This court was convened by order of the Chief Judge of the Court of Appeals of the State of New York, dated September 6, 1977, pursuant to article VI of the New York State Constitution, to investigate, hear, and determine matters concerning respondent in respect of the sales, purchases and exchange of New York City notes and Municipal Assistance Corporation ("MAC”) bonds owned by him.
The court appointed Harold R. Tyler, Jr., as its counsel, assisted by Rudolph W. Giuliani, Richard Parsons and Theodore Van Itallie. Respondent has been represented in these proceedings by Wachtell, Lipton, Rosen & Katz and.Charles S. Desmond.
On October 12, 1977 the court denied a motion by counsel for respondent for an order rescinding the appointment of Mr. Tyler as counsel to conduct the proceedings. The order and decision of the court are attached as Appendix I.
At the request of this court and its counsel, the Chief Judge filed a supplemental order, dated November 16, 1977, expanding the scope of the inquiry to include, inter alia, investigation of allegations that respondent obtained the advice and assistance of experts on the law and others in proceedings before
the Court of Appeals in a manner not consistent with the relevant Rules and Canons governing judicial conduct.
Counsel to the court has in close consultation with the court conducted a thorough investigation of all the allegations against respondent, has examined respondent and his law clerk, Perry S. Reich, under oath, has interviewed all the material witnesses, and has furnished to the court not only the results of his investigation, but also the benefit of his advice and judgment. Respondent has furnished information and records concerning his financial transactions. The court has reviewed written submissions from counsel for respondent. It has also allowed respondent and his attorneys to appear before it to present orally all facts and arguments they deemed relevant.
We observe that, unlike other Courts on the Judiciary which have been convened, our duty, in accordance with the order of the Chief Judge, is first to investigate and to ascertain the underlying facts. Not until there appears probable cause for removal or other discipline may the court proceed with the preferral of charges. We are acutely aware of our dual function and have pursued our obligation with due regard for the responsibilities inherent in both processes.
No essential issues of fact have developed from the inquiry. Respondent and his counsel have been given every opportunity to present their arguments with respect to those facts in the same manner as would have eventuated if a lengthy hearing had been had. Respondent and his counsel have waived the necessity of the service of charges and public hearing, which might have involved notice to the Governor, to the Legislature, and respondent’s suspension from office (NY Const, art VI, § 22, subds e, i). The letter of waiver reads as follows: -
"During the course of the proceedings of January 16, 1978, there was discussion as to whether * * * the Court would be empowered to issue a report reviewing the investigation that has been made and articulating the reasons for its determination. * * *
"It was my thought at the time that I had indicated such a waiver [of confidentiality] on behalf of Judge Fuchsberg. * * * questions had been raised as to whether my wording of such intended waiver of confidentiality had been conditional or otherwise insufficient to permit the Court the latitude of
rendering a report of this nature, should the Court be so inclined.
"To obviate any misunderstanding which may have resulted from my choice of language on the January 16 record, I wish hereby formally to set forth for the Court that the waiver to permit the Court to render such a report is intended to be entirely unconditional. This waiver is being expressed with Judge Fuchsberg’s full approval.” Under the circumstances, the court has resolved to adopt the procedure of issuing this report of the facts and the conclusions it draws from those facts.
The issue now before this court is whether the facts justify the removal or other discipline of respondent for cause (22 NYCRR 580.3 [b]). Respondent’s conduct must be measured against the relevant Rules and Canons[1] "in the general moral and ethical standards expected of judicial officers by the community.” (Sarisohn v Appellate Div., Second Dept, Supreme Ct. of State of N. Y., 265 F Supp 455 , 458; Bartlett v Flynn, 50 AD2d 401 , 404, app dsmd 39 NY2d 942 .)
I
We consider first respondent’s ownership, purchase and sale of New York City notes and MAC bonds and his participation in cases arguably affecting the value of those holdings.
Prior to taking office as an Associate Judge of the Court of Appeals, respondent had purchased large amounts of New York City short-term notes. On January 1, 1975, the date he commenced his Court of Appeals term, respondent held $3.4 million in par value of such notes. After taking office, respondent redeemed notes as they matured and continued to make substantial investments in securities of the City and State of New York. For the most part, these investments were in
short-term revenue anticipation and bond anticipation notes, maturing within one year of date of issue.
On July 2, 1975, respondent held $2,900,000 par value in New York City short-term notes. Between July 2, 1975 and December 28, 1976, respondent did not increase his holdings of New York City notes, but he continued to redeem notes as they matured. Such redemptions continued until November 14, 1975, on which date respondent held $1,500,000 par value of short-term city notes.
November 14, 1975 was the effective date of the Emergency Moratorium Act for the City of New York ("Moratorium Act”), which imposed a three-year "freeze” on redemption of, or actions to enforce short-term city obligations issued between November 14, 1974 and November 13, 1975. The entire $1,500,000 par value of notes respondent held on the effective date of the Moratorium Act had been issued during the previous year and were thus "frozen” by the act.
As a holder of "frozen” New York City notes, respondent was presented with two options. One was to exchange before December 29, 1975 his frozen notes (which under the act reduced the interest on the notes after maturity to 6%) for an equivalent par value of 8% MAC bonds due in 1986. The other was to hold the frozen notes. Respondent decided to exercise both options. In December, 1975, he exchanged $880,000 par value of frozen New York City notes for an equivalent par value of MAC bonds; he retained the remaining $620,000 of frozen notes.
On December 19, 1975, respondent undertook one further transaction with respect to his note holdings, namely, he sold $600,000 of 8.75% city notes due March 12, 1976 at 59.875, and purchased on the same day $600,000 of 7.55% city notes due February 13, 1976 at 59.625. Both the notes sold and those purchased were subject to the moratorium. The object of such sale and purchase, as stated by respondent, was to "record the depreciation” for tax purposes.
From December, 1975, through mid-December, 1976, respondent made no other purchases, sales or exchanges of city notes. On November 19, 1976, the Court of Appeals rendered its decision in Flushing Nat. Bank v Municipal Assistance Corp. for City of N. Y. ( 40 NY2d 731 ) holding the Moratorium Act unconstitutional. It was not until February 8, 1977 that the remittitur, specifying the time schedule for the repayment
of the formerly frozen notes, was handed down by the court ( 40 NY2d 1094 ).
During the period between the "main decision” in Flushing Nat. Bank v MAC (supra) on November 19, 1976 and the decision on the remittitur on February 8, 1977, respondent made two additional purchases of New York City notes. On December 28, 1976 he purchased $835,000 par value of New York City short-term bond and revenue anticipation notes. On February 4, 1977, he purchased an additional $200,000 par value of New York City short-term bond anticipation notes. The purchases on both dates were of city notes that were subject to the Moratorium Act, and were effected at prices below par value. The December 28 purchases of $835,000 par value of notes was effected at a principal cost of $771,241 or 92% of par value. The February 4 purchase of $200,000 par value of notes was effected at a principal cost of $189,900 or 95% of par value.
During the period in which respondent’s city note holdings were smallest—$620,000 between December, 1975 and December, 1976—he made sizable investments in New York State short-term notes, as well as his already mentioned exchange for $880,000 in MAC bonds. At the middle of this period, in June, 1976, he owned approximately $3 million in State notes. Between the date respondent commenced his Court of Appeals term and May 31, 1977, his holdings of New York City and/or New York State securities averaged, in aggregate amount, approximately $3,000,000.
New York City’s fiscal crisis and the legislation intended to remedy it provoked a significant amount of litigation. Among such cases decided by the Court of Appeals were: Wein v City of New York ( 36 NY2d 610 , May 27, 1975, "Wein I”), upholding the legislation which created the Stabilization Reserve Corporation; Sgaglione v Levitt ( 37 NY2d 507 , Sept. 29, 1975), holding unconstitutional a statutory provision mandating investment of certain State retirement system funds in MAC bonds; Wein v State of New York ( 39 NY2d 136 , March 23, 1976, "Wein II”), upholding the constitutionality of State appropriations to New York City and MAC; Flushing Nat. Bank v MAC ( 40 NY2d 731 , supra, Nov. 19, 1976), holding unconstitutional the "moratorium” on repayment of New York City short-term notes; Wein v Carey ( 41 NY2d 498 , March 31, 1977), rejecting a constitutional attack on a portion
of State short-term notes issued in the spring of 1976; and Quirk v Municipal Assistance Corp. for City of N. Y. ( 41 NY2d 644 , April 26, 1977), upholding the validity of the diversion to MAC of certain sales and use tax revenues.[2]
Respondent’s transactions in New York City, New York State and MAC securities during the pendency of the "fiscal crisis cases” in the Court of Appeals and inferior courts raise difficult questions of propriety. There are certain specific transactions, and certain cases, discussed later, which raise particular problems. But in focusing upon them we do not ignore the broader issue of the propriety of respondent’s purchase of New York City and State securities during a period in which cases involving difficult questions of law and requiring the drawing of subtle distinctions regarding the basic financial status of the city and State were frequently before the Court of Appeals.
A number of factors must be considered in arriving at the resolution of this broad issue of propriety. Among them is the fact that respondent had significant investments in New York City securities well before he became a member of the Court of Appeals. Many of his purchases after his term commenced were in fact "roll-overs”, i.e., reinvestment of the proceeds of redeemed notes into new notes. Also relevant is the fact that the Code of Judicial Conduct sets a higher "disqualification threshold” for government, as opposed to other, securities.[3] It must also be noted that in two of the "fiscal crisis cases” (Flushing Nat. Bank v MAC, 40 NY2d 731 , supra; Quirk v MAC, 41 NY2d 644 , supra) respondent disqualified himself and did not participate. In a third, Sgaglione v Levitt (supra), he voted against his apparent financial interest. In Wein v
State of New York ( 39 NY2d 136 , supra, ”Wein II”) respondent claims that an announcement was made from the bench that one of the Judges held city and MAC securities and that if anyone objected he would withdraw; and in Wein v Carey ( 41 NY2d 498 , supra), respondent held none of the State notes at issue at the time of argument and decision. Finally, in Boston Stock Exch. v State Tax Comm. ( 42 NY2d 1008 , supra), the possible effect on the value of respondent’s holdings was indirect and insubstantial.
Notwithstanding these facts, respondent’s transactions in city and State securities during the pendency of the "fiscal crisis cases” were ill-advised. Respondent’s holdings were, largely, short-term notes. They matured in a maximum of 12 months, and, since many were purchased after date of issue, they frequently matured in a shorter period. Thus, maintenance of respondent’s holdings required frequent "roll-overs.” The fact that it was necessary to "roll-over” these funds to keep them in short-term notes created frequent opportunities for re-examination of his investment policy. Respondent should have taken advantage of these opportunities to divert his assets elsewhere. Although we find that his failure to do so did not violate the letter of Canons 5C(1) and 5C(3), we conclude that his conduct violated the spirit of those and other Canons, most particularly Canon 2A.[4]
Respondent should have recognized that under the circumstances of the fiscal crisis and his position as a member of the Court of Appeals, city and State securities were inappropriate investments. It quickly became apparent that the fiscal crisis had provoked a stream of litigation and that some of these cases would reach the Court of Appeals. We construe the Canons not to have exacted the liquidation of all his holdings of New York State and city securities as soon as the course of events made it plain that cases affecting the value of those holdings would come before the Court of Appeals, but concern for avoiding the appearance of impropriety should have con
strained respondent from investing new funds in New York City and State securities and should have motivated him to discontinue the practice of "rolling-over” New York governmental securities.
