I sort of blew right by the story of the CFTC judge corruption scandal the other day when it came out, but it’s a pretty big deal. Barry Ritholtz takes a whack at it today. Basically, an Administrative Law Judge at the CFTC (Commodity Futures Trading Commission), George Painter, revealed in his retirement letter that a colleague of his, Judge Bruce Levine, has never awarded a case in favor of a plaintiff in 20 years on the bench. He traces this back to a deal Levine made with Wendy Gramm, the former head of the CFTC and the wife of Phil Gramm (R-Enron and UBS). Indeed, the numbers check out, at least for the time period we know about; Judge Levine has never decided in favor of a plaintiff, i.e. never decided in favor of an investor crying mistreatment or fraud by a commodity dealer or major broker in commodity futures and derivatives trading. Barry picks it up from there:

Now, if that isn’t weird enough, the WSJ has an a article in today’s paper that can only be described as a hit piece. The accusations of mental unfitness and heavy drinking come from the Judge’s wife in the middle of divorce proceedings.

I wrote to Sarah Lynch, asking how the Journal could do a story on this retiring judge — accusing him of being a drunk and mentally unfit — but omit his most explosive charges against his fellow judge and the CFTC chair Wendy Gramm. “In the Sept. 17 document, Judge Painter said he plans to step down in January and asked the agency to transfer his pending cases to an outside judge instead of Judge Levine.” That hardly does justice to the Judge’s retirement note, and completely omits his charge against former CFTC chair [...]

But what makes the WSJ piece truly weird is it ignores an article Judge Painter used to show Judge Levine was biased — from the WSJ itself! The December 2000 article about Judge Levine was titled: “If you got a beef with a futures broker, This Judge Isn’t for You—In Eight Years at the CFTC, Levine Has Never Ruled In Favor of an Investor (PDF)”

Here’s why Painter accused Levine of this misconduct: there are only two Administrative Law judges at the CFTC. “If I simply announced my intention to retire,” Judge Painter says in his letter, “the seven reparation cases on my docket would be reassigned to the only other administrative law judge at the commission, Judge Levine. This I cannot do in good conscience.” He wanted his docket to transfer to an admin law judge at the SEC or FERC instead.

The article that Ritholtz cites, which is nowhere to be found in the WSJ’s archives, makes the case pretty strongly that Judge Levine is in the pocket of the commodity dealers. And as the Center for Public Integrity explains, under Dodd-Frank the CFTC will be much more involved in regulating over-the-counter derivatives.

So far, the CFTC has not responded to this allegation.