I have received from Ms. Shantee Maharaj the following communication regarding my post concerning Judge Alito and the Vanguard recusal question. Download dec_16_univ_san_diego_response_letter.doc
Update: The text is as follows:
Shantee Maharaj, J.D.
32 Woodbourne Road
Jamaica Plain, MA 02130
December 16, 2005
By Electronic Mail
By Electronic Mail, First Class Mail and Certified Mail, Return Receipt Requested, to Prof. David McGowan
Kevin Cole, Interim Dean (email@example.com)
Virginia V. Shue, Associate Dean (firstname.lastname@example.org)
David McGowan, Prof. (email@example.com; firstname.lastname@example.org)
University of San Diego
School of Law
5998 Alcalá Park
San Diego, CA 92110-2492
Mary E. Lyons, President (email@example.com)
Robert Hoehn, Chair, Board of Trustees (firstname.lastname@example.org)
Julie H. Sullivan, Vice President and Provost (email@example.com)
Pamela Gray Payton, Asst.Vice Pres. (firstname.lastname@example.org)
University of San Diego
5998 Alcalá Park
San Diego, CA 92110-2492
Re: RETRACTION AND CORRECTION DEMAND of the November 5, 2005 internet publication by “David McGowan, University of San Diego School of Law” entitled “Judge Alito and the Vanguard Recusal Question” at http://www.legalethicsforum.com/
This is to bring your attention to certain false statements contained in the above-referenced internet publication by a faculty member using the identity “David McGowan, University of San Diego School of Law.” Professor McGowan’s publication not only contravenes the “Code of Conduct” listed on your website which “describes how we shall conduct ourselves as representatives of the University”, but his misrepresentations have incited erroneous reader comments, and his actual errors are repeated/referenced on other internet sites as well. To provide context and to help you better understand Prof. McGowan’s malicious conduct, I have attached, for your convenience, two pleadings filed by my lawyer, Professor John G.S. Flym, in the Massachusetts and Pennsylvania Courts. These pleadings are among others we have filed which are public records.
I hereby demand that you promptly retract your statements, and publish the following corrections:
1. Prof. McGowan asserts that “a Massachusetts court found that the plaintiff’s late husband, D. Dev Monga, had moved money from his business to his Vanguard account in an effort to hide assets from his creditors.” No court has ever found that Mr. Monga had moved money from his business to his Vanguard account. Indeed, during oral argument before the Massachusetts Appeals Court, on October 14, 2005, (in my appeal of the Massachusetts Receivership order), Vanguard’s own attorney, John Baraniak, Esq., of Choate, Hall & Stewart, Boston, in response to a direct question put to him by the Appeals Court Judge, Judge Graham, as to whether there was any evidence of fraud in the moneys used by Mr. Monga to set up his IRA, Attorney Baraniak unequivocally conceded that there was no evidence of fraud whatsoever. Mr. Baraniak confirmed what Vanguard’s Counsel, Suzanne Barton and Paul Gallagher stated a decade earlier in assorted letters and pleadings to the Massachusetts Receiver; that Vanguard could not lawfully transfer Mr. Monga’s IRAs to the Receiver because there was no evidence of fraud. The record shows that in their unlawful efforts to seize my husband’s statutorily protected IRAs to satisfy a judgment before my husband could even appeal said judgment, the creditor’s Attorneys, Peter and Cathy Brooks, and the Receiver, John Ottenberg, whose appointment Attorneys Brooks obtained, never presented any evidence of fraud: Ottenberg simply asserted that the amount in Monga’s IRAs “... seemed high for someone his age ....” At the time Ottenberg made this assertion, my husband, (who died of cancer in 1996), was 56, a member of the Massachusetts Bar and a successful petroleum engineer who had established two very successful companies.
2. Equally egregious is Prof. McGowan’s statement that Vanguard complied with the Massachusetts courts orders “to prevent Monga from defrauding his creditors by appropriating entity assets to his personal account.” Vanguard’s own pleadings filed in court show that as Monga’s IRA Trustee, Vanguard, a Pennsylvania Company, unlawfully froze Monga’s statutorily protected IRA in June 1992 without a valid Court order and maintained the freeze for six years. No “entity” assets were ever appropriated to Monga’s personal account and the legality of Monga’s IRA held by Vanguard is not open to debate: The documentary evidence before all courts, Massachusetts and Pennsylvania, shows that all of Mr. Monga’s IRAs contained only legitimate retirement savings and all contributions to his IRAs were made years before Monga even met the plaintiff who later sued him.