While we are troubled generally by the maintenance of respondent’s city and State note holdings, there are several specific occurrences which raise particular problems and must be considered in greater detail.
As we have noted, respondent owned short-term city notes that were effectively frozen by the "Moratorium Act”. On November 14, 1975, the effective date of that act, he held $1.5 million in city notes. In December, 1975, respondent, pursuant to an offer made to all holders of frozen notes, exchanged $880,000 of such notes for an equivalent par value of long-term MAC bonds. This exchange created a direct conflict in cases challenging MAC and thus compounded respondent’s existing conflicts in participating in "fiscal crisis” litigation. The fact that Wein v State of New York ( 39 NY2d 136 , supra, "Wein II”), a case concerned with a major appropriation to MAC, was argued before the court only one month after this exchange, underscores the insensitivity of the respondent’s action. That the exchange may have been a prudent investment decision does not relieve the respondent of his responsibility under the Canons to handle his financial affairs in such a way as to minimize possible areas of conflict. We conclude that this exchange violated Canons 5C(1) and 5C(3) of the Code of Judicial Conduct.
Respondent’s sale and repurchase of $600,000 in frozen notes in December, 1975, described above, also invites scrutiny. This sale and repurchase have been misperceived in articles appearing in the press as an outright purchase of frozen notes and have elicited critical comment. Unlike the $880,000 MAC exchange, this transaction did not add a new type of security to respondent’s holdings and thus did not expand the categories of cases presenting direct conflicts. Nonetheless, we find that, given the context of the fiscal crisis and respondent’s position as a member of New York State’s highest tribunal, the propriety of any transaction in these frozen notes may be legitimately questioned. The fact that a particular action may be prudent from a business standpoint must never distract a Judge from his obligation to promote public confidence in judicial institutions. (See Canon 2A.)
Respondent’s purchases of city notes during the period after the Court of Appeals held the Moratorium Act unconstitutional in Flushing Nat. Bank v MAC ( 40 NY2d 731 , supra), but before settlement of the remittitur in the same case, raise some serious questions. The facts show that he purchased $835,000 par value on December 28, 1976, and $200,000 par value on February 4, 1977, of precisely the notes at issue in the Flushing case and the then pending remittitur.
The Court of Appeals decided Flushing Nat. Bank v MAC on November 19, 1976. That decision, holding the Moratorium Act unconstitutional, was a clear statement of the noteholders’ rights to repayment of principal. However, the decision left open the period of time to be allowed for the city to make such repayment. In the words of the court, "[plaintiffs] are not entitled immediately to extraordinary or any particular judicial measures unnecessarily disruptive of the city’s delicate financial and economic balance.” (40 NY2d, at p 741). Accordingly, the court directed that the time schedule for repayment be determined in a remittitur, which was issued by the court on February 8, 1977 ( 40 NY2d 1094 ).
As it turned out, the remittitur did not have a measurable impact on the market price of the notes formerly subject to the Moratorium Act. It is clear, however, that the remittitur, by imposing an accelerated repayment schedule, or alternatively, replacing the legislative moratorium with a judicial one, could have had an effect on the price.
Respondent had disqualified himself from participation in the Flushing main decision and remittitur; and we find that he did not make these purchases on the basis of "inside” information as to the action the Court of Appeals would take. Nonetheless, these purchases could reasonably create the impression, despite the absence of a factual basis for such impression, that respondent was purchasing securities on the basis of some information or advantage not generally available to the public. If the six Judges of the Court of Appeals who participated in the Flushing decision could not have made these purchases, then respondent should likewise not have made these purchases. Conduct which, "[n]o matter how innocent * * * unnecessarily and unwisely put a burden of explanation and justification not only on [a Judge] but on the judiciary of which he is an officer”, is justly subject to criticism (Matter of Suglia, 36 AD2d 326 , 328). "[T]he appearance
of impropriety and the perception by the public of special privilege and advantage must be avoided.” (Matter of Feinberg, 39 NY2d [a], [v]). We thus conclude that respondent’s purchases of New York City notes while the remittitur was still pending before the court on which he sits created the appearance of impropriety in violation of Canon 2A.
We are also obliged to consider respondent’s failure to disqualify himself in Wein v City of New York ("Wein I”) and Wein v State of New York ("Wein II”). We are cognizant that the issue of disqualification is "one of the most difficult and delicate problems in judicial administration.” (American Cyan-amid Co. v Federal Trade Comm., 363 F2d 757 , 763, cert den 394 US 920 .) However, we detect in Canon 3C a new stress on the objective factor of the appearance of impartiality. (See Note, Disqualification of Judge and Justices in the Federal Courts, 86 Harv L Rev 736 ; House Report No. 93-1453 on new US Code, tit 28, § 455, in 1974 US Code Congressional and Administrative News, p 6351.)
Wein I (which was argued in the Court of Appeals on May 2, 1975) concerned the constitutional validity of a statutory scheme authorizing the Stabilization Reserve Corporation ("SRC”) to issue up to $520 million in bonds and notes and pay the proceeds into the city’s general fund. Respondent was given notice of the arguable impact of the case on the validity of his city note holdings by (1) the allegations of the complaint that the Comptroller of the City of New York had announced on January 27, 1975 that the city proposed to sell $700 million of bonds and notes ($290 million in city revenue anticipation notes, $141 million of city bonds, and $260 million of SRC notes by the SRC), and that the amount of borrowing power under article VIII (§ 4) of the State Constitution was insufficient to permit such a sale; (2) plaintiffs argument that these short-term notes, because they were rolled over year after year, were permanent indebtedness and not a temporary debt which could be excluded from indebtedness within the meaning of the Constitution; and (3) the claim in the amicus brief of the Financial Community Liaison Group that "the re-establishment of access to the public market [for city securities] * * * is essential to the survival of the City.”
At the time of his participation in this case, respondent owned approximately $3.8 million par value in New York City notes. These are "government securities” and thus appear to
bring into play the higher "disqualification threshold” set out in Canon 3C(3)(c)(iv), i.e., require disqualification only if the outcome of the proceeding could substantially affect the value of the government securities. That provision, however, should not divert attention from the standard set forth in Canon 3C(1), which mandates disqualification whenever "impartiality might reasonably be questioned”. As a holder of a substantial amount of city notes, respondent should have recognized that his impartiality in the proceeding was open to legitimate question.
A procedure is provided under the Canons to eliminate the appearance of partiality. Under Canon 3D (22NYCRR 33.3 [d]) a Judge may disclose the basis of his conflict on the record and if the parties and lawyers all agree in writing that such conflict is insubstantial, the Judge may participate in the proceeding.[5] Respondent’s failure either to disqualify himself from this case or utilize this procedure constituted a violation of Canon 3C(1). We reach this conclusion without questioning respondent’s belief in his own impartiality, or, indeed, the fact of his impartiality in contributing to the decision of this case. Our concern, rather, is with "[t]he guiding consideration * * * that the administration of justice should reasonably appear to be disinterested as well as be so in fact.” (Public Utilities Comm, v Poliak, 343 US 451 , 467; see, also, Matter of Dodge & Stevenson Mfg. Co. 77 NY 101 , 110; cf. Commonwealth Corp. v Casualty Co., 393 US 145 , 150.)
Wein II involved a constitutional attack on legislation providing for appropriations of $250 million and $500 million to the City of New York and MAC, respectively, from the State Local Assistance Fund. The funds at issue had already been advanced to the city and MAC in the fall of 1975, at the height of the city’s fiscal crisis. Thus, while a decision holding the appropriations unconstitutional could not have altered the fact that the funds had been disbursed and utilized, reports in the press and arguments made to the Court of Appeals suggest that such a decision would have affected both the financial stability of the city and the marketability of its obligations (see New York Times, March 24, 1976; amicus brief of certain New York financial institutions). At the time of the
argument and decision in Wein II, respondent held $880,000 par value in MAC bonds, $620,000 par value in city notes and approximately $800,000 par value of State notes.
The case presented a significant conflict of interest given respondent’s city, State and MAC holdings. Indeed, respondent testified that he recognized such conflict and planned to disqualify himself from the case. As it turned out, he elected to participate. It is claimed that his participation was preceded by an announcement in open court by the Chief Judge that an unnamed Court of Appeals Judge owned some city and MAC securities and that if counsel objected the Judge would disqualify himself. However, the Judge involved was not named and the amounts of his holdings were not specified. Even assuming that respondent, through the Chief Judge, made some effort to inform the litigants in Wein II of his conflict of interest, his failure to disqualify himself was a violation of Canon 3C(1). We note that if he had identified himself and stated the amounts of his holdings, that action would have assured that the parties’ waiver of disqualification was both knowing and intelligent.
II
During the course of the inquiry into respondent’s financial dealings and his participation in certain cases raising arguable conflicts, allegations were received that respondent had consulted with law professors in respect of proceedings before the Court of Appeals.
The facts are not in dispute. Respondent consulted with law professors with regard to at least 12 different cases pending before the Court of Appeals. In certain of the instances the consultation amounted to a telephone conversation with a professor in which new developments in the relevant area of law were discussed. In other instances respondent sent the briefs in the case to the professor and asked him to prepare and submit a memorandum containing the latest authorities. In three instances, respondent sought and obtained from law professors draft opinions. Substantial portions of the language of the opinions eventually published by respondent in these cases were taken from the draft opinions which had been submitted by the law professors. Finally, in at least one, and possibly two, cases, respondent forwarded an unpublished draft opinion of another Judge on the Court of Appeals to a
law professor with whom he was consulting without notifying the Judge in question.[6]
Canon 3A(4)[7] provides a specific procedure for obtaining the advice of an outside expert. It prohibits a Judge from initiating or considering any ex parte communications concerning a pending matter; however, it permits him to obtain the advice of a "disinterested expert on the law” if he notifies the parties of the identity of the expert, the substance of his advice, and affords them reasonable opportunity to respond.
Concededly, in all of the cases and instances mentioned, respondent did not notify members of the court, the parties, or their counsel, that he was seeking outside consultation. There was no opportunity, therefore, for the parties or their attorneys to comment upon the expert rendering the advice or the substance of the advice rendered as is required by the Canon and the Rule. Thus, it is clear that respondent’s consultations constituted violations of Canon 3A(4) and 22 NYCRR 33.3 (a) (4). (See Informal Opinion 1346, Nov. 26, 1975, ABA Committee on Ethics and Professional Responsibility.)
There is no evidence, however, that such violations were willful. Respondent has testified he was unaware of the Canon’s existence, as have the law professors with whom he consulted. We note, in this connection, that the Canon was adopted relatively recently. It was promulgated by the American Bar Association in 1972, adopted by the New York State Bar Association in 1973, and adopted by the Administrative Board of the Judicial Conference in 1974. Canon 3A(4) has no clear antecedent in the prior Canons of Judicial Ethics originally promulgated by the ABA in 1924. Moreover, we are also aware that prior to the adoption of Canon 3A(4), some Judges in other jurisdictions apparently engaged in the practice of consulting law professors in connection with pending cases without notifying the parties. (See, e.g., the discussion of
Judge Clark’s and Frank’s consultations with Professors Moore and Noss at Yale University in Schick, Judicial Relations on the Second Circuit, 1941-1951, 44 NYU L Rev 939 , 941-947.)
