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Judge Steps Aside from Amazon Case, Citing Financial Conflict of Interest

A federal judge has recused himself from presiding over an Amazon real estate case due to financial conflict, after being the subject of a Dec. 30 Wall Street Journal report that revealed his wife’s investment in the e-commerce giant’s stock.

Amazon, the plaintiff in the trial, has accused two former employees of taking kickbacks from a real estate developer and violating Amazon’s conflict-of-interest policies.

U.S. District Judge Liam O’Grady of the Eastern District of Virginia had ruled in Amazon’s favor on several pretrial motions during the 20 months he oversaw the civil case.

An Amazon representative told Sourcing Journal the company did not have any  comment on the case.

O’Grady disclosed in a Dec. 14 notice that he learned that his wife held approximately $22,000 of stock in Amazon on Nov. 23, indicating that the stock was held in a brokerage account, rather than what he thought was a mutual fund. He contends that he had no familiarity with the contents of his wife’s stockholdings.

With that in mind, his participation in this case (and others involving Amazon) violated a 1974 federal law that requires judges to disqualify themselves from cases involving parties in which they, their spouses or their children under 18 have a financial interest, such as individual stocks. Investments in mutual or index funds are exempted.

O’Grady’s wife sold the shares Dec. 2, after the Wall Street Journal contacted the judge about the conflict of interest. However, the judge said in the said in the Dec. 14 notice that his recusal would “substantially affect the progress of this case” and initially stayed on.

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After learning of the conflict, the defendants—the two ex-Amazon employees and real estate developer Northstar Commercial Partners—asked the judge to step aside in a Dec. 21 court filing.

The Amazon suit is one of 66 cases since 2010 that O’Grady has heard in the Alexandria, Va., federal courthouse while his wife was invested in plaintiffs or defendants, a Journal review found. O’Grady told the Journal in an email that he was reviewing his case lists and disclosure forms and would notify parties of conflicts.

At a recusal hearing held on Jan. 6, O’Grady defended himself against arguments that the financial conflict put his impartiality in doubt. He said the “idea that I would steer this case in Amazon’s favor because I felt that my wife’s $22,000 investment in Amazon’s stock would be at risk if I didn’t is literally—is almost insane.” He noted that he had ruled against Amazon in a separate counterfeiting case in May.

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

In an order on Monday, O’Grady said he was reluctant to step aside because his wife no longer owned the stock and the defendants in the case who had asked him to recuse offered no evidence that he was biased in Amazon’s favor.

“However, perception of the fair administration of justice—both by the public and by the parties in the case—is of the highest importance to the Court,” O’Grady wrote.

The case was reassigned on Monday to Judge Michael Nachmanoff.

The subject of the current Amazon case, filed in April 2020, focuses on more than $400 million in development projects in Northern Virginia, where Amazon has established data farms for its Amazon Web Services (AWS) business.

Beginning in 2018, Amazon entered into lease agreements with Denver-based Northstar Commercial Partners for nine of these data centers on three sites. The developer bought land and constructed shell facilities for Amazon, which then built out the interiors.

Amazon alleged in its suit that two employees, assigned to solicit developers and obtain bids for real estate deals, steered the lease contracts to Northstar in return for millions of dollars in kickbacks.

The suit names as defendants the two ex-employees, Casey Kirschner and Carleton Nelson; WDC Holdings LLC, which does business as Northstar, and Northstar founder Brian Watson; as well as several other corporate entities created for the Amazon deals. It alleges racketeering, fraud, conspiracy, breach of contract and unjust enrichment, among other claims.

The Wall Street Journal found 65 additional cases handled by O’Grady despite his wife’s stock investments in plaintiff or defendant corporations, including Bank of America Corp., IBM and Verizon. Federal law requires judges to maintain recusal lists of companies in which they or their families are invested and update it regularly.

Judge O’Grady’s Amazon case example is just one instance of many where an arbiter with no financial stake should have presided. In September, the WSJ reported finding 131 federal judges who oversaw 685 conflicted cases between 2010 and 2018, in which they or their families were financially invested in one of the parties involved. It has since found violations by five more judges, and some of the 131 judges have identified more suits where they should have recused themselves, pushing the case total above 950. Parties in past litigation who are notified of judicial conflicts can request to have their suits reheard.