Judges in health care suits hold stock in industry firms

(Bloomberg) -- Three federal judges overseeing challenges to the Obama administration's health-care overhaul own shares of companies in the industry, including insurers and medical-device makers, the government watchdog group Center for Public Integrity reported.

The Washington-based group based its finding on an analysis of financial disclosure statements filed by the judges in 2009 and 2010. The judges had holdings in investment funds that owned shares of companies such as UnitedHealth Group Inc., the largest U.S. insurer by sales, or owned shares directly in companies such as medical-equipment makers Covidien Plc and Medtronic Inc., the group said today.

"If a conflict arises, I will divest myself either of the case or of the stock," U.S. District Judge Keith Starrett, who is hearing a Mississippi suit challenging the constitutionality of the health-care law, said in a phone interview. He owns shares in Laboratory Corp. of America Holdings, a provider of blood and other medical tests, the Center for Public Integrity reported.

This month, a federal judge in Richmond, Virginia, concluded that the law signed by President Barack Obama in March improperly requires Americans to maintain a minimum level of health insurance, going beyond Congress's powers to regulate interstate commerce. Federal officials have appealed.

VANGUARD HEALTH

U.S. District Judge Gladys Kessler in Washington was one of the other two judges highlighted by the Center for Public Integrity. Kessler reported this year that she owns as much as $250,000 of shares in Vanguard Health Care Fund, which lists UnitedHealth Group as its sixth-largest holding. She also received dividends of less than $1,000 from stock in Covidien, according to the nonprofit group.

Kessler said she hadn't seen the report and declined to comment in a telephone interview today.

U.S. District Judge Michael Schneider, based in Tyler, Texas, reported that he owned less than $15,000 in Covidien stock in a 2008 disclosure form filed in 2009, the Center for Public Integrity said. He has been assigned to hear a suit claiming that the health-care law discriminates against physician-owned hospitals and violates the Constitution.

Schneider declined to comment on the group's report, Linda Pritchard, a court clerk, said today in a telephone interview.

Starrett, based in Hattiesburg, Mississippi, reported this year that he owns stock in LabCorp and Medtronic valued at less than $15,000 each, the Center for Public Integrity said. Starrett said he doesn't handle his investments and doesn't think Medtronic is among his holdings.

'INDEPENDENT ADVISER'

"This was done by an independent investment adviser," the judge said today.

Judges faced with conflicts either sell their holdings or put them in trusts administered by others, said Carl Tobias, a law professor at the University of Richmond in Virginia.

"Judges' financial holdings can create problems in high- profile cases like this one," Tobias said in a phone interview. "Judges have found reasonable ways to deal with their investments."

The Virginia case that is being appealed by federal officials is Commonwealth of Virginia v. Sebelius, 10-cv-00188, U.S. District Court, Eastern District of Virginia (Richmond).