We do not condemn the judicial practice of consulting with law professors and other experts on the law.[8] When properly safeguarded, it can assist in achieving thorough and well-researched opinions. (See Justice Traynor’s plea for assistance from disinterested scholars appearing in amici curiae in Traynor, Badlands in an Appellate Judge’s Realm of Reason, 7 Utah L Rev 157 , 170.) The interests of all parties are protected if, in each case where an expert is consulted, the
parties are informed of his identity, the substance of his advice and allowed an opportunity to respond. Failure to observe such safeguards creates the possibility of unfairness. As stated by Justice Denecke of the Oregon Supreme Court: "Ex parte conversations or correspondence with experts, law teachers or otherwise, is unfair and can be misleading. The facts given may be incomplete or inaccurate, the problem can be incorrectly stated or other matters can be incorrectly stated.” (Denecke, The Judiciary Needs Your Help, Teachers, 22 Journal of Legal Education 197, 203.) Moreover it cannot be assumed that legal and other experts will give only objective advice. They may have developed philosophical loyalties which aifect the advice that they give; as practicing attorneys they may have cases involving the same problems on which they are rendering advice; as consultants they may owe allegiance to business or other- interests that could benefit from acceptance by courts of their viewpoints. Unless the parties are given the opportunity to respond to the expert and the substance of his advice, his prejudices and preconceptions may go unchallenged. In short, the practice of judicial consultation with experts without notice to the parties is fraught with dangers. Notice to the parties, as mandated by Canon 3A(4), largely eliminates these dangers while preserving the beneficial aspects of obtaining such outside help.
In view of the fact that respondent’s violations of Canon 3A(4) were not willful, that he has indicated his intention to comply strictly with it in the future, and that the Canon constitutes a relatively recent limitation on a practice which has occurred in the past on other appellate courts, we are inclined not to castigate respondent for those consultations in and of themselves which, although violations of the Canon, amounted to little more than informal solicitations for current thinking in a particular area of the law. It is important, however, to emphasize that even this conduct was violative of the Canon and that the prescribed procedure of the Canon should be followed, if such solicitations of advice appear necessary.
However, respondent’s actions went beyond merely asking for advice from the law professors in question. On three occasions substantial portions of the language of opinions published under respondent’s name were taken from drafts
submitted by the law professors. Also, admittedly on one and possibily on two occasions, he provided professors with unpublished draft opinions of other Court of Appeals Judges without notifying the Judges in question.
We find these actions by respondent most disturbing. We have no reason to doubt respondent’s testimony that in each of these three cases he arrived at his result independently and that he employed the language submitted to him only because it correctly reflected his own views. Our concern is with the appearance that such a practice creates. The substantial incorporation of outside experts’ language in a Judge’s opinion suggests, without more, that the expert is influencing the decision-making process. To that extent such a practice impairs the public’s confidence in the independence and integrity of the judiciary and thereby violates Canon 2A. The practice also violates Canon 2B[9] (22 NYCRR 33.2 [c]) by conveying to the law professors in question and allowing them to convey to others the impression that they are in a special position to influence respondent.
We are mindful that law clerks often contribute substantially to the preparation of opinions. There are, however, important distinctions between a law clerk and an outside expert. The law clerk is a sworn court employee (22 NYCRR 25.23). He is a recognized figure of the judicial institution, familiar to the litigants and fully exposed to the submissions of both parties to the adversarial proceeding. We cannot accept respondent’s explanation that he looked upon the law professors he consulted as "ad hoc” law clerks.
We are equally disturbed by respondent’s breach of the court’s confidentiality. No Canon specifically prohibits transmission to noncourt personnel of unpublished, draft opinions formulated by Judges and circulated as part of the collective decision-making process. However, the adverse impact of transmitting such draft opinions to those outside the court system is so obvious that condemnation of it need not be based on an express Canon or Rule. Confidentiality is crucial to the success of many types of deliberative processes, but it is of the utmost importance for the proper functioning of a collegial court. (See Nixon v Sirica, 487 F2d 700 , 740-742.)
CONCLUSION
Although we conclude that respondent’s purchases and exchanges of New York governmental securities, his participation in cases potentially affecting the value of these securities, and his consultations with outside experts in some respects violate the Rules and Canons as previously described, we believe that the preferral of charges seeking his removal from office is not warranted. We have carefully examined all of the relevant circumstances: and, aside from minor details, there can be no question or dispute about what occurred. However, conduct authorizing the removal of a judicial officer has been defined as that "justifying 'the finding that his future retention of office is inconsistent with the fair and proper administration of justice.’ ” (Matter of Kane v Rudich, 256 App Div 586 , 587; Matter of Barlow, 141 App Div 640 , 643.) "Removal of any public officer, especially one elected by the voters, is an extreme penalty.” (Matter of Sobel, 8 NY2d [a], [j].)
In our view, the evidence does not support a determination that the respondent is unfit to continue in judicial office. The record establishes his inattentiveness to and, at times, a cavalier disregard for the necessity of avoiding the appearance of impropriety; yet the same record does not show deliberately fraudulent conduct, willful violations of Rules and Canons, or corrupt actions inspired by financial interest. We cannot say that conduct presenting the appearance of impropriety is never sufficient for removal. Nonetheless, in the circumstances of this case, the absence of any evidence of fraudulent or corrupt intent persuades us not to prefer charges seeking the respondent’s removal. The absence of controverted operative facts which require sifting by a trial process also argues against preferral of charges.
We conclude, therefore, that these proceedings should be terminated, with the observation that the record discloses behavior that properly subjects respondent to censure and disapproval, and with the hope that the foregoing discussion of respondent’s actions, in light of the applicable standards of judicial conduct, will assist in assuring that respondent and others similarly situated will be attentive to the Rules and Canons and act in a way that does not cast the slightest doubt on the independence, impartiality, and integrity of the judiciary.
While I agree thoroughly with the majority opinion, my reason for separate concurrence is that certain observations should be made so that "he that runs may read.” Comment in the news media has been that extensive and that imprecise as to require full and detailed explanation of what we are doing—and why. At the outset, I must say that the use of the word "censure” in each of the other writings as descriptive of what is visited upon respondent may possibly be misleading. Assuming censure to be the functional equivalent of severe disapproval, we are of the opinion that, were we to go through the whole panoply of procedure as suggested by Justice Simons, it would be a useless charade terminating in no sanction more severe than censure.
The majority opinion has explained why we terminate the proceeding without going further. Justice Suozzi has added light on the subject. Our dissenting brother Simons has his own views, based, it seems to me, upon a misapprehension of our function, and this impels me to add a few words of comment on what appears to be an assertion that, by termination now, we rush to judgment without proper evaluation of the evidence to ascertain the facts. There are no issues of fact in this case, as may easily be ascertained by examination of the dissent itself. The dissent displays a full and complete knowledge on the part of the dissenter of what those facts are. Of course, "respondent’s conduct has been evaluated to a very substantial degree on the basis of his own evidence”, but virtually all that evidence constituted admissions of the conduct we have criticized. Every item of evidence upon which the dissent would base formal charges came from respondent’s own mouth as primary or corroborative testimony, whether elicited by our investigative counsel in interviews or in answer to this court’s questions during the court’s closed session with respondent and his counsel. Nothing more would be ascertained at a formal hearing upon charges except perhaps cumulatively.
Justice Suozzi has aptly described our unique and unprecedented assignment by the Chief Judge as, preliminarily, an investigative court. Without belaboring the point, I add only that, by doing what we do here, we have exercised a discretionary function ordinarily performed by a Grand Jury in voting "no bill”. The only difference is that we have in effect added a "presentment” explaining our reasons. This is en
tirely appropriate in the circumstances of publicity which surrounded the inception of this case and the designation of this court.
I believe that a so-called rollover of securities, the propriety of the ownership of which may be questionable, is not improper per se. A rollover of investment in a criticizable situation neither adds to nor subtracts from the justification for the criticism. If done to avoid sacrificial loss because of a depressed market, the basic question to be answered is not changed: was the investment proper to begin with in the circumstances which obtained at the time of original purchase? A Judge who has innocently invested in securities which, at the time of purchase, were free of any foreseeable taint, should not be forced to dispose of them at a sacrifice. Whether he should disqualify himself later in a case involving those securities, for a reason not originally foreseen, is an entirely different question.
We believe that we have considered all relevant facets of the financial transactions here examined and that the inferences we have drawn and the conclusions we have arrived at are sound. If there are disagreements amongst us, they are of small consequence and our conclusion is the same, i.e., charges are not called for.
The same is true as to the matter of the assistance provided by the law professors. What was done was improper; the Canons say so clearly, and we have also said so in no uncertain terms. Whether charges should be preferred, and respondent suspended from his position for 60 days, and a trial take place which would tell us no more than we now know, involves a different question, the answer to which is clear. The proceeding should be terminated.
I concur with the majority in the decision to terminate this proceeding with a public report and to publicly censure the respondent in lieu of formal charges and a public hearing. I agree that (1) his purchase of $1,035,000 of short-term city notes at issue in Flushing II after that decision was announced but before the payment schedule was decided, (2) his participation in Wein I when he had substantial holdings in short-term city notes, (3) his participation in Wein II given his ownership of similar notes and MAC bonds, and (4) his consultations ex parte with law professors
warrant the public disapproval implicit in this disciplinary sanction. However, my evaluations of the respondent’s financial transactions measured against the pertinent Canons and Rules governing judicial conduct do not coincide with my colleagues with regard to (1) the "broad issue of the propriety” of his ownership and the purchase of city and State securities from the date that he became a member of the Court of Appeals; (2) the simultaneous sale and repurchase on December 19, 1975, of $600,000 of New York City short-term notes which were frozen by the Moratorium Act to record a tax loss, and (3) the exchange before December 29, 1975 of $880,000 par value of similar notes for an equivalent amount of long-term MAC bonds.
I file this separate opinion in order (1) to demonstrate the propriety of the procedure which has been adopted, and (2) to state the reasons for my disagreement with my colleagues. My dissenting colleague claims that the procedure adopted does not satisfy "constitutional obligations” and does not protect respondent’s "right to defend himself’. It must initially be noted that this Court on the Judiciary was convened by the Chief Judge and given the extraordinary authority "to investigate” as well as "to hear and determine.” In so doing, the Chief Judge sought to achieve "maximum expedition and fairness to the public, the Court of Appeals, and each of its members, including Judge Fuchsberg.” By this directive the Chief Judge also explicitly left the "evaluation of the conduct involved and resolution of the issues, and other relevant or pertinent matters * * * to the investigation and determination” of this court.
Unlike any other Court on the Judiciary in the history of this State, this court, before reaching the point when charges would ordinarily be filed or the proceeding terminated for lack of "probable cause”, has been through all of the processes involved in the discharge of its four separate functions which may be compared to those of investigator, prosecutor, Grand Jury and trial court in a criminal proceeding. During the past seven months of our deliberations, our functions have of necessity and understandably, overlapped. In the case of every other Court on the Judiciary, the function of trial court could not be pursued until formal charges were served on the respondent. In those cases, the procedure of serving charges is a necessary mechanism to advise a respondent of the alleged
improprieties and to provide him with the opportunity, which due process requires, to answer or move against the charges and to defend against them. In this case the respondent has been amply apprised of the allegations and given full opportunity, both by written and oral submissions under oath, to answer the allegations and to defend himself.
Formal charges are also required where removal of the Judge is sought in order (1) to give notice of the charges to the Governor and the Legislature as required by the Constitution, and (2) to invoke the pertinent provisions by which a Judge may be suspended pending determination of the disciplinary proceeding. Clearly if removal were deemed the only appropriate action here, formal charges would have to precede a final disposition.
A public hearing is necessary in those cases where the matter cannot be disposed of prior to the hearing due to unresolved factual issues. In the Matter of Sobel (8 NY2d [a], [h]), and Matter of Feinberg, (39 NY2d [a], [u]) sanctions were imposed without the necessity of a hearing because no factual issues existed.
