Judge owned stock in firms he ruled on JUDICIARY

U.S. District Judge Manuel Real U.S. District Judge Manuel Real Photo: Virginia Lee Hunter, California Watch Photo: Virginia Lee Hunter, California Watch Image 1 of / 1 Caption Close Judge owned stock in firms he ruled on 1 / 1 Back to Gallery

A federal judge has issued three key rulings over a four-year period that favored companies in which he owned stock, a California Watch analysis has found.

Measures are in place to prevent judges from violating federal conflict-of-interest laws. But Judge Manuel Real, a 46-year veteran of the bench appointed by President Lyndon Johnson, appears to have skirted those safeguards, records and interviews show.

Judges are supposed to disclose everything from their investments to their attendance at expenses-paid seminars. When a financial conflict arises, no matter how small, they are required to step aside, by federal law and the Code of Conduct for United States Judges.

"This is what we call a 'bright line' rule, meaning that it gives clear and unambiguous guidance to judges and the public," said Steven Lubet, a Northwestern University law professor who specializes in judicial ethics.

But in at least three cases before the federal District Court for the Central District of California in Los Angeles, Real did not recuse himself:

-- In 2008, he awarded $746,027 in damages and fees to Microsoft Corp. in a copyright infringement case against a computer sales and repair company. At the time, Real held Microsoft stock worth between $15,001 and $50,000, according to his financial disclosures.

-- In another 2008 case involving a contract dispute between Atlanta Cancer Care and biotech giant Amgen, Real dismissed the suit against Amgen. Real held between $15,001 and $50,000 of Amgen stock, too, which he transferred to someone else shortly after the case was appealed.

-- The following year, Real dismissed a lawsuit against Verizon. After the plaintiff in the case appealed the decision to the Ninth U.S. Circuit Court of Appeals, Real bought Verizon stock worth $15,001 to $50,000. The appeals court upheld Real's dismissal, but returned the case to Real for further deliberation. The parties reached an agreement in February 2011, and Real dismissed the case.

In all three cases, the company's stock rose at least a dollar per share during the two months following Real's ruling or dismissal.

Plaintiff upset

"When there is money involved, it is human nature to protect your own interests," said John Schneider, a plaintiff in the Verizon case and a retired electrical contractor. "I would say he looked out for his financial interests before he looked out for mine. Judges should be above reproach."

Real did not respond to repeated interview requests.

There is no indication that Real had a financial incentive in making his decisions, and many factors affect stock prices. But legal experts consulted by California Watch said Real's rulings were, at a minimum, good news for the companies.

A judge who repeatedly fails to withdraw from cases can face sanctions ranging from a private reprimand to suspension from hearing cases. Beyond that, a judge can be referred to Congress for an impeachment hearing.

"If a judge is willfully disregarding the disqualification rules, there is precedent for saying he should be disciplined," said Charles Geyh, an expert in judicial ethics who teaches law at Indiana University. "In addition, where judges are not diligent in keeping track of their financial conflicts, where there is a pattern of incompetence, they could also be sanctioned."

Software checks

Federal judges are required to report not only their financial holdings to the federal court system, but also those of their spouses. They are supposed to use conflict-checking software that cross-references their stock holdings against their courtroom dockets, automatically flagging potential problems.

But technology is no panacea. Courts generally afford judges autonomy in who does the checks and how often.

"It is up to each judge to actually run these reports," said Molly Dwyer, clerk of court of the Ninth U.S. Circuit Court of Appeals. "We are not policing the judges. ... We are accepting them at their word."

Real, 88, was appointed to the bench in 1966. He earns $174,000 a year and like other federal trial court judges enjoys what has effectively become life tenure. One of his more notable decisions was a 1970 order to use mandatory busing to desegregate Pasadena schools.

Among judicial ethicists as well as attorneys who have argued cases before him, Real is known as an iconoclast, famous for a 1984 courtroom spat with Hustler magazine Publisher Larry Flynt during which Real ordered Flynt gagged and handcuffed to his wheelchair.

Past reprimands

Years later, the Ninth U.S. Circuit Court of Appeals issued an opinion in which it criticized Real for his accounting of $33.8 million in disputed assets of Philippine dictator Ferdinand Marcos.

Real faced a potential impeachment inquiry by Congress in 2006 over misconduct allegations, congressional documents show. He was accused of showing favoritism in a bankruptcy case toward a woman whose probation he supervised. In the end, Congress did not pursue the impeachment.