Edwards gave loan to a federal judge
Conflict issue arose as senator’s spouse played role in case
In 1994, when Sen. John Edwards
(D-N.C.) was still the biggest tort lawyer in North Carolina, he lent $30,000 to a federal bankruptcy judge who was then overseeing a case on which Edwards’s wife, Elizabeth, did much of the legal work. The judge, J. Rich Leonard, is a longtime friend of Edwards’s.
Edwards, who won election to the Senate in 1998, did no business in Leonard’s courtroom. But in 1999, Leonard approved a $1 million contingency fee for Nicholls & Crampton, the law firm where Elizabeth Edwards was an associate and working on the case. She had left the firm in 1996, three years before the parties settled and the fee was actually awarded. She has said she received no benefits from the award.
Subsequently, Edwards supported Leonard’s unsuccessful efforts to move up the federal judicial ladder.
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patrick g. ryan
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| Sen. John Edwards (D-N.C.) |
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Leonard denied that the loan posed any kind of a conflict of interest. “I couldn’t imagine a circumstance under which he [Edwards] would have come into a bankruptcy court,” he said.
But Jonathan Turley, a professor of law at George Washington University who has brought ethics charges against judges before, said the arrangement presented a “compelling case of conflict of interest.”
“It is hard to imagine a judge could rationalize presiding in a case where he holds a loan from a couple,” he said.
“It’s generally inappropriate for a judge to preside in a case with an attorney who has a financial arrangement, or loan, with the judge. The problems aren’t dramatically reduced by the fact that the loan was signed by the husband, as opposed to the wife,” he said.
“The underlying concerns remain the same: If a judge has both a personal and a pecuniary association with a couple, the judge should recuse himself from cases affecting the couple.”
Another law professor who teaches ethics at a major university said judges should never be soliciting money — including loans — from lawyers who might represent clients in their courtroom.
“Personal loans are verboten from anyone who is or might have business before a judge,” said the law professor, who asked not to be quoted by name. Such conduct could create an appearance of favoritism, and is considered improper both for the giver and recipient of the loan. “Anything a lawyer can’t do with a judge, a judge can’t do with a lawyer.”
The federal Code of Judicial Conduct states, “A judge should refrain from financial and business dealings that tend to reflect adversely on the judge’s impartiality” and should avoid the appearance of conflicts.
Turley said the judge would have had a responsibility to disclose the potential conflict to the defense counsel in the case.
Elizabeth Edwards’s name was listed as counsel for the plaintiff on court documents.
It is one of the main cases she worked on during 12 years at the firm, the Edwards campaign disclosed.
Both Edwards and Leonard have cited the loan on their financial disclosure forms.
Kim Rubey, a spokeswoman for Edwards’s presidential campaign, said Edwards made the loan to help Leonard while he was going through a divorce. She said Leonard needed the loan because his assets were tied up in joint accounts.
“The senator made the loan to help him with his finances during a tough time,” she said. “He was trying to help a friend who was in need of financial assistance to help get his kids through college.”
Nicholls & Crampton represented Conner Home Sales, a North Carolina mobile home company, in a Chapter 11 bankruptcy suit involving numerous creditors. Elizabeth Edwards had done much of the work in that case over a period of years, although she told the Raleigh News & Observer that she had no financial interest in the case when it was eventually decided.
“I never got any of it myself,” she told the paper in August, adding that she had “zero financial interest” in the case. Sen. Edwards’s spokeswoman said Elizabeth Edwards began working on the case in 1987.
Leonard, who is now the chief U.S. bankruptcy judge for the Eastern District of North Carolina, cited the loan on his financial disclosure form from 1999. He disclosed receiving an “unsecured loan” of less than $15,000 from “J.R. Edwards.”
Edwards’ spokeswoman and Leonard both confirmed that the total amount of the loan was $30,000. Edwards made the loan at the end of 1994, and it was paid off at the end of 1998, they both said.
Leonard also lists himself on the form as director of the Wade Edwards Foundation, named for Sen. Edwards’s son, under the heading of “positions” on the same 1999 disclosure form, although he apparently did not draw a salary, since it was not listed on a separate line for “non-investment income.”
Edwards established the foundation after Wade’s tragic death. Edwards and Wade once hiked Mount Kilimanjaro with Leonard and his son, not long before Wade’s death.
On Edwards’s financial disclosure report for 1998, Edwards listed as an asset the “repayment of loan to Richard Leonard” as being valued at less than $1,001 — an amount his spokeswoman said accounted for interest received on the loan.
Leonard, who has known Edwards since the two of them clerked for the same judge
after graduating from law school, said in an interview that he needed the loan because all of his assets were held jointly with his former wife, making it harder to obtain a loan by other means.
“We were running one day, and I just said, ‘I need to borrow some money to pay this tuition so I can get all this stuff settled,’” he told The Hill.
Leonard said that the loan was at a market rate of 8 percent interest and that he had paid it back. Leonard said that even in the highly unlikely event that Edwards or his firm were to participate in a case before him, he would have recused himself.
“I would have thought that we were too close friends,” he said.
As to the Conner case, Leonard noted that in 1995 he ruled against Nicholls & Crampton, who represented Conner Home Sales as the plaintiff, on an important motion for partial summary judgment. His ruling was reversed on appeal.
The case eventually settled for about $5 million damages in Leonard’s courtroom before trial. Leonard said he knocked down the attorneys’ fees in the case from about $1.2 million to $1 million, or 20 percent of the $5 million award — a percentage he said was lower than the industry standard of about a third.
“I know the recusal principles very well, and apply them every day, he said. “Friendship with the spouse of a lawyer is not a per se disqualifying, and it’s my judgment call.”
A search of Leonard’s docket did not reveal any instances where John Edwards’s firm, Edwards and Kirby, argued a case before him.
Edwards, who was elected in 1998 and is seeking his party’s presidential nomination in today’s Super Tuesday primaries, also worked to get Leonard nominated to a federal judgeship, although Leonard was never confirmed.
President Clinton had nominated Leonard for the U.S. Court of Appeals for the 4th Circuit in 1995, but then Sen. Jesse Helms (R-N.C.) blocked the nomination.
Republicans and Democrats have been able to sort through some of their differences to get other judges through the confirmation process for the 4th Circuit, however.
President Bush’s White House counsel’s office subsequently interviewed Leonard about a seat on the 4th Circuit Court of Appeals or the District Court, at Edwards’s urging.
Leonard said he disclosed the loan transaction every year on his disclosure forms, and twice disclosed it to the Judiciary Committee. “This is not a secret,” he said. “It was internally vetted at the White House and by the Justice Department when I was nominated. They wouldn’t have nominated me if they thought they were walking into a land mine.”
In a statement of biographical information presented to the Judiciary Committee when he was seeking confirmation as a District Court judge, Leonard listed the Conner case as one of 10 significant opinions he handed down from the bench.
