By JOE STEPHENS - Staff Writer
Date: 04/04/98 23:00

ERIE, Pa. -- Engineer Walt Sweet always suspected something was amiss during his lawsuit against General Electric, the largest employer around this blue-collar town. Now he's even more convinced.

"I don't think I got a fair shake," Sweet said. "It makes me disbelieve even more in the justice system."

There is no evidence that U.S. District Judge Sean McLaughlin skewed his rulings to favor General Electric. Sweet himself acknowledges that.

But records show that while overseeing the case, McLaughlin owned stock in the manufacturing giant. During that period he presided over seven other lawsuits against General Electric.

"I can't say the guy did anything wrong," Sweet said. "But there's always that question, you know?"

Two weeks ago, prompted by The Kansas City Star's study, Sweet filed a motion accusing the judge of violating federal ethics laws. He asked for a new trial before a different judge.

McLaughlin said in letters to The Star that he was "not cognizant" of his stock ownership while handling Sweet's lawsuit. The problem was compounded, he wrote, because someone left the stock off a list, which his staff kept to prevent conflicts.

He declined to say whether Sweet was entitled to a new trial.

McLaughlin's lapse is one of many among federal judges outside the Kansas City area. The Star studied financial reports filed by judges in the districts of Oregon and Western Pennsylvania, and found problems involving stock ownership both places.

In Pennsylvania, the newspaper reviewed six years of financial disclosure forms for 12 district judges. It found that six of the judges had issued orders in lawsuits involving corporations in which they or their spouses had a financial interest.

The court orders spanned 20 legal actions. In two additional cases, trust funds that benefited a judge's wife held stock in a litigant.

The cases included lawsuits that resulted in million-dollar settlements, charges that corporate negligence led to deaths, claims that faulty appliances set homes ablaze -- even two class-action complaints.

One still-pending hazardous-waste lawsuit may have set a record for conflicts. As the litigation stretched over years, Judge Gustave Diamond's wife bought stock in one company listed as defendant in the $9 million case. Then she bought stock in a second defendant. Then a third.

Diamond told The Star he was unaware the companies were among the many defendants in the 8-year-old Superfund cleanup lawsuit. He speculated that the discovery would force him to withdraw and a short time later, he did.

He passed the case -- which now fills 60 file folders -- on to a new judge.

McLaughlin appeared to have the most problem cases among the Pennsylvania judges. He presided over all or part of 10 legal actions involving companies in which he owned stock.

Six of those lawsuits were brought by workers who, like Sweet, claimed General Electric demoted them or laid them off to replace them with younger workers.

Sweet said he had no idea about the judge's stock until told by The Star -- yet McLaughlin presided over Sweet's case and jury trial for 15 months.

Sweet said several of the judge's rulings damaged his chances of winning. For example, McLaughlin barred Sweet from telling the jury about comments made by some of his co-workers. Sweet claimed the remarks proved the company discriminated against older employees.

On two occasions, McLaughlin's office notified General Electric that it was delinquent in filing court papers. Yet the court docket indicates the judge never penalized the company or ruled that General Electric had defaulted in the case.

Sweet pushed on through a jury trial overseen by McLaughlin. The jury found in favor of General Electric.

That outcome prompted Sweet's lawyer to abandon other claims he was handling for laid-off General Electric workers, including Eleanor May Nelson.

"I dropped it," Nelson explained, "because I didn't think I could win."

Eileen Damico also was pursuing an age-discrimination lawsuit against the company at the time, a case handled by McLaughlin. The judge sold his stock, worth up to $15,000, during the case and continued to preside through a jury trial.

Damico won a judgment of $62,000, and later settled for a reduced amount to avoid an appeal.

Today, despite lacking any evidence, Damico is convinced McLaughlin's stock holdings influenced his rulings. She thinks the judge should face a penalty.

"Judges have an awful lot of power," Damico said. "Too much power, I think."

McLaughlin said in a written response that he was surprised Damico or any other plaintiff would describe him as hostile or biased.

"Every litigant was treated fairly and impartially," the judge said. "I was not cognizant of my stock ownership in those cases and had I been, they would have been reassigned.

"Thus, my stock ownership in G.E. played no role whatsoever in any of my rulings."

Even so, Sweet is pushing for a new hearing. The next step is ordering a transcript of his last trial, he said, at an estimated cost of $6,000.

"I hate to shell it out when it's somebody else's fault," Sweet said. "This guy is a judge, and he's paid to know the law.

"If there is such a thing as integrity, I think the cases ought to be re-heard."

Oregon judges

In Oregon, The Star reviewed disclosure forms for nine federal district judges and identified two problem cases. In each instance, a judge issued orders while owning stock in a litigant.

The study also raised questions about the finances of Judge Ancer Haggerty. He submitted unitemized statements from a stockbroker showing that in 1996 he owned $116,762 worth of "investments." The statement did not identify any of them.

An official at the brokerage firm explained that the term refers to a mix of stocks, bonds and mutual funds. Filing instructions and federal law require judges to disclose and identify each of their assets -- including individual stocks, bonds and mutual funds.

Also raising questions: A 1995 report in which Haggerty disclosed he bought American Express stock valued at almost $4,500. Yet he never reported selling the stock and it does not appear on his disclosure forms in following years.

Court records show Haggerty recently threw out a lawsuit against a subsidiary of American Express.

Some forms submitted by judges in other states also appeared to be incomplete, misleading or wrong. The judges attributed the problems to honest mistakes.

In Haggerty's case, he agreed in a letter to The Star that he would disclose the stocks in his accounts in the future. But he refused to clarify his past reports.

"By law, you are entitled to these reports," he said of the unitemized stockbroker's statements, "but that is all you are entitled to."