The big Wall Street defendants in the seemingly never-ending Mayberry v. KKR saga, over charges of breaches of fiduciary duty, fee grifting, and other bad behavior, got a big break due to a remarkably lame error by the presiding judge, Philip Shepherd. His being assigned to the case in 2017 was seen as offering some hope of getting relief for Kentucky Retirement Systems, the most fabulously underwater state pension system in the US.
Unfortunately, Shepherd is in an elected post. And his campaign website made the remarkable mistake of including headlines from stories celebrating how tough he was on big bad financiers. As you can see from the first embedded filing below, KKR quickly and brazenly ran to the Kentucky Supreme Court demanding that Shepherd be replaced by a special judge. This was procedurally improper and the matter was remanded to Judge Shepherd. As you can see from the second document, Shepherd decided to recuse himself and referred the case to Judge Thomas D. Wingate. Shepherd was widely seen as the most progressive judge in the state, so this outcome is a win for KKR, Blackstone, and the other defendants.
As much as we hoped for a different outcome, it wasn’t too likely. As former prosecutor Dave in Santa Cruz wrote:
The use of a headline about pending litigation — probably by a campaign consultant — was the kiss of death.
Judges are required to avoid “even the appearance of partiality.” I went through the mandatory training when I volunteered as a judge pro tem. You are responsible for reviewing your campaign materials. You can’t put off blame on a spouse or consultant.
Recall that the Kentucky Attorney General swooped in to intervene in the case and is now attempting to represent all interests related to the defined benefit plans, even though there are conflicts among the parties. As a correspondent added:
Attorney General Cameron did not file anything to help Shepherd — a Democrat. Cameron is McConnell clone. McConnell is a hedge fund political vehicle. Shepherd’s campaign opponent is right wing nut. Cameron wants rid of Shepherd even though that is bad for the case he filed.
One has to wonder if Shepherd is glad to escape. He’d ruled in favor of the plaintiffs on the major challenges made by the defendants, but the case astonishingly went to appeal before any trial court ruling was made, on the issue of standing, due to adverse appellate and US Supreme Court rulings after the case was filed. In a sign Shepherd was getting tired of how long the case had dragged out, he did not allow the plaintiffs to replead the case, when there’s ample precedent saying that should have been allowed.
We’ll continue to keep tabs on these cases, but I don’t expect things to work out well for Kentucky Retirement Systems beneficiaries or Kentucky taxpayers.
00 (2022-05-16) Affidavit for Designation of Special Judge
00 Shepherd recusal