3. Again, with no concern for the facts, Prof. McGowan states “Vanguard was not trying to keep the plaintiff's assets for itself. It paid those assets to Monga's creditors, and the chance that Ms. Maharaj, his widow, would get money out of Vanguard was trivially low.” Vanguard did not pay any of the IRA assets to “Monga’s creditors” as McGowan claims. Court records show that Vanguard kept $92,000 from Monga’s IRA as legal “fees” – to oppose Monga! Vanguard then gave the balance to the Receiver, Ottenberg, who paid himself and Attorney Peter Brooks (who had obtained Ottenberg’s appointment as Receiver.)
Prof. McGowan evidently failed to understand that a bona fide IRA can not be used to pay a judgment creditor. The federal statute in question, 26 U.S.C. §408 provides that IRAs are “for the exclusive benefit of an individual or his beneficiaries” and are “nonforfeitable.” The April 4, 2005, unanimous opinion written by U.S. Supreme Court Justice Thomas in Rousey v. Jacoway, 125 S.Ct. 1561 (2005), resolved this exact question. That is, 26 U.S.C. §408 means what it plainly says, that IRAs are protected against creditors’ claims, as do its counterpart Massachusetts and Pennsylvania exemption statutes, as well as the explicit terms of Vanguard’s IRA Contract with Monga. Vanguard’s IRA Contract with Monga, Section 8.1 provides that the IRA is established for the exclusive benefit of the accountholder or his beneficiary; and that the IRA account holder’s interest in the IRA shall be non-forfeitable at all times. Section 8.2 provides that “no interest, right, or claim in or to any of the IRA shall be assignable, or subject to garnishment, attachment, execution or levy of any kind, and that Vanguard shall not recognize any attempt to effect any such assignment;” Section 8.4 provides that the IRA shall be “governed by Pennsylvania Law”, “which prohibits the seizure of assets held in an IRA account to satisfy a judgment.” Rousey simply reaffirmed the Supreme Court’s decision over a decade ago in Patterson v. Shumate, 504 U.S. 753 (1992), (that ERISA pension funds are beyond the reach of creditors, even where the pensioner was guilty of crime, citing Guidry v. Sheet Metal Workers Pension Plan, 493 U.S. 365 (1990)). Prior to Rousey, seven federal Circuit Courts of Appeals had followed the decision in Patterson to protect IRAs from creditors’ claims.
4. Prof. McGowan admits “I am not an expert in the regulation of funds…” yet, he states “the plaintiff’s case seems to have been frivolous, and even if it had not been the expected cost (risk) to Vanguard was trivial.” Prof. McGowan’s failure to grasp the three points above also led him to completely misunderstand this case against Vanguard. My husband’s federal Pennsylvania lawsuit at issue (E.D. Pa. 95-5235) sought compensatory and punitive damages against The Vanguard Group, Inc., Vanguard Fiduciary Trust Company, and Vanguard/ Morgan Growth Fund, Inc., (collectively “Vanguard”) for unlawful conversion of his IRA. Significantly, long before the 1998 Massachusetts State court order which Prof. McGowan cites, one Pennsylvania Federal Judge explicitly warned Vanguard that, should it decide to comply with a Massachusetts order directing it to transfer Monga’s IRA, Vanguard would be subject to a Pennsylvania suit for damages by Monga. The reason, quite simply, is that the Massachusetts Receiver, Ottenberg, who sought to reach Monga’s IRA to pay the judgment should have “domesticated” whatever Massachusetts order upon which he was relying by getting a Pennsylvania court to “endorse” that Massachusetts order. The Receiver failed to “domesticate” any Massachusetts Order in Pennsylvania. Ottenberg’s choice to ignore normal procedure reflects the fact that he would have lost any judicial inquiry into the legality of Monga’s IRA.
5. Prof. Mr. McGowan further restates that Monga’s “case at issue placed Vanguard at no risk at all… and that disqualification is required only where the litigation presented a risk to the judge’s interest by threatening severe harm to the firm involved, which was not the case here, [and] That is another reason this case presents no real risk of an economic conflict.” Prof. McGowan fails to understand the nature of the appeal in which Judge Alito participated, and a judge’s duty to recuse when a conflict exists. The three Vanguard entities were no mere stakeholders in this case, as McGowan suggests, but were being sued by Monga for, inter alia, unlawful conversion of his statutorily protected IRA, breach of contract, and breach of fiduciary duty. As Monga’s IRA Trustees, Vanguard stood accused of having acted illegally, and of having resorted to false representations before both the Massachusetts and Pennsylvania Courts in order to cover up its unlawful conversion of Monga’s IRA. Challenging the Pennsylvania District Court’s basis for dismissing Monga’s complaint without addressing its merits, namely without an evidentiary hearing or factual finding, was the object of Monga’s appeal to the Third Circuit. This appeal was assigned to a panel including Judge Alito. In 2002, again without a hearing, Judge Alito ruled in Vanguard’s favor while having financial and ownership interests in Vanguard. He upheld dismissal on grounds not even argued by Vanguard in the District Court, by reliance on legal doctrines of dubious validity, as applied to Monga, and by refusing to follow clearly applicable jurisprudence. If you want the specifics, I will send you a copy of Prof. Flym’s Petition for Writ of Certiorari filed in the U.S. Supreme Court seeking review of Alito’s decision. (As you know, certiorari petitions are discretionary, rarely granted, and a refusal to grant certiorari review says nothing about the merits of a petition).
