Opinion 18-109

June 21, 2018

Digest:         (1) A full-time judge need not report on his/her annual statement of financial disclosure his/her theoretical involvement with a company the judge believed was completely dissolved and/or abandoned before he/she assumed judicial office, even though it is still listed as “active” on the NYS Department of Corporations website, where (a) the judge has never received any compensation or seen any evidence of business or other activity by the company, (b) the founder assured the judge that the company was never funded, never engaged in any business activity, was abandoned years ago and was thought to be dissolved, and (c) the founder has agreed that the judge should be deemed to have resigned from any theoretical involvement with the company several years ago nunc pro tunc.
(2) On these facts, the judge should ask the company’s founder in writing to formally dissolve the apparently abandoned company; once the judge has made this request, the judge has no further ethical obligation.

Rules:          Judiciary Law § 211(4); 22 NYCRR pt 40; 40.1(l); 40.1(n); 100.2; 100.2(A); 100.4(D)(3); 100.4(I); 100.5(A)(4)(g); Opinion 09-186.

Opinion:

         More than eight years before assuming judicial office, the inquiring judge had agreed to be involved in two proposed businesses. Although the businesses were organized and registered as limited liability companies, the founders have assured the judge that neither company ever actually engaged in any business, and thus their founders never (a) filed any tax returns, (b) paid any biennial fees or (c) re-registered either company. The inquiring judge never provided any funds for these companies and received no income from them. Indeed, the judge and the founders believed that the companies were dissolved as a matter of law. On becoming a candidate for elective judicial office, the inquirer filed an annual statement of financial disclosure (see 22 NYCRR 100.5[A][4][g]; 22 NYCRR pt 40). Question 4(a) states:

List any office, trusteeship, directorship, partnership, or position of any nature whether compensated or not, held by the reporting individual with any firm, corporation, association, partnership, or other organization other than the State of New York. Include compensated honorary positions; do NOT list membership or uncompensated honorary positions. If the listed entity was licensed by any state or local agency, was regulated by any state regulatory agency or local agency, or, as a regular and significant part of the business or activity of said entity, did business with, or had matters other than ministerial matters before, any state or local agency, list the name of any such agency.

The then-candidate did not list either company on the annual statement of financial disclosure, because he/she believed they were long since defunct and/or abandoned. After assuming judicial office, however, the judge consulted with an attorney when filling out the annual statement of financial disclosure (see 22 NYCRR 40). The attorney advised the judge that the companies were dissolved by operation of law on failure to re-register and pay biennial fees. However, on double-checking the NYS Department of Corporations database, it turned out that both companies are listed as “active.” The judge has discussed with the companies’ founders, and confirmed in writing, their mutual understanding that (a) the companies were dissolved by operation of law several years earlier and (b) the judge should be deemed to have resigned from the companies several years ago (before assuming judicial office), nunc pro tunc. The judge requests guidance on how to proceed.¹

         A judge must always avoid even the appearance of impropriety (see 22 NYCRR 100.2) and promote public confidence in the judiciary’s integrity and impartiality (see 22 NYCRR 100.2[A]). A full-time judge must not serve as an “active participant of any business entity,” unless an exception applies (22 NYCRR 100.4[D][3]). A candidate for elective judicial office, other than a town or village justice position, must “file with the Ethics Commission for the Unified Court System a financial disclosure statement containing the information and in the form set forth in the Annual Statement of Financial Disclosure” within a specified period of time (22 NYCRR 100.5[A][4][g]; 22 NYCRR pt 40). A sitting judge must likewise annually disclose his/her “income, debts, investments or other assets … as required by Part 40 of the Rules of the Chief Judge” (22 NYCRR 100.4[I]; 22 NYCRR pt 40).

         We note, first of all, that it does not violate Part 100 for a judge or judicial candidate to file what he/she believes to be a truthful statement in his/her annual statement of financial disclosure based on the information available to him/her at the time (cf. 22 NYCRR 40.1[l] [providing for disciplinary action as permitted by law for a reporting individual “who knowingly and willfully with intent to deceive makes a false statement or gives information which such individual knows to be false”]). On becoming aware of a possible inaccuracy, the judge or candidate may seek guidance from the UCS Ethics Commission and/or the Advisory Committee on Judicial Ethics about whether it is necessary to file an amended statement.² Thereafter, if needed, the judge should file an amended statement within a reasonable period of time as directed by the UCS Ethics Commission.

         As a matter of judicial ethics, we believe Question 4(a) of the annual statement of financial disclosure does not request information about a judge’s theoretical involvement with a defunct or abandoned company that has, to the judge’s knowledge, never been funded and never engaged in any business. Where, as here, (1) the judge has never received any compensation or seen any evidence of business or other activity by the company, and (2) the founder has assured the judge that the company was never funded, never engaged in any business activity, was abandoned years ago, and was thought to be dissolved, then, for Part 100 purposes, the judge may treat this as an “uncompensated honorary position[]” that need not be reported on Question 4(a).

         Moreover, because the founders of these apparently abandoned companies also agree that the judge should be deemed to have resigned from any theoretical involvement with the companies several years ago nunc pro tunc, we further conclude the judge does not, in fact, hold “any office, trusteeship, directorship, partnership, or position of any nature” for the purposes of Question 4(a). Thus, even if the companies have not been dissolved, the judge holds no reportable position with them.

         Under these circumstances, we conclude the judge need not make any disclosures concerning these companies in response to Question 4(a) and therefore need not amend any prior annual statement(s) of financial disclosure on this ground.

         Instead, the judge should ask the founders in writing to formally dissolve the apparently abandoned companies if they have not already done so. Once the judge has made this request, he/she has no further ethical obligation.

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¹ The judge first contacted the UCS Ethics Commission, but was apparently unable to obtain a definitive answer about how to answer Question 4(a). However, he/she obtained an extension of time to file his/her annual statement of financial disclosure.

² We recommend that a judge first seek guidance from the UCS Ethics Commission, before consulting us (see Judiciary Law § 211[4]; see also 22 NYCRR 40.1[n] [“Upon written request from any person who is or may be subject to the requirement of filing a financial disclosure statement, the commission shall render advisory opinions concerning such requirement. Such requests shall be confidential, but the commission may publish such opinions provided that the name of the requesting person and other identifying details shall not be included in the publication.”]; Opinion 09-186 [noting that the Ethics Commission is “the agency with the ultimate authority to interpret Part 40”]).