Opinion: 99-123

September 14, 1999

Digest: A judge should not accept the opportunity of participating in an initial public offering of stock of a corporation which is represented by an attorney whom the judge has appointed to fiduciary positions.

Rule:  22 NYCRR 100.2; 100.2(C); 100.4(A)(1); 100.4(D)(1)(a);
           Matter of DiFede 1982 WL 196856 (N.Y. Com. Jud. Cond.);
           Matter of Chananau, 1982 WL 196854 (N.Y. Com. Jud. Cond.).


            A judge submits the following inquiry:

May a full time judge purchase the common stock in a corporation approved by regulatory authorities for public trading under the following circumstances?

The judge is well acquainted with an attorney who from time to time he has appointed to fiduciary positions. The attorney is currently representing a corporation which is being converted to one whose common stock will be publicly traded. All approvals are in place and the corporation will shortly commence trading on the NASDAQ Exchange. In advance of the first day of trading, shares are offered for purchase to the public at a fixed price and allocated in a manner approved by the Securities and Exchange Commission and other regulatory bodies. These shares may not be traded before the first day of trading. May the judge avail himself of an opportunity to buy these shares at the fixed price prior to the first day of trading?

            In the opinion of the Committee, the judge should not avail himself of the opportunity being presented by the attorney whom the judge has "from time to time ... appointed to fiduciary positions." That opportunity is presumably intended or anticipated to be of some financial benefit to the judge. And the source of this benefit is the lawyer who has been a fiduciary appointee of the judge "from time to time." It is this fact which renders the judge's participation unacceptable. Thus, it is not necessary to quantify or fully explore the nature, scope and details of the benefit. For the acceptance of the opportunity would, in our view, at the very least constitute an appearance of impropriety in violation of section 100.2 of the Rules Governing Judicial Conduct. 22 NYCRR 100.2. It would "convey or permit others to convey the impression that they are in a special position to influence the judge" (22 NYCRR 100.2[C]), and might well "cast doubt on the judge's capacity to act impartially as a judge." 22 NYCRR 100.4(A)(1). Further, it could also be regarded as a financial dealing that "may reasonably be perceived to exploit the judge's judicial position." 22 NYCRR 100.4(D)(1)(a).

            We further note that the State Commission on Judicial Conduct has disciplined judges in matters involving the receipt of material benefits from fiduciaries appointed by the judge. See Matter of DiFede, 1982 WL 196856 (N.Y. Com. Jud. Cond.); Matter of Chananau; 1982 WL 196854 (N.Y. Com. Jud. Cond.).