6. Prof. McGowan has attempted to downplay Judge Alito’s unlawful conduct in failing to recuse, suggesting that it was merely “a mistake—an ‘oops’”. In McGowan’s opinion, unethical behavior is acceptable as long as the impact of any damaging and unjust results is limited, in this case to a single woman, a widow. The “Oops” explanation suggests that Judge Alito’s failure to recuse was inadvertent. This explanation strains any reader’s intelligence: How could Judge Alito possibly be ignorant of his own Vanguard investments amounting to hundreds of thousands of dollars, or of Vanguard’s status as party Defendants in the case? Alito’s recusal list includes Vanguard, and three Vanguard companies were clearly named as Defendants in the case. All judges remain fully responsible for noticing and acting on such facts themselves. Judge Alito knew of his large and growing Vanguard investments because he was required by the judicial canons of ethics to pay close attention to his investments. Moreover, he is required to file an annual report of his financial investments with the Administrative Office of the Judicial Conference of the United States. The Appellate pleadings before Alito included the name Vanguard 19 times on the covers of the main briefs, and over 400 times altogether in the documents, in addition to repeated references to Vanguard in the lower court opinion he was reviewing. Vanguard appeared in the caption and opening text of the opinion Alito himself authored. Included in those papers was Vanguard’s required corporate disclosure form, which explained in detail the relationship of the named Vanguard parties to the Vanguard funds he owned. The specific purpose of this form is to provide judges with the facts they need about the corporate parties before they sit on a case involving the parties. Judge Alito also personally ruled on motions and signed all the orders in this appeal that identified Vanguard prominently. Judge Alito even acquired additional Vanguard Funds on three separate occasions in 2002 while ruling on this appeal! Clearly, Prof. McGowan’s “oops” explanation is not credible.
Judge Alito remained personally responsible for knowing and acting upon the relevant facts. The statute requires that a judge “shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.” See, Liljeberg v. Health Services Acquisition Corp., 486 U.S. 847 (1988). As Judge Alito said to Chief Judge Scirica in 2003, his personal practice is “to recuse myself ‘when any possible question might arise.’” [Quoted from Alito’s 2003 letter to Scirica] This means that Judge Alito was obligated under his own practice to recuse himself.
7. Prof. McGowan clearly fails to understand why Judge Alito’s participation in this appeal was illegal. Alito’s promise, as a nominee to the Third Circuit bench, in 1990 to recuse himself from any case involving Vanguard amounts to his concession that the judges’ recusal statute, 28 U.S.C. §§ 455(a), (b) & (d), would require him to do as much. Indeed, Alito’s recent response to the Senate Judiciary Committee’s Questionnaire clearly shows that Alito continued to include Vanguard companies up through 2005 on his “standing recusal list.” The recusal statute, as you should be aware, dates back to 1974 when Congress adopted the “however small” phrase, in defining the importance of the “financial interest” which would trigger a judge’s recusal - Congress chose this phrase despite efforts to substitute a “de minimis” test. In the mid-1970’s the Judicial Conference of the United States issued an “Advisory” warning federal judges that certain mutual funds convey an ownership interest in the fund management company, (not to be confused with ownership of the securities in a Fund’s portfolio at any given time):
... shares in some mutual funds may convey an ownership interest in the mutual fund management company in which case that company should be included on the conflicts lists ....
See www.uscourts.gov/guide/vol2/checklist.pdf. The salient fact, which Judge Alito surely knew, and which McGowan apparently ignores, is that in language paralleling that of the “Advisory” of the Judicial Conference of the United States, Vanguard explicitly states that it is owned by its Funds: Vanguard explains that its unique organizational structure, unlike some other mutual funds, makes the funds’ shareholders owners of the management company known as The Vanguard Group. Thus Alito’s investments in several Vanguard mutual Funds, to the tune of up to $900,000, made him an owner of Vanguard, a party to this appeal.
