This article originally appeared in the Daily Journal on February 25, 2019.
Secrecy in the judicial decision-making process is essential to court functioning. It preserves the courts’ ability to debate, experiment, and collaborate among jurists and their staff, while ensuring litigants and the public learn of rulings simultaneously.
Given the sheer number of security scandals that have engulfed America’s political and business classes in the first quintile of the 21st century, from Edward Snowden’s NSA disclosures to Yahoo’s 3-billion user data dump, it’s a wonder the courts haven’t fallen prey to unwelcome disclosures. Because the incentives surely exist, if one is willing to look past the risk and immorality of it. Disclosing sealed indictments could mean big political points. Details of a decided-but-unreleased decision involving a public company could be worth millions to Wall Street traders.
And it’s not like it hasn’t happened before.
Like a Fox
Growing up wealthy in Kentucky in the late 1800s, Ashton Fox Embry was destined for great things. Law school at Georgetown led to a stenographer’s position in the Department of Justice just as the federal government was getting its post-Civil War footing. After school, Embry took a law clerk position with a federal district judge in Tennessee, Edward Sanford, where the docket was mostly criminal matters like “illicit distilling.” He then moved to a stint in the newly created solicitor general’s office, before jumping at an opening as the sole law clerk to Supreme Court Justice Joseph McKenna.
It was 1911, and Supreme Court clerks were a relatively new innovation. The job wasn’t the case-analyzing, opinion-drafting, intellectual repartee that it is today; it was mostly a typing and valet position, paying the justice’s bills and keeping track of his votes on the court’s cases. Embry kept his head down and did his duty ably for nearly a decade, even after McKenna’s mental capacities began to fail him.
But on December 16, 1919, Embry suddenly and unexpectedly wrote his justice and tendered his immediate resignation. Embry told McKenna that his side-hustle — a bakery business — had succeeded so well that he needed to devote himself full-time to more leavened endeavors.
What McKenna didn’t know when he accepted Embry’s resignation later that day was the lede in the morning’s New York papers. They ran a shocking story: Someone had leaked the results of the Supreme Court’s pending decision in United States v. Southern Pacific Railroad to a group of Wall Street speculators shortly before the decision was officially announced. The government had challenged Southern Pacific’s title to some land on account of the company’s alleged fraud when applying for it; the justices decided to come down on the government’s side. When the decision hit, the stock cratered by nearly 10 percent — and the speculators, who had sold the stock short hours before the decision’s release, pocketed a tidy sum.
CSI: Flapper Era
About a month before the Southern Pacific decision, a journalist for the International News Service, Marlen Pew, had gone to see Chief Justice Edward White. Pew told White that Pew’s friend, John Hammond, reported that a group of men invited him to join a scheme to make money off the stock market from early access to Supreme Court opinions. White, deeply troubled by the revelation, referred the matter to the Justice Department’s Bureau of Investigation, which began an undercover investigation employing the latest in crime-fighting technology.
With Hammond as an inside informant, government agents had him wear a primitive wire — a half-pound wooden dictograph that recorded conversations on an imprinted cylinder. Hammond wore the device during meetings with his co-conspirators: Barnett Moses, a D.C. attorney, and Major Millard Mayer, an Army surplus clerk. Their contact was John Graves, a “confidential clerk” with the Justice Department.
But as an executive-branch employee, Graves didn’t have access to the Supreme Court’s secret deliberations. He had to be getting his information from someone else on the inside. Working backwards, investigators discovered that Graves and Embry were close friends from their early days within the department. Graves had certified Embry’s oath of office and had worked on cases with Judge Sanford in Tennessee, who later gave Embry his first clerkship. It even turned out that Embry had brought Graves in as partner in his bakery business.
On questioning, and facing Hammond’s inside information, the four players — Moses, Mayer, Graves and Embry — had trouble keeping their stories straight. Moses confessed to receiving secret Supreme Court deliberations from Graves; Mayer had personally traded Southern Pacific stock shortly before the decision was released; Embry gave Graves $5,000 the night before Southern Pacific’s announcement, and Graves used the money to short the company’s stock, then spent the night in Moses’s hotel room. Days later, Graves gave Embry an extra $600.
Those facts were enough. By the end of 1919, the Justice Department was ready to seek an indictment.
Short-Sale Arm of the Law
But what crime did the defendants commit? The Securities Exchange Act would outlaw insider trading, but not until 1934. No criminal statute formally required Supreme Court communications be kept confidential.