Therefore, unless the formality of charges and a public hearing are required for these stated purposes, there is no need to prolong this proceeding and to follow the protracted and cumbersome procedure urged by our dissenting colleague.
Obviously he does not share our confidence that we have, ourselves, and in consultation with our able, conscientious and independent counsel and his staff inquired into and ascertained all of the underlying and essential facts encompassed within the several areas of our investigation. It is, therefore, significant that the dissent makes no reference to a single fact essential to the conclusion of this proceeding which is in dispute, or was not available during this seven-month inquiry, or must await a trial, or otherwise precludes a determination as to the misconduct and the appropriate disciplinary sanction forthwith. I know of no such fact or facts or impediment to a simultaneous statement of the respondent’s conduct which violates the Canons and Rules governing judicial conduct and precludes the imposition of an appropriate disciplinary sanction short of removal. The unequivocal opinions and firm judgments implicit in my colleague’s dissent have been formed without the benefit of these additional but presumably crucial facts. They point up the inconsistency of his questioning of the
procedure adopted and his concern for the respondent’s right to defend himself.
The answer to the assertion that we have not heard or questioned a single witness under oath is a clear and obvious one. The respondent and his law assistant were examined under oath by counsel and their respective transcripts were provided • to each member of the court. A review of the proceedings of other Courts on the Judiciary establishes the fact that proof upon which other courts haved based their final determinations had initially been heard by a hearing officer designated by the court to hear and report, and not by the court directly in the first instance. (Matter of Waltemade, 37 NY2d [a]-[nn].)
Additionally, the respondent appeared before the court with his counsel. I am unaware of any impediment which existed at that time to a thorough examination of his acts and motives. If in fact, as the dissent suggests, an unanswered question existed as to why the respondent "felt obliged to limit his investment options * * * to tax exempt securities of New York”, that question could have been easily resolved at that time.
I submit therefore that, absent any issue of fact, there is no need to have a public hearing. Inasmuch as the majority of this court does not deem removal of the respondent from his public position as an appropriate sanction, formal charges to initiate the notice process and to temporarily suspend the respondent pending the hearing and its conclusion in compliance with the pertinent constitutional provisions are of no avail here.
I have no doubt that procedure is a "relevant” or "pertinent” matter left to the determination of the court by the order of the Chief Judge which convened it and that, therefore, the procedure adopted is constitutionally permissible. Equally important, it achieves the "maximum expedition and fairness to the public, the Court of Appeals, and each of its members, including Judge Fuchsberg” contemplated by the Chief Judge when he convened this court in such an unprecedented manner. Accordingly I concur with the procedure that is being followed with the observation that the conduct which forms the basis for this public discipline would not require the more severe sanction of suspension or removal if formal charges preceded the termination of this proceeding. Similarly
this conduct is no less objectionable or worthy of less disapproval because we do not adhere to the procedure of formal charges and a public hearing.
The majority of my colleagues have criticized two specific transactions, to wit: (1) the purchase of $600,000 of frozen short-term notes on December 19, 1975, and (2) the exchange of $880,000 of similar notes for MAC bonds between December 16 and December 29, 1975. I disagree with their evaluations as to each of these transactions.
On the effective date of the Moratorium Act (L 1975, ch 874), respondent had $1,500,000 of unredeemed city short-term notes which were frozen by the act for a period of three years. This act provided that it would be effective "only as to those holders of city notes who are first offered an opportunity to exchange their short-term obligations for long-term bonds of the Municipal Assistance Corporation”. As to those holders who refused the offer, they would continue to receive interest as provided in the notes until maturity, and 6% after maturity during the term of the three-year moratorium.
The prospectus for this offering provided a tax incentive that "A person who exchanges City Notes for 1975 Bonds will realize gain or loss measured by any difference between his adjusted basis for his City Notes and the fair market value of the 1975 Bonds which such person receives.” When the offer expired on December 10, 1975, respondent had taken no action. Subsequently, on December 16, 1975, the offer was extended to December 29, 1975. During this period, and conceivably after Special Term had held the moratorium constitutional, on December 23, 1975 (Flushing Nat. Bank v Municipal Assistance Corp. for City of N. Y., 84 Mise 2d 976), he exercised his option and exchanged $880,000 in notes for MAC bonds.
The $600,000 transaction was the one which was described in the press as the Judge’s "earliest and largest” purchase of notes at a time when they were selling at 59.6 on the dollar and small investors were selling or converting their city notes for fear that the moratorium would preclude a full return. It was as to this transaction that a profit of $240,250 was reported.
It is now clear that respondent’s purchase was not a new purchase in order to profit from the depressed state of these securities. Rather, it was part of a dual transaction consisting
of the sale of $600,000 of frozen notes purchased prior to the time the moratorium was contemplated, much less became effective, and the simultaneous repurchase of an equivalent amount with at least two features that differed from the notes sold, in order to qualify for a tax "exchange” and to derive the benefit of an end-of-year tax loss which is a recognized and legitimate tax device engaged in by many knowledgeable investors. It was not, as reported, the respondent’s "earliest and largest” purchase, and the loss on the notes sold offset the gain on the notes purchased which were redeemed after the moratorium was lifted.
It has been suggested that for Federal tax purposes an "exchange” of notes is effected by an extension of the maturity date under the Moratorium Act as though new notes had been issued (Journal of Taxation, July, 1976, pp 20-23). Therefore, it can be argued that there was no reason for respondent to have recorded the tax loss in the manner that he did. The argument is fallacious for two reasons: (1) The Internal Revenue Service has not recognized or approved such an exchange; (2) the tax consequences would accrue only on the maturity date of the notes, which in this instance would not have been until March 12, 1976. Thus, the possibility of this deferred tax benefit should not cast the decision to record a tax loss at the end of 1975 in any less favorable light.
I submit that the perception of special privilege or the appearance of impropriety was created not by the transaction itself, but rather by the incomplete report due to the limited information available at the time. The claim filed by respondent after the moratorium was lifted would not have disclosed the simultaneous sale of an equivalent amount of notes at 59.875 on the dollar. Therefore, the incompleteness of the disclosure and the resulting misperception are understandable. So there was not, in the huge profit disclosed publicly. Such profit as there was did not exceed $1,500, if that.
I cannot believe, given the complete facts as to this transaction, that a fair-minded person or public would have perceived it as an instance of special privilege or judicial impropriety. Since the burden of explanation resulted from the incompleteness of the report and not from the transaction itself, and the areas of respondent’s existing conflicts were not compounded, the stamp of disapproval affixed to it by my colleagues is neither warranted nor justified. His conflicts with respect to
his participation in any case involving short-term notes, as in Flushing Nat. Bank v MAC (supra) or MAC bonds, as in Wein II, were the same as if he had taken no action whatsoever. For this reason, I cannot join with my colleagues in their evaluation of this transaction.
The same reasoning applies to respondent’s exercise of the option to exchange $880,000 in frozen notes for MAC bonds. Again, it was not a case of respondent making a new purchase which expanded the areas of his disqualification. His short-term notes in an amount of $1,500,000, or the combined holdings of $620,000 in notes and $880,000 in MAC bonds would have required his disqualification in short-term note or MAC bond cases in any event.
I deem the charge of impropriety with respect to this transaction by my colleagues as an unreasonable and strained application of Canons 5C(1) and 5C(3).
In addition to the specific findings of judicial misconduct with respect to these two transactions, the purchase of $1,035,-000 short-term notes after the decision and before the remittitur in Flushing II and his participation in Wein I and Wein II, my colleagues go further and find misconduct which they have encompassed in their discussion of "the broader issue of propriety” of respondent’s purchase of New York State and city securities.
According to the majority, the transactions in city and State securities were inappropriate for a member of the Court of Appeals because "It quickly became apparent that the fiscal crisis had provoked a stream of litigation and that some of these cases would reach the Court of Appeals.” The dissent takes a similar approach by stating that respondent continued "to trade, going in and out of the market in these various securities while crucial financial matters relating to them were being debated before the Court on which he sat.”
I must differ with my colleagues on this issue because, in my opinion, they have fashioned with the benefit of hindsight a series of violations of the Canons and Rules where none was reasonably perceptible at the time these transactions were made.
My colleagues arrive at this critical view of these transactions by the simple device of juxtaposing these transactions against the 11 cases that came before the Court of Appeals
related to the "fiscal crisis” within the same time span of these transactions. The thrust of their critical findings is that the earlier cases in 1975 and 1976 generated by the fiscal crisis, given the issues involved, alerted the respondent to the "stream” of cases which actually reached the Court of Appeals, and that he should have reasonably foreseen the conflicts to which his financial transactions exposed him. They contend that compliance with the standards of the Canons and Rules governing judicial conduct required him to cease his investments in tax-exempt city and State securities.
I submit that this approach to their findings of judicial misconduct within this "broader issue” does not withstand close scrutiny. None of the fiscal crisis cases of a substantive nature which reached the Court of Appeals in 1975 and 1976 can even now be viewed as the prelude to the subsequent cases which, taken together, constitute the "stream” precipitated by the city’s fiscal crisis.
When the respondent became a member of the Court of Appeals, he had substantial holdings in city short-term notes. Despite the well-publicized fiscal crisis of the city, these short-term notes did not begin their sharp downward trend until late July or thereafter. Until then his roll overs or new purchases of similar notes between January and July, 1975 were prudent investments for him. My colleagues’ doubts about investment judgment, which are implicit in the discussion of this issue, are not material or relevant to their evaluation of his judicial conduct, and should not play any part in their consideration of the broader issue of the propriety of these transactions.
The first of these cases was Wein v City of New York (Wein I) ( 36 NY2d 610 ), decided in May, 1975. There the Court of Appeals upheld the constitutionality of a statutory scheme authorizing the Stabilization Reserve Corporation to issue up to $520,000,000 in bonds and notes and pay over the proceeds into the city’s general fund.
The legislation which was the subject of this litigation (L 1974, ch 594) authorized the sale of SRC bonds and notes, which were not secured by the city’s full faith and credit, to assist the city in providing essential services during the fiscal years 1973-1974 and 1974-1975. When this litigation came before the Court of Appeals in May, 1975, the fiscal years for
which these funds were intended were about to expire, and as yet no such notes had been issued or sold.
This is the case which my dissenting colleague states "illuminated the problem and suggested the need to attempt to reduce his holdings.” In explanation and justification of his participation in this case which forms the basis of a finding of judicial impropriety herein, the respondent stated that he "did not deem that there was any nexus between City notes and the outcome of the case. The central issue was whether the SRC was an impermissible device to avoid City debt limits. * * * Any possible effect on my full faith and credit short term City notes was most remote.”
On the appeal the financial community argued that an adverse decision which would preclude the issuance of these notes and bonds would have dire consequences for the financial stability of the city and State. In upholding this device the impediment to the issuance of these securities was removed. Nonetheless, the bonds and notes which it was argued would prevent financial disaster for the city were never issued thereafter.
Even though the violation resulting from this participation in Wein I is not negated by the subsequent events, they confirmed the validity of his perception when the case reached the Court of Appeals.
In this regard, it must be noted that at the time of the Court of Appeals decision in Wein I, MAC had not even been formed, and the Moratorium Act had not even been passed. The appropriation of $500 million to MAC, which was the subject of the litigation in Wein II was not made until September, 1975. In this context and in the light of the actual events, I cannot accept the conclusion of my colleagues that this case was a precursor of the subsequent cases which the respondent should have foreseen at the time. It imputes to him extraordinary prophetic powers to foresee that the plaintiff in this case and his associate Quirk would generate 4 of the 10 fiscal crisis cases which followed.
