Written by Jonathan Stempel
- Reuters, New York City -A U.S. appeals court overturned the dismissal of an antitrust case in which ten major banks were accused of overcharging investors for corporate bonds worth billions of dollars. The court reasoned that the trial judge ought to have stepped aside because his spouse had stock in one of the banks.
- While U.S. District Judge Lewis Liman “almost certainly unknowingly” had a conflict of interest, the 2nd U.S. Circuit Court of Appeals in Manhattan held that his partiality may be fairly questioned due to his wife’s ownership of Bank of America shares creating an “appearance of impropriety.”
- The unsigned ruling on Tuesday was made almost three years after a Wall Street Journal investigation revealed that more than 130 federal judges have been supervising cases involving corporations in which they or family members held shares since 2010, in violation of both federal law and judicial ethics.
- Bond buyers have claimed that since 2006, banks including Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase (NYSE: JPM), Morgan Stanley, NatWest, and Wells Fargo have been overcharging them for “odd-lot” trades, which account for the majority of corporate bond transactions and are valued at less than $1 million.
- Liman, a former president Donald Trump appointment, was given the case in April 2020, and, three months after his wife sold $15,000 worth of Bank of America shares, it was dismissed with prejudice in October 2021.
- Parties were made aware of the conflict by a court clerk in February 2022, who said that the judge’s “ownership of stock neither affected nor impacted his decisions.”
- Investors challenged the decision, and it was unclear when Liman was made aware of the conflict. The case was then moved to U.S. District Judge Valerie Caproni.
- The banks claimed that recusal or reopening the case was not necessary since Liman was unable to identify his conflict.
- However, the appeals court determined that there was a “legitimate risk” that such infractions would erode public trust in the legal system.
- Chief Justice John Roberts of the United States Supreme Court emphasized in his 2021 annual report on the judiciary that judges must exercise caution when it comes to financial conflicts.
- Said investor’s attorney George Zelcs: “We look forward to litigating the case on the merits before Judge Caproni.”
A Bank of America representative refused to comment.
- The case in question is 2nd U.S. Circuit Court of Appeals, No. 21-2905, Litovich v. Bank of America Corp (NYSE: BAC) et al.
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