State of Washington

Ethics Advisory Committee

Question

May a judicial officer continue to hold shares of stock in a family business? May the judicial officer continue to own the shares and receive corporate distributions as long as the judicial officer has no part in the operation of the business (except shareholder’s meetings), or must the judicial officer divest him/herself of the shares entirely? If divestiture is not required, is something like a “Massachusetts Trust” mandated? If so, can the trustee disburse income to the judicial officer or must it accumulate in the trust. May the trustee be a family member, friend or employee of the business? May the judicial officer simply give someone else the power to vote the shares?

The judicial officer has an interest in a family independent insurance agency which operates as a subchapter “S” corporation. The agency has been in the judicial officer’s family for three generations. At one time the judicial officer managed the business when the judicial officer had an insurance agent’s license. For the last couple of years, the judicial officer was an officer, director and part-time employee and 50% shareholder of the agency. The other 50% shareholder is the judicial officer’s sister.

Following appointment to the bench, the judicial officer resigned as an officer, director and employee of the corporation pursuant to CJC Canon 5(C)(3). The judicial officer’s office key was turned over to the business manager.

Answer

CJC Canon 5(C)(3) provides in part that judicial officers may hold and manage investments and engage in other remunerative activity, but they should not serve as officers, directors, managers, advisors or employees of any business. Additionally, CJC Canon 5(C)(1) provides that judges should refrain from financial and business dealings that tend to reflect adversely on their impartiality, interfere with the proper performance of their judicial duties or exploit their judicial position. Canon 5(C)(2) provides that judges should not involve themselves in frequent transactions with lawyers or persons likely to come before the court on which they serve.
CJC Canon 5(C) permits a judicial officer to continue to hold shares of stock in the family insurance agency. The judicial officer has resigned as an officer, director and employee of the corporation pursuant to CJC Canon 5(C)(3). The judicial officer may continue to receive corporate distributions as long as the judicial officer abides by Canon 5(C)(3). The judicial officer is not required to establish a trust in order to retain the stock.

The business is not likely to involve the judicial officer in frequent transactions with attorneys or other persons likely to come before the judicial officer nor will it otherwise interfere with the proper performance of the judge’s judicial duties.

Opinion 97-02

02/21/1997