The next case was Sgaglione v Levitt ( 37 NY2d 507 ), decided in September, 1975. In this case respondent voted against his interest and joined the majority in holding unconstitutional a provision of a State statute mandating the investment by the State Comptroller of certain State retirement funds in MAC
bonds. I find nothing in Sgaglione to hint or suggest that MAC bonds or city notes would be the subject of future litigation.
The next case was Wein II ( 39 NY2d 136 ), decided March 23, 1976. In Wein II the Court of Appeals upheld legislation which granted an appropriation of $250,000,000 to the City of New York and $500,000,000 to the Municipal Assistance Corporation. I do not know what there is about this case, as my colleagues suggest, that should have alerted the respondent to any future litigation regarding MAC bonds.
Furthermore, apart from his exchanges of short-term notes for MAC bonds in December, 1975, and the simultaneous sale and repurchase of $600,000 of short-term notes for tax loss purposes in the same month, respondent did not purchase any of these latter securities until after the date of the remittitur in the moratorium case, i.e., February 8, 1977, and the majority has not accused him of any violation in engaging in transactions after February 8, 1977.
The only other purchases made by respondent prior to February 8, 1977, the date of the remittitur, was that of a substantial amount of short-term State notes between March and October, 1976 and $200,000 of New York City bonds in December, 1976. However, at the time of these purchases there was no litigation pending or any other indication that these particular securities would be the subject of future litigation. Indeed, the first litigation concerning State notes was Wein v Carey ( 41 NY2d 498 ), which was decided on March 31, 1977, and after respondent had redeemed all of his short-term State notes purchased in 1976.
I submit that my colleagues’ treatment of this broad issue is plagued by its reliance on hindsight. My colleagues have effectively imposed a new standard of conduct upon the respondent retroactively by an application of the Canons and Rules which could not have been reasonably perceived by him when he made each of these investments.
My colleagues’ statement of these improprieties is too general and vague. It reflects the difficulty in defining them in clearer and more precise terms, even with the perfect vision of hindsight. It underscores the fallacy and unfairness of imputing to respondent an extraordinary clairvoyance as to the litigation to be reasonably anticipated in the Court of Appeals involving "fiscal crisis” issues from January 1, 1975, to the present.
By their determination here the majority imposes a new standard of judicial behavior, i.e., that the mere existence or threat of a fiscal crisis in one level of government should put all Judges on notice to refrain from purchasing all government securities. However, my difficulty with it is that I believe that before adopting such a standard and imposing it retroactively against the respondent, we ought to face up to all of its implications.
Inasmuch as the fiscal crisis is continuing, all appellate Judges of this State who continue to hold or now purchase New York State or New York City securities are now exposed, in view of this determination, to similar charges of impropriety.
Besides the continuing fiscal crisis on a State level, one can also project that Federal aid, in terms of loans, may be forthcoming to help the city. Surely, a Federal taxpayer suit challenging this aid may reasonably be anticipated. Are we now enunciating a standard whereby no Federal Judge may now purchase New York governmental securities or roll over those which he presently owns? Again, a quick perusal of plaintiff-defendant tables indicates that several utility companies have been involved in numerous lawsuits over the years. In view of the recent history of blackouts during the summer months, it is obvious that lawsuits against major utility companies such as Consolidated Edison and Long Island Lighting will continue in the near future. Do investments by Judges in these and similar utilities now expose them to violations of the Canons and Rules governing judicial conduct?
In the past each Judge has, on his own, made the concededly difficult decision as to whether he should disqualify himself when a case involving securities that he owned, actually came before him. If the majority intends to propose the more stringent test that it has suggested in its opinion, it should do so in much clearer terms than is found in its opinion. Only then can the issue be intelligently discussed on the merits, in the appropriate forum, and if approved, applied in a prospective manner.
For these reasons, I do not join in the majority’s opinion on this "broader issue” of the propriety of the respondent’s purchase of city and State securities. My dissenting colleague goes further than the majority in listing those cases where respondent should have disqualified
himself. In particular, he cites Wein v Carey ( 41 NY2d 498 , supra) ("Wein III”), Quirk v MAC ( 41 NY2d 644 ), and Boston Stock Exch. v State Tax Comm. ( 42 NY2d 1008 ).
I cannot agree with the dissenter’s criticism of respondent’s participation in these three cases.
The dissent argues that respondent should have disqualified himself in Wein III, which was argued and decided in March, 1977. This case dealt with a constitutional attack on the issuance of certain short-term State notes. The dissenter maintains this position despite his admission that respondent, prior thereto, had redeemed all the short-term State notes that he had purchased in 1976 and had eliminated any chance of conflict in this area. I know of no Canon, even that one which deals with the appearance of impropriety, which could be applied in this instance in criticism of respondent.
In the Quirk case, the Court of Appeals considered whether the State’s diversion of the proceeds of the New York City sales tax and the tax on stock transfers from New York’s general city revenues to the Municipal Assistance Corporation unconstitutionally impaired the rights of the city’s bond holders. Respondent owned city bonds when the case was argued on March 31, 1977, and disqualified himself. The court upheld the legislation on April 26, 1977. During this period—between March 31 and April 26, 1977, respondent bought city notes and redeemed a substantial amount of his bonds. It is these purchases which the dissenter criticizes. However, the notes that were bought were completely different from those whose value could have been affected by the outcome in Quirk. Therefore, this transaction is not subject, as the dissent argues, to the same condemnation as that leveled against respondent for his purchase of city notes between the date of the decision invalidating the Moratorium Act and the date of the remittitur. In the latter situation, the notes that were purchased were identical to those which were the subject of the appeal that was being conducted by the court.
Similarly, with regard to Boston Stock Exch., the dissent does not challenge the majority’s characterization of the relationship between this case and respondent’s holdings as indirect and insubstantial. Instead, he merely criticizes respondent’s participation in this case at a time when (1) newspaper disclosures about his conduct had already been published and (2) this court had already been convened. Neither of these
latter occurrences is sufficient to mandate the disqualification of a Judge from participation in the case. I view the dissent’s reasoning and criticism of the respondent on this point as strained and overreaching.
As to the issue of the use of law professors, respondent explained that he was not aware of Canon 3A(4), until it was called to his attention by this investigation. The reasonableness and plausibility of respondent’s unawareness must be evaluated in light of the fact that there has been a virtual dearth of material in the literature of legal ethics either discussing or defining this Canon or the practice to which it is directed. My research has failed to uncover any article in any law review or legal periodical, including the New York Law Journal, dealing with this particular Canon, except for Wechstein, Round Table Discussions on the Proposed Code of Judicial Conduct ( 9 San Diego L Rev 785 ). This dearth of material is not surprising considering the fact that Canon 3A(4) was only recently adopted.
My dissenting colleague takes the position that ex parte communications between a Judge and a law professor were prohibited in the former Canons of Ethics, which contained a prohibition against ex parte communications (Canons of Judicial Ethics, Canon No. 17, as amd April 1, 1948), and "long before that, indeed as long as the legal profession has existed”.
The dissenter’s position is legally and historically untenable and flies in the face of the commentary to this Canon which he has cited in his opinion. If it is true, as the dissent suggests, that this type of communication between Judge and law professor had always been prohibited, there would clearly not have been the necessity to promulgate a new Canon to cover this issue. To the contrary, the fact remains that Canon 3A(4) was adopted because it was felt that the existing practice of Judges consulting with outside experts contained a danger to the impartiality of the judiciary and the fundamental fairness of the adversary system.
Despite these obvious dangers in allowing Judges to consult with outside law professors, it must be strongly emphasized that, contrary to the position taken by my dissenting colleague, prior to adoption by the American Bar Association in 1972, Canon 3A(4) simply had no antecedent in the prior Canons of Judicial Ethics.
Whatever differences may exist among the members of this court, we all concur with the observation that "Respect for the courts cannot be maintained by minimizing errant judicial behavior”. The public disapproval of respondent’s conduct, in which I join with the majority, may be minimal when contrasted with a removal. It is nonetheless a disciplinary sanction which even the most errant of Judges does not contemplate or welcome.
The improprieties with which respondent has been charged simply do not rise to the level of misconduct for which the most appropriate remedy is more than the public censure herein enunciated. I share the majority’s confidence that this sanction will have the appropriate effect upon respondent in particular, and the judiciary collectively.
I disagree with both the procedure adopted by the majority and the conclusions it has reached on the evidence.
The procedure satisfies neither this court’s constitutional obligations nor protects respondent’s right to defend himself upon specified charges at a hearing before a decision is made. The Constitution directs the convening of a Court on the Judiciary to discipline a Judge for cause after due notice to him and a hearing on the charges. After hearing the proof, the court may censure, suspend or remove the Judge or it may dismiss the charges (NY Const, art VI, §22). I know of no precedent or procedure which authorizes the court to terminate the proceedings with informal censure after an investigation establishes preliminary proof of misconduct. On the contrary, logic and law dictate that once misconduct is discovered, charges should be preferred and the full details of the misconduct should be searched out and determined in a hearing.
The majority states that the court should not proceed with formal charges or hearing unless there appears "probable cause for removal or discipline.” However, it has made a finding not only of probable cause for discipline, but of misconduct in fact. Certainly at this point in the proceedings, nothing in the law casts us in the role of a Grand Jury at liberty to charge or not as we wish.
Nor do I find support for the disposition used here in the order convening this court. Undoubtedly, the order contemplated termination of our responsibilities if investigation failed to produce probable cause for formal charges, but it could not authorize us to ignore constitutional requirements and it most certainly was not intended that we do so if we found evidence of misconduct.
Further than that, I do not believe that the procedure adopted here is appropriate even if it is legally permissible.
The purpose of the constitutional provisions creating the Court on the Judiciary is to protect the integrity of judicial office. Removal or discipline of an incumbent is authorized for "cause”. That term encompasses not only wrongdoing or corruption but also conduct affecting general character and fitness for office as well as acts which justify a finding that the Judge’s retention in office is "inconsistent” with the fair, proper and wholesome administration of justice (see Matter of Droege, 129 App Div 866 , 882, app dsmd 197 NY 44 ; see, also, Matter of Waltemede, 37 NY2d [a], [iii]; Matter of Pñngst, 33 NY2d [a], [ii]; Friedman v State of New York, 24 NY2d 528 , 540; Matter of Kane v Rudich, 256 App Div 586 , 587). In discharging our constitutional responsibility, we must decide whether respondent possesses the character and judgment to remain a Judge of New York’s highest court. That question cannot be resolved in a summary way upon a narrow and isolated view of his actions with respect to a few cases. It requires the evaluation of respondent’s conduct throughout his term of office. This court has not heard or questioned a single witness under oath. Much of the information before us has been supplied by respondent and his counsel and respondent’s conduct has been evaluated to a substantial degree on the basis of his own evidence. Such an investigation, no matter how thorough, is not a substitute for a hearing and the court should not rely upon it to eliminate the fact-finding process from which proper inferences may be drawn and from which the ultimate conclusion of fitness or unfitness may be made. It is obvious from the several disparate opinions of the court that a proper conclusion cannot be achieved without such proof. Finally, it should be noted that respondent has been censured without a hearing although he has admitted no wrong. Indeed, the court has preferred no charges for him to
admit even if he chose to do so (cf. Matter of Sobel, 8 NY2d [a], [f], [g]).