The grand jury ultimately indicted Moses, Mayer, Graves and Embry on a theory that the four conspirators “impaired the functions” of government — a violation of United States Code Section 37 — by depriving the Supreme Court of its usual practice of announcing its decisions at customary times. A strange theory, that the government has a legal right to announce things at customary times, and on penalty of a criminal violation, but there was some case law to support it.
The defendants hired a slew of top-notch D.C. lawyers, including Frank Hogan, founder of the international firm now called Hogan Lovells. They demurred to the indictment and sought to quash it on the ground that section 37 didn’t cover behavior like that alleged. Losing in the lower courts, they took their challenge up to the Supreme Court — the same Supreme Court the defendants were charged with “impairing.” The court denied certiorari; records don’t indicate how Justice McKenna voted.
But all that legal talent was still able to raise questions about Hammond’s background, and since he was the government’s inside informant and star witness, the Justice Department assigned a young up-and-comer named J. Edgar Hoover to investigate him. Hoover discovered that Hammond had a checkered history with military intelligence during World War I. He was sacked from his post following accusations of paranoia and insubordination. After the war, Hammond had tried his hand as a newspaper cartoonist, but his humor somehow got on the wrong side of Al Capone, leading Capone to kidnap Hammond’s son. The boy was eventually released unharmed, but it was all enough to raise a red flag for Hoover, whose report eventually concluded that Hammond was unreliable, vindictive, self-aggrandizing, eccentric and lacked “good mental balance.”
In 1921, Warren Harding replaced Woodrow Wilson as president. Staff turnover at the Justice Department, Hoover’s damning report on Hammond, and procedural irregularities in the investigation (including months’ delays preparing investigators’ reports) meant the prosecution became more of an embarrassment than a capfeather. The case faded away, and eventually, the government dismissed the indictment. No prosecution ever went forward.
Second Acts in American Life
With the indictment dismissed, Embry was free and clear. He became a wealthy, upstanding member of the District’s mid-century business community, and grew his bakery business to seven branches by the time he died in 1965. Aside from his pastry empire, Embry served as treasurer of a sign manufactory, president of a wrench-making company, government clerk during the depression, and even a cafeteria owner. He married and had four children, and lived to see his grandchildren and great-grandchildren. But the Supreme Court scandal always hung over him: After his death, his son reportedly fulfilled a final wish and snuck on to Supreme Court grounds after dark to spread his ashes.
Embry always denied his guilt, and no conclusive evidence ever established that he was the leaker. But Hoover had, in the end, believed he was — and so did 9th Circuit Judge John Owens, whose research unearthed Embry’s story for a 2000 law review article, “The Clerk, The Thief, His Life As A Baker,” 95 Nw. U. L. Rev. 271. A former Supreme Court clerk and Justice Department prosecutor himself, Owens couldn’t believe that Embry would suddenly resign his position with Justice McKenna, a job he reportedly loved, unless something dramatic occurred — and it’s difficult to imagine the timing could be a coincidence. Embry’s extra $600 and entangled relationships with the other conspirators give that determination strong indicia of credibility.
Today, judicial law clerks are bound to secrecy not just by a strict code of ethics, but several criminal statutes. Trading on unreleased court decisions would not only constitute a violation of federal securities laws (18 U.S.C. Section 1348), but could also constitute several other felonies, including conversion of government property (18 U.S.C. Section 641), unlawful removal of government records (18 U.S.C. Section 2071), unauthorized use of papers involving legal claims (18 U.S.C. Section 285), and possibly even violations of laws protecting classified information (18 U.S.C. Section 798). Government investigations are so much more sophisticated, and law clerks have so much to lose, that it’s difficult to imagine such a scheme succeeding today.
But the incentives are very powerful. Perhaps the most important way the judicial system can preserve its essential decision-making secrecy is by encouraging the largely accurate belief that societal rule of law rises and falls on the respect given the courts. When Hammond came forward and told Pew of the scheme, and encouraged him to disclose it to Chief Justice White, he would later claim he did so because of how much he respected the Supreme Court — the “one sure part” of government, the branch which “could not, would not” ever go wrong.
At a time when some politicians blithely grab cheap points by railing against “so-called judges,” Hammond’s optimism about the Third Branch may be worth repeating.
Ben Feuer is the chairman of California Appellate Law Group LLP*, an appellate boutique with offices in San Francisco and Los Angeles. He handles civil and business appeals in the 9th Circuit and California Courts of Appeal. You can email him at firstname.lastname@example.org or find him at www.calapplaw.com. Appellate Zealots is a monthly column on recent appellate decisions and appellate issues written by the attorneys of the California Appellate Law Group LLP.
*In July 2022, the California Appellate Law Group was renamed the Complex Appellate Litigation Group.
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