Federal judge says it's 'almost insane' to assert wife's stock holdings affected his decisions

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Updated: A federal judge in Virginia said in a recusal hearing last week that it was “almost insane” to assert that his wife’s $22,000 holding in Amazon.com Inc. stock affected his decisions in a case involving the company.

Law.com has coverage of the hearing in which U.S. District Judge Liam O’Grady of the Eastern District of Virginia considered a recusal motion filed by three defendants in an Amazon lawsuit. O’Grady has ruled for Amazon on several pretrial motions; he disclosed his wife’s stock holding in a Dec. 14 notice.

The Amazon suit alleges that two former employees who sought bids for real estate deals took kickbacks from a real estate developer.

O’Grady said in the notice that he learned Nov. 23 that his wife held $22,000 of Amazon stock in a brokerage account, rather than a mutual fund, as he had understood. If the stock had been in a mutual fund, recusal wouldn’t have been required, the Wall Street Journal reported in a Dec. 30 article. O’Grady’s wife sold the shares Dec. 2, after the newspaper contacted the judge about the conflict.

During the Jan. 6 hearing, O’Grady pushed back against arguments that the conflict raised questions about his impartiality, according to Law.com.

“The idea that I would steer this case in Amazon’s favor because I felt that my wife’s $22,000 investment in Amazon’s stock would be at risk if I didn’t is almost insane,” he said.

O’Grady said Amazon “is a multibillion-dollar company, and this case in no way could ever affect the stock price in Amazon’s stock, and nothing I could ever do in this case would have an impact. So the underlying basis for my impartiality being questioned is 100% flawed.”

He added that he had denied summary judgment to Amazon in a separate suit, which “clearly demonstrates my neutrality in handling cases involving Amazon.”

Despite O’Grady’s defense of his rulings, he recused himself in a Jan. 10 order, Law.com reports.

O’Grady said he thinks that recusal isn’t required because there is no evidence of partiality. But he said he was stepping aside because the perception of fair administration of justice is of the highest importance.

The Wall Street Journal reported in September that, over the last decade, 131 federal judges failed to recuse themselves in cases involving companies in which they or their families owned stock. Since then, the newspaper found that five more judges heard cases despite financial conflicts. The newspaper also identified additional suits in which the 131 judges had financial conflicts requiring recusal.

The Wall Street Journal found 65 additional cases handled by O’Grady despite his wife’s stock investments in plaintiff or defendant corporations, including the Bank of America Corp., the International Business Machines Corp. and Verizon Communications Inc.

According to the Wall Street Journal, O’Grady “is by all accounts a skilled and accomplished lawyer who has sat on the federal bench since 2007, handling major espionage, drug and government-leak cases, as well as complex patent litigation. Yet by his own admission he misunderstood how federal law applied to his situation. He said he mistakenly believed his wife’s account was a mutual fund, which doesn’t require judges to disqualify themselves.”

Updated Jan. 11 at 10:32 a.m. to report that O’Grady decided to recuse himself.

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