Moreover, I disagree generally with the majority’s view of the substantive issues of this proceeding. Certainly the instances of misconduct it finds are fully supported by the information before us, but there is much more to this case than evidence of occasional lapses or isolated instances of bad judgment. There is evidence of improper conduct that has continued during respondent’s entire tenure in office. In the period of slightly over two and one-half years before this court was convened, respondent repeatedly ran afoul of both specific and general provisions of the Rules Governing Judicial Conduct and the Code of Judicial Conduct in matters of first importance to the court on which he worked. His investment practices led inevitably to tangled conflicts between his private affairs and his judicial obligations, and his breaches of the court’s confidentiality and use of the law professors were a serious intrusion upon the rights of his colleagues on the Court of Appeals and the litigants appearing before him.
The majority has recognized the appearance of impropriety created by respondent’s conduct. It chooses to minimize his actions, however, because of certain attendant circumstances, circumstances which I do not find mitigating.
First, the contention is made that respondent had little choice in his investments because he held New York securities before he took office. I disagree. On January 1, 1975 he held $3.4 million in city notes but no other New York securities. He continued to purchase additional city notes from January through May, 1975. It was in May, 1975 that Wein v City of New York ( 36 NY2d 610 , "Wein I”) was argued. If nothing else alerted him to the conflicts created by his investments and the important cases coming before the court, that case should have illuminated the problem and suggested the need to attempt to reduce his holdings. Instead, in July, 1975 he increased his city note holdings by new purchases of $775,000 par value. After that his holdings diminished as the notes matured and by December, 1975 his city notes totaled $1,500,-000. With the overturning of the Moratorium Act in Flushing II (Flushing Nat. Bank v MAC, 40 NY2d 731 ), these notes could have been liquidated. Instead, in December, 1976 re
spondent again began to purchase city notes and by May, 1977 he held over $2.5 million par value.
As far as the city bonds, the State notes or MAC bonds are concerned, respondent did not own any of these securities when he began his term of office. He started buying State notes in August, 1975; he exchanged for MAC bonds in December, 1975 and he started purchasing city bonds in December, 1976. There was a void in his State note investments from December, 1976 to April, 1977 but in April, 1977 he began to reinvest in them. From all that appears, he continues to invest in New York securities to the present time.
Respondent could have minimized or eliminated his city note holdings by reasonable efforts, perhaps not immediately upon taking office, but in a relatively short period of time. He could have avoided purchases of MAC bonds, of city bonds and of State notes. He did none of these things. Instead, he continued to trade, going in and out of the market in these various securities while crucial financial matters relating to them were being debated before the court on which he sat. Obviously, other securities were available for purchase which would not conflict with his judicial responsibilities. Without a hearing on this matter, observers may only speculate as to why respondent felt obliged to limit his investment options during this time to tax exempt securities of New York.[1]
Second, the majority observes that many of respondent’s purchases were "roll-overs.” I fail to see any significance in that fact. These were voluntary transactions and there was no necessity for roll over except to maintain a position in a particular security. On the contrary, respondent had logical opportunities for an orderly liquidation of these investments without loss because the securities were short term and had frequent maturity dates when they were redeemed at par.
Next, the majority contends that there is a higher threshold of disqualification in cases involving government securities, that before a Judge is obliged to recuse himself the outcome of the case must "substantially affect” the value of his holdings (see 22 NYCRR 33.3 [c] [3] [iv]).[2] That argument ignores the fact that these were no ordinary appeals against the city and State governments involving run of the mill negligence or contract claims. These were funding cases, legal tests of the sophisticated legislative schemes which provided the means for massive infusions of capital into New York City to save it from bankruptcy. The primary purpose of this legislation was to bolster the cash position of New York City either by direct loans or by enhancing the marketability of its short-term notes.[3] The obvious result of stabilizing the city’s finances in either way was to enable it to borrow by strengthening the value and the attractiveness of its obligations. Insofar as these plans failed or were declared illegal, additional pressure was placed upon the State and its loan structure because of the possible necessity of huge State cash transfers to the city to avoid insolvency. It was the manifest purpose of all of this legislation to have a "substantial affect” on the value of New York City obligations and any judicial decisions upholding or striking down the legislation necessarily had a "substantial affect” on New York City’s creditors. And in addition, the symbiotic relationship of the State and city governments and of the Municipal Assistance Corporation in this attempt to rescue New York City closely linked the value of their various securities.[4]
Furthermore, it is obvious that respondent was no ordinary or casual investor. He was reputed to be one of the largest individual holders of New York securities and his purchases exceeded many millions of dollars annually. We are not reviewing the conduct of a Village Justice who has purchased a $100 sewer bond and then presided at the sewer contractor’s trial to recover overtime payments from the village. This investigation concerns an Associate Judge of the State’s highest court. He invested millions of dollars in New York securities during a two and a half year period when some of the most important and complex legal cases in the history of this State, cases involving the very securities he had purchased, were decided by the court on which he sat. If the "substantial affect” rule exempted him from disqualification in these cases, it is difficult to envision a case in which a Judge holding government securities will ever be disqualified.
Finally, the majority analyze several cases[5] and find reasons
to mitigate the seriousness of respondent’s conduct.
It notes that he disqualified himself in Flushing II (Flushing Nat. Bank v MAC, 40 NY2d 731 , supra) and in the Quirk case (Quirk v MAC, 41 NY2d 644 ). The majority finds his conduct censurable in Flushing despite the disqualification, however, and I fail to see how the fact of disqualification can operate in his favor. I find his conduct similarly improper in the Quirk case and accordingly I would not agree that nonparticipation operated in his favor in that case either.
The details of the Judge’s conduct during the interim between the decision and the remittitur in Flushing II are documented in the majority’s opinion. As the majority note, there was, in effect, a judicially imposed "moratorium” after the November judgment but before the court’s remittitur in February. It differed from the legislative moratorium in that until the remittitur was handed down the time of payment of the frozen notes was uncertain and the interest to be payable after maturity was uncertain.[6] Both of these uncertainties could affect market price and both were to be resolved by the court on which respondent sat. Nevertheless, after judgment but before the remittitur, he purchased over $1 million of the specific securities subject to this judicial "moratorium”. Although he did not participate in Flushing II he was a member of the court and obviously working in Albany during the period between judgment and remittitur. Further than that, he had participated in Flushing I (Flushing Nat. Bank v City of New York, 38 NY2d 999 ) and prior administrative decisions in the case. If such exposure did not give him inside information, and we have no evidence that it did, it most certainly should have acquainted him with the details of the case and its seriousness, and it thereby afforded him special reason to know that his purchases would be highly suspect and that they could not be explained or excused by his recusal. His actions manifestly appeared improper to the public, precipitating a news article in the New York Times and ultimately leading to the convening of this court.
Respondent also disqualified himself in the Quirk case. He, nevertheless, placed himself in a vulnerable position of appar
ent impropriety by his investments during the time it was under consideration and I find nothing about his action during that case to mitigate his conduct.
In Quirk the court considered whether the State’s "diversion” of the proceeds of the New York City sales tax and the tax on stock transfers from New York’s general city revenues to the Municipal Assistance Corporation unconstitutionally impaired the rights of the city’s bondholders. Since respondent held city bonds when the case was argued on March 31, 1977, he disqualified himself. The court’s decision on April 26 held the legislation constitutional. The decision was obviously adverse to bondholders and was generally considered to be beneficial to city note holders because it permitted the increase of MAC funds available to purchase short-term obligations of the city.
During the time the decision was sub judice, there were several changes in respondent’s investments. On April 15, 18 and 19 he bought a total of $505,000 par value city notes and on April 15, 1977 $1,080,000 of his city bonds matured. (On April 28, after the decision, he reinvested $200,000 of this amount in city bonds.) It is my judgment that respondent should not have purchased city bonds after taking office. Having done so, however, redemption of them at maturity was involuntary. The appearance of impropriety arises from his addition of $505,000 par value of new city notes and the contemporaneous redemption of city bonds during the time the Quirk case was under advisement by the court. As did his conduct in Flushing II, his investment activity during the Quirk case created the unmistakable appearance that he was benefiting from inside information and his conduct "unnecessarily and unwisely put a burden of explanation and justification not only on [him] but on the judiciary of which he [was] an officer” (Matter of Suglia, 36 AD2d 326 , 328).
The majority note that in Sgaglione v Levitt, ( 37 NY2d 507 ) respondent voted against his apparent interest. That assumes that his participation in the case was with foreknowledge of his vote. Even so, the result does not alter the manifest impropriety of his participation in a case which would make funds available to purchase city notes at a time when he held $1.5 million of those notes. No matter how he voted he was subject to criticism. The disappointed litigant might readily
contend that the Judge either voted in his own interest or bent over backward to avoid the appearance of doing so.
Then there were the Wein cases.
The majority acknowledges the impropriety of the respondent’s participation in Wein I (Wein v City of New York, 36 NY2d 610 ). Only two weeks before the case was argued and while it was on the Court of Appeals calendar respondent purchased $1,765,000 par value city notes by rolling over matured notes. At the time of argument he held a total of $3.8 million in city notes. Despite this obvious conflict, respondent participated in the appeal and he voted with the majority in a 4-3 decision to uphold legislation authorizing a pay over of funds from the Stabilization Reserve Corporation to the city at a time when he was a creditor of the city.
In Wein II (Wein v State of New York, 39 NY2d 136 ), the Court of Appeals held that the Financial Emergency Act was constitutional insofar as it authorized State moneys from the Local Assistance Fund to be paid over to the City of New York and to the Municipal Assistance Corporation. The appeal was argued January 13, 1976. The previous December respondent exchanged $880,000 of his city notes for MAC bonds. He also sold $600,000 of city notes and invested the proceeds in an equivalent amount of different city notes to record the tax loss.
The exchange for MAC bonds was voluntary and it was improper because it increased the number of agencies involved in the city financing problems whose securities he held. By adding MAC bonds to his existing holdings of city and State securities, he expaned the possible cases in which he would be required to disqualify himself. But even more importantly, at the time of this exchange Wein II was already calendared for argument in less than a month. Thus, respondent invested in MAC securities after it was publicly announced that a case directly involving those very securities was before the Court of Appeals and when his purchase required that he not participate in the case. Nevertheless he did participate in the case and he voted with the majority of the court approving the pay over of funds to MAC.
It is his contention that his participation was excused because counsel for all parties waived his disqualification. The evidence that there was such a waiver is confliciting, however. Some persons who were in court do not recall any announce
ment of interest or any waiver and others specifically deny that it occurred. In any event, as the majority concedes, even if the disqualification was waived by the parties, it did not comply with 22 NYCRR 33.4 (d) because it was not in writing (nor was there any clerk’s minute of it) and the parties did not have a disclosure upon which they could determine whether respondent’s interest was "insubstantial”. Even more importantly, the ramifications of the decision went far beyond the litigant’s interest in the case and respondent should not have accepted the waiver of their counsel if such there was.
The ultimate decision to disqualify or not is personal and must be made by the affected Judge. Only he is in possession of all the facts requiring disqualification. Given the extent of respondent’s holdings and his direct interest in the outcome, he should not have accepted a waiver of his disqualification in this case. Former Chief Judge Hastings of the United States Court of Appeals for the Seventh Circuit stated the issue well:
"Fundamentally, it finally becomes a matter of personal conscience—a conscience in tune with what is right or what is evil under any given set of circumstances.