8. Prof. McGowan erroneously claims that after I complained that Judge Alito should not have heard the case because of his Vanguard investments, Judge Alito disagreed but “recused himself and sent the case to the Third Circuit to decide what to do.” To suggest that Judge Alito recused himself over a year after he decided the case in favor of a company in which he had invested hundreds of thousands of dollars seriously misrepresents Judge Alito’s actions at the time. The fact is Judge Alito could not have recused himself after he actually participated and decided this appeal. The record is clear, Judge Alito never recused himself. Indeed, he wrote the Opinion which made Vanguard, a company in which he has financial and ownership interests, the winner.
Actually, after I challenged his participation in my appeal, Judge Alito’s letter to the Chief Judge merely stated that his post-decision recusal “will of course necessitate the reconstitution of a panel to consider the pending motion” to disqualify him and vacate his decision. Chief Judge Scirica reconstituted the panel to consider my motion to vacate, then vacated Alito’s opinion and ordered the new panel to take whatever steps were appropriate in the case. The fact is, the appeal was neither heard by the second panel (nor, for that matter, by Judge Alito’s). The second panel simply reissued the same opinion Alito had authored. This second panel, appointed in early February 2004, ignored the fact that my lawyer, Prof. John Flym, a member of the Third Circuit bar, had filed his appearance in this appeal on behalf of Monga’s estate in mid-January 2004. Up to that time, as Monga’s widow, I had been forced to represent my husband’s estate pro se. The second panel decided to proceed on the basis of my original pro se “informal” brief, and to forego oral argument, (despite a clear rule mandating such arguments in all but “frivolous” appeals). The Third Circuit has never suggested that my appeal was frivolous. Perhaps most egregiously, despite Prof. Flym’s repeated inquiries with the Clerk’s office and requests to be notified when the new panel had been appointed, Prof. Flym learned of its appointment, as well as of its mode of procedure, eight weeks after the fact, just one day before the second panel issued its “Not Precedential & Not for Publication”, word-for-word replica of Judge Alito’s 2002 Opinion, except for the addition of footnote 1 on page 5. Despite the Rule’s provision that “Service on a party represented by counsel must be made on counsel”, notice of the February 12, 2004 order was mailed 6 ½ weeks later, by letter dated 3/30/04, which Prof. Flym received on April 6, 2004. The letter was addressed to all counsel of record, with the notable omission of my lawyer, Prof. Flym’s name! The second panel’s mode of proceeding effectively denied me my constitutional right to be represented by, and heard through, counsel. Rule 45(c) also requires the date of service to be noted on the Docket. No such entry was made on the Docket in this case, nor were entries made respecting certain papers which my lawyer, Prof. Flym thereafter filed seeking reconsideration of the second panel’s actions. The transparent effect of the second panel’s adopting verbatim Judge Alito’s 2002 Opinion is to suggest that Judge Alito’s failure to obey the recusal statute is a mere technicality, as opposed to what it is: a structural error affecting the integrity of the appellate process, as well as the disposition of this appeal.
9. It’s worth noting that the impartiality mandated by the Constitution’s Due Process Clause has been understood by federal judges from the earliest days of our Republic: Judges from Chief Justice Marshall and Justice Livingston in 1813, to Chief Justice John Roberts in our time, have routinely recused themselves from cases where their financial interest in a party was much smaller than Judge Alito’s in this case. No one should be surprised that the principle of “Justice under Law” entitles everyone in this land to have their cases decided by judges who have no financial interest, real or apparent, (28 U.S.C. § 455(a)), in their opposing parties.
10. Finally, Prof. McGowan’s characterizations of me, Monga’s widow, is quite disturbing. The protection of IRAs from creditors for the exclusive use of individuals and their beneficiaries is of national significance: Millions of Americans could experience my late husband’s fate - anyone with the misfortune of having their assets placed under receivership based only on unproven allegations of fraud and even before having had the chance to appeal the underlying judgment (an appeal which incidentally, he had as of statutory right). People who have relied on federal and state laws protecting their IRAs against reach by creditors may be dismayed to discover that IRA Trustees such as Vanguard permit their IRAs to be seized anyway, based on no more than an out-of-state Receiver’s speculative claim that assets might have been fraudulently transferred into the IRAs, to defeat satisfaction of a judgment debt. Even more egregious, is the fact that Vanguard kept $92,000 from my husband’s IRA to oppose him! It seems to me that Prof. McGowan’s readers deserves a bit more understanding of their stake in the appeal of my late husband’s case - and why it was both illegal and outrageous for Judge Alito to, quite plainly, choose to ignore his duty to obey the recusal statute.
Please feel free to contact me should you have any questions. Should you wish to communicate with my lawyer, Prof. John Flym, he can be reached at email@example.com or 617-373-3348.
Very truly yours,
cc: John G. S. Flym, Prof.
Pro Bono Attorney
for Shantee Maharaj and The Estate of D. Dev Monga
The Senate Judiciary Committee
Davidson Hughes Communications