected by her but by a broker -- and that the judge wasn't aware of which stocks he'd picked.
Chief Judge Judith Kaye will address the issue of corruption in the courts in her state-of-the-judiciary speech tomorrow, one court source said.