"It must be a conscience alive to the proprieties and the improprieties incident to the discharge of a sacred public trust. It must be a conscience propelled by a consuming desire to play a leading role in the fair and impartial administration of justice, to the end that public confidence may be kept undiminished at all times in the belief that we shall always seek truth and justice in the preservation of the rule of law. It must be a conscience, not shaped by rigid rules of doubtful validity, but answerable only to a moral code which would drive irresponsible judges from the profession. Without such a conscience, there should be no judge.” (Hastings, Judicial Ethics as it Relates to Participation in Money-Making Activities, Conference on Judicial Ethics, Law School of the University of Chicago, Oct. 22, 1964.)
Wein III (Wein v Carey, 41 NY2d 498 ) merits the court’s notice although we have no evidence of conflict at the time the case was decided. During the year before the argument of Wein III, respondent had purchased over six million dollars in the very investments challenged in that appeal. Some of the notes had been purchased as recently as six months before argument. He participated in the decision but he states that
at the time he participated he had disposed of his State notes.[7] Nevertheless, the sums involved are so substantial, his interest so direct and the purchases so recent that the appearance of impropriety from his participation in the decision was undeniable.
Finally, the majority assert that the Boston Stock Exchange case (Boston Stock Exch. v State Tax Comm., 42 NY2d 1008 ) had only an indirect effect on respondent’s holdings. The issues did relate to funding New York City, however, and it is revealing that the case came before the Court of Appeals after the publication of newspaper accusations of impropriety on the part of respondent and after this court was convened to investigate his financial activities. Most Judges would be sensitive to such a situation. Respondent apparently was not. He participated in the case and wrote the court’s memorandum decision.
The brief recitation of the pertinent circumstances in these cases demonstrates that respondent’s failure to regulate his investments generally to avoid conflict in his judicial duties violated a good deal more than the "spirit” of Canons 5C(1), 5C(3) and 2A. There can be no question that he had knowledge of the potential for conflict of the most serious sort because of his investments. The financial problems of New York had been matters of national concern before he took office. They were continuing and assumed crisis proportions during his judicial tenure. The various legislative and administrative efforts to rescue the city were common knowledge and the legal challenges to them were predictable. The cases quickly entered the legal pipeline at the Supreme Court level and, given the sums of money involved and the serious issues raised, none could doubt that the litigation would eventually reach the State’s highest court for final resolution. Indeed, barely a term of the Court of Appeals passed without these various financing plans engaging the court’s attention in one way or another. If this public notoriety alone was not sufficient to bring home the fact of conflict, counsel on these appeals specified in brief and oral argument and in the most dramatic way the potential impact of each decision upon the securities of the city and State and the court’s bench notes further spelled out the issues for each Judge.
Given the fact that respondent was heavily invested in New York City notes when he took office, he made no effort to liquidate or limit them even after the potential for conflict, disqualification, and the appearance of impropriety became apparent. On the contrary, after he took office he increased both the amount and the types of his holdings, and continued to sit in the fiscal cases generally with the exceptions noted. It is unthinkable that a Judge should feel unconstrained in buying these securities at that time. If there is any pattern to be discerned from respondent’s trading, however, it is that the business of the court played little part in his investment decisions. These were serious violations which reflect adversely on his judgment and weigh heavily upon his fitness to hold judicial office.
III
The other important area under investigation has been a practice started by respondent during his first term on the Court of Appeals, a practice of using outside experts to assist him in performing his duties and doing so without notice to or the consent of the court or the parties to the litigation.
Unfortunately, I disagree with the majority on some of the facts regarding these incidents and I do not agree with the inference that many of these inquiries were merely "informal solicitations” on the current state of the law. As I interpret the results of our investigation, the inquiries in at least 10 of the cases dealt with the issues presented in specific appeals pending before the court. In six, possibly seven, cases the professors actually prepared draft opinions and in at least two others they submitted written analyses of the legal problems to the respondent. In four reported decisions, parts of the professors’ memoranda were published in dissent, concurrence or as the lead opinion of the court. The law professors confirm the practice and estimate that in some cases as much as 50-75% of the final published opinions was their work product, not that of respondent.
Worse still, on some occasions court papers were forwarded to the professors for their use and respondent admits that in one case the unpublished opinion of an associate was forwarded to a professor to prepare a dissenting opinion in opposition. There is evidence this may have occurred in at least one other case also. In one instance a professor appar
ently used a case for classroom discussion before the court’s decision was announced.
Whatever may be one’s view of the propriety of generalized hypothetical discussions with experts not connected with the court (and the practice is not generally approved),[8] respondent’s conduct far exceeded such minor transgressions. It most certainly was not assistance in the form of amicus briefs as suggested by Judge Traynor.9 The practice condemned here involved unauthorized consultations with outsiders on confidential court business and it was a direct violation of 22 NYCRR 33.3 (a) (4).
The majority finds that respondent should be excused for this practice because the prohibition against it is new. The Canon was adopted by the American Bar Association in 1972, by the New York State Bar Association in 1973, and by the Administrative Board in 1974. That should have provided enough advance warning but if it did not, the former Canons of Ethics contained a similar prohibition against ex parte communications (Canons of Judicial Ethics, Canon No. 17, as amd April 1, 1948) and long before that, indeed as long as the legal profession has existed, confidentiality has been the recognized duty of lawyers and Judges. It is hardly a new concept.
Furthermore, the violations continued after respondent had explicit notice of the Canon. After the supplemental order authorizing our inquiry into this area was served upon respondent, he participated in at least two appeals in which he had sought advice from professors. Despite the knowledge conveyed by this supplemental order, respondent neither gave the required notice to the parties that he had discussed their cases with outsiders nor withdrew from paritcipation in the appeals.
No useful purpose will be served by detailing the other evidence produced by the investigation. I note with dismay, however, that the respondent’s chambers in New York City apparently share a common reception room with a private law firm, thereby giving the impression that the law firm has some special relation to the Court of Appeals, or at least one member of it.
IV
Respondent admits to no error in his financial dealings or his participation in the fiscal crisis cases. On the contrary, he insists that this conduct was at all times unimpeachable. His explanations, however, do not rise to the level of justification. Indeed, in many instances they are not even valid excuses. For example, respondent contends that these New York securities, securities that were at times unmarketable, were "prudent” and "conservative” investments, suitable for a Judge sincerely trying to avoid controversy. He excuses some of his trades because they reflected sound business judgment, but that is a consideration which is largely irrelevant on the issue of ethical conduct. He asserts that his participation in the fiscal crisis cases was determined in absolute good faith, but sincere men often make errors of judgment, particularly when their own financial interests are involved. His counsel contends that the increases in respondent’s holdings of city and State securities, far from being mistakes, were to be encouraged because they avoided increasing the kinds of securities held. That argument ignores the fact that it is these very securities and the continued repurchase of them that is at the root of the respondent’s problems.
As for the use of outside experts, respondent admitted a technical violation of the rule because he was unfamiliar with it but he attempted to justify the use of law professors by contending they were ad hoc law assistants and he stated that he used their draft opinions because he wanted to turn out work of the "finest judicial craftsmanship”.
So, we have before us evidence of a continuous pattern of trading in New York securities during a period when appeals closely affecting those securities were coming before the court regularly and we also have evidence of the respondent’s participation in many of those appeals. We have evidence of repeated violations of the Rule regulating the use of outside experts. Added to this is evidence that after service of the original order encompassing respondent’s financial activities, his investments continued much as usual and he participated in the Boston Stock Exch. case. Later, after service of the supplemental order gave notice that his use of outside experts was improper, he still failed to comply with that Rule in two cases. And finally, we have the explanations offered for this conduct which manifest a complete lack of understanding of
proper judicial behavior or appreciation of the problems which were created by his actions. This evidence certainly establishes probable cause for disciplinary action. The majority’s action in determining that it is insufficient to warrant even the preferral of charges condones a standard of behavior more akin to the main chance philosophy of the market place than one which is rightfully expected of those holding high judicial office.
These are not matters that can be brushed off because they were not "willful”, or because respondent was unaware of certain Rules or Canons, or because he was "negligent”, or "insensitive” or "ill-advised”. Respondent was charged with the responsibility of meeting commonly accepted standards of judicial propriety and complying with applicable Rules and Canons, whether he had read them or not. Errors such as those committed here may be excused once but their repetition on the scale present in this case suggests either indifference or the inability or unwillingness to meet the ethical requirements of judicial office.
This matter should go forward. The evidence presented raises issues going directly to the heart of the judicial system, the impartiality of its Judges and the integrity of the court’s decisions. The public interest requires that neither be compromised in appearance or in fact for the public must respect the courts, and the Judges of the court must deserve the respect of the public. That is the bedrock upon which our system of law is built for the ocurts have little else to enforce compliance with their judgments other than the acceptability of them borne of public respect. The public need not always be convinced of the correctness of the court’s decisions but they must always believe in the integrity of the decision-making process. Many sound judicial decisions are unpopular; many rest upon reasoning so evenly balanced that little persuades the public to accept the result other than respect for the courts. But accept these decisions they must, if civilized government is to exist. If that be asked of them, then they are entitled to demand that the Judges of their courts conduct their public and private affairs both in fact and in appearance with the highest rectitude.
There is another aspect which bears upon the public interest heavily, albeit indireclty, and which should be considered also. Laymen, indeed many Judges who have not had the
opportunity to work on an appellate court, may not understand fully the collegial aspects of such institutions. The Judges live and work together closely on matters affecting the lives and fortunes of thousands of the State’s citizens. Their decisions are the result of a meeting of minds after individual study followed the debate and discussion of the whole court at conference. This fusing of intellects is meant to produce a reasoned product which approximates justice and law as best as the human mind can explicate it. The Judges need not like their colleagues personally but they must rely upon them and they must trust and respect them or the court’s work will suffer gravely. On the best appellate courts the members exercise a synergistic influence on one another which enlarges the ability of the membership of the court as a whole. When mutual respect and trust among the Judges is lost, there is serious injury to the decision-making process and the effectiveness of the court may be crippled.
Ultimately, evidence of misconduct appearing, the full extent of that misconduct must be determined and the public interest weighed against it before an appropriate sanction is imposed. That decision should not be short-circuited in the way proposed by the majority. Respect for the courts cannot be maintained by minimizing errant judicial behavior and finessing constitutional procedures. Respect is maintained by performance which assures the public that misconduct does not exist because it will not be tolerated.
On the record before us there is substantial evidence that respondent has violated the Rules and Canons governing judicial conduct. The evidence requires preferral of formal charges and a hearing to determine the proper sanction for this misconduct.
Presiding Judge Hopkins and Judge Kane concur in Per Curiam opinion; Judges Markewich and Suozzi concur in result in separate opinions; Judge Simons dissents in another opinion.
On March 16, 1978, the Court on the Judiciary ordered the proceeding to be terminated:
At a Court on the Judiciary for the State of New York, held at Brooklyn, New York, on the 16th day of March A.D. 1978.
Present: Honorable James D. Hopkins, Presiding.
Honorable Arthur Markewich
Honorable Joseph A. Suozzi
Honorable T. Paul Kane
Honorable Richard D. Simons
In the Matter of the Proceedings Pursuant to Section 22 of Article VI of the Constitution of the State of New York, in Relation to the Honorable Jacob D. Fuchsberg, Associate Judge of the Court of Appeals.
The Court on the Judiciary, having been convened by order of the Chief Judge of the Court of Appeals to investigate, hear, and determine matters concerning respondent, having examined the sworn statement of respondent, the written records and submissions furnished by respondent and his counsel, having heard the oral statements of respondent and his counsel, having considered the waiver contained in the letter of respondent and his counsel, dated February 21, 1978, and the court having rendered its opinion censuring respondent, it is
Ordered that this proceeding is terminated. Presiding Judge Hopkins and Judge Kane concur in Per Curiam opinion; Judges Markewich and Suozzi concur in separate opinions; Judge Simons dissents and votes to prefer charges and to hold a hearing.
Irving N. Selkin (Signed)
Irving N. Selkin
Clerk of the Court on the Judiciary
Footnotes
- 1 The basic documents governing the conduct of Judges are (1) the Code of Judicial Conduct ("Canons”) adopted in 1973 by the New York State Bar Association and (2) the Rules Governing Judicial Conduct ("Rules”) (22 NYCRR Part 33), promulgated by the Administrative Board of the Judicial Conference in 1974. These two documents are basically identical. The only difference of significance for this proceeding is the omission from Canon 5C(3) of the Code of Judicial Conduct, which provides: "A judge should manage his investments and other financial interests to minimize the number of cases in which he is disqualified. As soon as he can do so without serious financial detriment, he should divest himself of investments and other financial interests that might require frequent disqualifications.”
- 2 Another of the cases that arguably had an effect on the value of respondent’s holdings but which does not fit into the line of "fiscal crisis cases” is Boston Stock Exch. v State Tax Comm. ( 42 NY2d 1008 , Sept. 13, 1977). It involved the stock transfer tax which at the time was earmarked to secure MAC bonds.
- 3 It has been argued by respondent’s counsel that this distinction may be construed to encourage judges to invest in government securities. (Code of Judicial Conduct, Canon 3C[3][c][iv]; 22 NYCRR 33.3 [c] [3] [iv]). Although this argument goes too far and ignores some of the facts presented here, all other things being neutral, a Judge could reasonably conclude based on the different standards for disqualification that investment in government securities will create fewer instances necessitating disqualification. Here, of course, all things were not neutral, and investment in these securities was continued, maintained and in some respects expanded, despite the pendency in the Court of Appeals and lower courts of many cases arguably affecting the value of these securities.
- 4 Canon 5C(1) provides: "A judge should refrain from financial and business dealings that tend to reflect adversely on his impartiality, interfere with the proper performance of his judicial duties”. (22 NYCRR 33.5 [c] [1].) Canon 5C(3) appears in footnote "1”. Canon 2A provides: "A judge should respect and comply with the law and should conduct himself at all times in a manner, that promotes public confidence in the integrity and impartiality of the judiciary.” (22 NYCRR 33.2 [a].)
- 5 Under Judiciary Law (§ 14), the parties may, in writing or in open court upon the record, waive a claim as to disqualification when the Judge owns securities of a corporate litigant.
- 6 Respondent recalls sending only one draft opinion of another Judge to a law professor; however, one of the law professors interviewed recollected a second such incident.
- 7 "A judge shall accord to every person who is legally interested in a proceeding, or his lawyer full right to be heard according to law, and, except as authorized by law, neither initiate nor consider ex parte or other communications concerning a pending or impending proceedings. A judge, however, may obtain the advice of a disinterested expert on the law applicable to a proceeding before him if he gives notice to the parties of the person consulted and the substance of the advice, and affords the parties reasonable opportunity to respond.” (22 NYCRR 33.3 [a] [4])
- 8 Thode’s Reporter’s Notes to Code of Judicial Conduct states: "Canon 3A(4) and Commentary are based in part on old Canon 17. * * * The more difficult questions concerned such transactions as a telephone call by a judge to a law professor to obtain advice on a contested issue within the area of the professor’s expertise, or consultation by the judge with another judge not on the same panel or the same court. These are not infrequent or hypothetical situations—the Committee was informed of many such communications. See the discussion of the controversy between Judges Frank and Clark over these very issues in the recent book by Marvin Schick, Learned Hand’s Court (The Johns Hopkins Press, 1970), and Schick’s article, Judicial Relations on the Second Circuit, 1941-1951, 44 N.Y.U.L. Rev. 938 , 941-947 (1969). The Committee concluded that unless the ex parte communication is authorized by law—statute, common law, and rule being the principal methods of authorization—the communication should be prohibited. Communications between judges and between the judge and court personnel whose function is to aid the judge in carrying out his adjudicative duties were recognized by the Committee as falling within the 'authorized by law’ provision. * * * "Strong arguments were made to the Committee that a judge should be allowed to obtain the advice of disinterested experts on issues of law in a proceeding before him. The Committee recognized the potential for better decisions implicit in such consultations, but also perceived the possible inroads on the adversary system. One obvious way for a judge to obtain the aid of a legal expert is the amicus curiae brief, and in the Commentary the Committee emphasizes the value of that technique. * * * "The Committee recognized that the amicus curiae brief is too formal, time-consuming, and cumbersome a procedure to be useful in every situation. Therefore, it authorized a judge to obtain advice on a legal issue if the judge gives notice to the parties of the name of the person consulted and the substance of the advice received, and then affords the parties an opportunity to respond. There is no requirement that the advice be in writing; it could be received in a telephone conversation. This procedure is intended to allow a judge to obtain expert help not otherwise available in the proceeding, while preserving the adversary process through the notice given and the opportunity to respond. The Committee concluded that the adversary process entitles the parties to be informed of the content of such communications through the use of the notice procedure or the amicus curiae brief, or else to have the proceeding or an impending proceeding free of those communications. The Committee was of the opinion that if either the judge or the expert does not want the name of the expert or his advice to become known, then such advice should not be received by the judge.”
- 9 Canon 2B provides, in part: "A judge * * * should not * * * convey or permit others to convey the impression that they are in a special position to influence him.”
- 1 Respondent contends the city notes were “prudent” and "conservative” investments and his counsel contends there was no fiscal crisis until the fall of 1975. However, whatever attractions New York securities may have had during the times involved in this matter, certainly stability and security of investment were not among them. The Legislature recognized New York City’s financial crisis by adopting extraordinary financial assistance legislation at its regular session the year before, in 1974 and at its regular and extraordinary sessions of 1975. On May 30, 1974 the Legislature adopted chapter 594 of the Laws of 1974, • creating the Stabilization Reserve Corporation, The legislative finding in section 2533 of that act provided: "The legislature hereby finds and declares that the city of New York is faced with a grave and unprecedented fiscal crisis”; see, also, legislative findings: Municipal Assistance Corporation Act (approved June 10, 1975; L 1975, ch 169, § 3031); New York City Financial Emergency Act (L 1975, ch 868, § 1, approved Sept. 9, 1975); and see, generally, US Cong, Joint Economic Comm, New York City’s Financial Crisis: An Evaluation of Its Impact and of Proposed Policy Solutions (US Government Printing Office 1975, at pp 5-6: "While New York’s immediate problem is obtaining market access, the borrowing problems of the city have been manifest for some time prior to March, 1975, when the city was last able to market its own securities. Through the last half of 1974, New York City notes and bonds were issued to yield, at that time, unprecedented interest rates, indicative of the market’s inability to handle completely the bonds and notes issued by New York City”; emphasis added).
- 2 The rule provides: "ownership of government securities is a "financial interest’ in the issuer only if the outcome could substantially affect the value of the securities.”
- 3 (See, e.g., Stablization Reserve Corporation Act, L 1974, ch 594, § 2533 et seq.; New York Financial Emergency Act, L 1975, ch 868, § 1.)
- 4 See, e.g., the amicus brief of "Certain New York Financial Institutions” in Wein v State of New York ( 39 NY2d 136 ) urging that provisions of the Financial Emer *tt gency Act appropriating money to the City of New York and MAC be upheld: "An adverse [to the defendants] decision, depending upon its breadth, could call into question the validity of some or all of the debt now outstanding of the State of New York, would undoubtedly recreate the financial emergency which it is to be hoped has now been remedied, and would unfairly prejudice those who in good faith purchased debt instruments issued by the State and other public entities. * * * [T]he continued pendency of this suit with accompanying publicity aggravates the concern of the investment community as to the marketability of various government obligations including those of the City and State of New York.” See, also, the Assistant Solicitor General’s affidavit in Sgaglione v Levitt ( 37 NY2d 507 ) which stated the interrelationship of the various securities. "[T]he legislature created a New York State Emergency Financial Control Board to provide for and to implement a comprehensive financial plan for the City of New York in order to permit the City to meet its obligations and maintain essential services * * * [part of this plan was the provisions as to investment of pension funds in MAC bonds challenged by plaintiff in the instant action] The failure of commitment on any part of this financial plan would most likely result in a withdrawal from the plan by other proposed participants, the City would be unable to meet its obligations and the Emergency Financial Control Board would be unable to take the steps necessary to prevent default by the City and to preserve the integrity of not only the City’s financial structure but that of the State of New York and other municipalities as well.”
- 5 In our investigation we have considered the effects of respondent’s financial dealings in 10 cases before the court during the period January, 1975—September, 1977: Wein v City of New York ( 36 NY2d 610 [1975] ["Wein I”]); Sgaglione v Levitt ( 37 NY2d 507 [1975]); Boston Stock Exch. v State Tax Comm. ( 37 NY2d 535 [1975], revd 429 US 318 [1977], and 42 NY2d 1008 [1977]); Flushing Nat. Bank v City of New York ( 38 NY2d 999 [1976]); Wein v State of New York ( 39 NY2d 136 [1976] ["Wein II”]); Flushing Nat. Bank v MAC ( 40 NY2d 731 [1976] [the "Moratorium Case”]); Police Benevolent Assn, v City of New York ( 41 NY2d 205 [1976]); Wein v Carey ( 41 NY2d 498 [1977] ["Wein III”]); Quirk v MAC ( 41 NY2d 644 [1977]); and Wein v Levitt ( 42 NY2d 300 [1977] ["Wein IV”]).
- 6 The court eventually deferred the interest question to the Supreme Court ( 40 NY2d 1094 ). Judge Gibson fixed interest on matured city notes at 6% (Flushing Nat. Bank v MAC, 88 Mise 2d 1047). That decision has been noticed for appeal.
- 7 These were State notes maturing in one year. Respondent’s holdings did not exceed approximately three million dollars at any one time.
- 8 (See Thode, Reporter’s Notes to Code of Judicial Conduct, pp 52-54; Denecke, The Judiciary Needs Your Help, Teachers, 22 Journal of Legal Education 197, 203, cited in majority opinion.) 9. (Traynor, Badlands in Appellate Judges Realm of Reason, 7 Utah L Rev 157 , cited by majority, at p [w].)
Cases cited
- Bartlett v. Flynn 50 AD2d 401 at 404 p. 1
- Flushing National Bank v. Municipal Assistance Corp. 40 NY2d 731 p. 1
- Flushing National Bank v. Municipal Assistance Corp. 40 NY2d 1094 p. 1
- Wein v. City of New York 36 NY2d 610 p. 1
- Sgaglione v. Levitt 37 NY2d 507 p. 1
- Wein v. State 39 NY2d 136 p. 1
- Boston Stock Exchange v. State Tax Commission 42 NY2d 1008 p. 1
- In re the Proceedings against Suglia 36 AD2d 326 at 328 p. 1
- Public Utilities Commission v. Pollak 343 US 451 at 467 p. 1
- In re the Appointment of a Receiver of the Late Dodge & Stevenson Manufacturing Co. 77 NY 101 at 110 p. 1
- Commonwealth Coatings Corp. v. Continental Casualty Co. 393 US 145 at 150 p. 1
- In re Barlow 141 App Div 640 at 643 p. 1
- In re the Removal from Office of Droege 197 NY 44 p. 1
- Friedman v. State 24 NY2d 528 at 540 p. 1