Stonewalled by the S.E.C.
By WILLIAM D. COHAN
New York Times Opinionator
On President Obama’s first full day in office, he struck a much-needed symphonic chord in favor of press freedom, openness and a willingness to err on the side of sharing too much information rather than too little.
“A democracy requires accountability, and accountability requires transparency,” Obama argued. “As Justice Louis Brandeis wrote, ‘sunlight is said to be the best of disinfectants.’ In our democracy, the Freedom of Information Act (FOIA), which encourages accountability through transparency, is the most prominent expression of a profound national commitment to ensuring an open government. At the heart of that commitment is the idea that accountability is in the interest of the government and the citizenry alike.”
One got the distinct impression from Obama’s well-crafted prose that he cared deeply about whittling down the increasingly high bureaucratic walls that seemed to be thwarting the release of public information:
“The Freedom of Information Act should be administered with a clear presumption: In the face of doubt, openness prevails,” Obama’s executive order continued:
The government should not keep information confidential merely because public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears. Nondisclosure should never be based on an effort to protect the personal interests of government officials at the expense of those they are supposed to serve. In responding to requests under the FOIA, executive branch agencies should act promptly and in a spirit of cooperation, recognizing that such agencies are servants of the public. All agencies should adopt a presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA, and to usher in a new era of open government. The presumption of disclosure should be applied to all decisions involving FOIA.
Authors and journalists are especially dependent on the FOIA to get access to information — like documents, depositions, e-mails and reports — that federal agencies obtain through subpoenas (or the threat of their use) as part of ongoing investigations. Needless to say, getting access to this information is often essential to fleshing out the details of historical or current events and allows us — collectively — to get that much closer to the truth. Once FOIA requests are filed, an agency has 20 business days to respond and to start the clock ticking on the actual release of information.
Since I became a full-time writer in 2004, I have made numerous FOIA requests, mostly to the Securities and Exchange Commission, the home of documents relating to the Wall Street firms that have been the subjects of my two books, “The Last Tycoons,” about Lazard Frères & Co., and “House of Cards,” about the collapse of Bear Stearns. I have also filed FOIA requests with the SEC in the hope of prying information out of the agency about Goldman Sachs, the subject of my third book, which I am still writing. (Congress, by way of contrast, is not subject to FOIA or to FOIA requests; the documentary information Congress obtains and then releases occasionally is done deliberately or leaked — often for political reasons.)
I wish I could report that the process of getting information from the S.E.C. about Wall Street investment banks has been smooth or easy, or the slightest bit productive. Or that since President Obama issued his executive order, the flow of information has improved or become less Kafka-esque.
Unfortunately, the FOIA office at the S.E.C. seems to have perfected the art of obfuscation and premeditated delay, apparently with the hope that I will grow frustrated by bureaucratic hurdles or because, by delaying, a publication deadline can pass. Indeed, a September 2009 60-page audit of the S.E.C.’s compliance with FOIA found the agency had a “presumption of non-disclosure” and that “there are inadequate or incorrect procedures for determining whether potentially responsive documents exist and how exemptions . . . are applied, which have the effect of creating a presumption of withholding, rather than disclosure, as required by the FOIA.”
For my Lazard book, I filed an FOIA request with the S.E.C. relating to the commission’s investigation into the firm’s role in infamous merger between ITT Corporation and Hartford Fire Insurance Company. At first, the S.E.C. responded that it could not release any information about the case, which began in 1968 and ended in 1981. When I reminded the agency that it had done so previously — some 20 years before — it agreed that I could see the 40 un-indexed, completely disorganized boxes of documents. After a few hours in a S.E.C. conference room in Washington, though, I was told my time with the boxes was up. Eventually, I prevailed on the S.E.C. to ship them — at my expense — to the S.E.C.’s office in New York City, where I spent every day of the next three months going through them. For reasons not entirely clear, I was not permitted to copy the documents. But I got what I needed.
In November 2006, in the midst of writing a still-unpublished and uncompleted book about the trials and tribulations of David Wittig, a former Wall Street investment banker who became the C.E.O. of Westar Energy in Topeka, Kan., I filed an FOIA request with the S.E.C. asking for documents about the S.E.C.’s investigations of Wittig. To date, I have not received a single page about Wittig from the agency, as is noted on an S.E.C. index of requests from that time period.
In April 2008, soon after starting “House of Cards,” I made an FOIA request in hope of obtaining information about the S.E.C.’s investigation into the collapse of the two Bear Stearns hedge funds, as well as “any S.E.C. investigations related to short-sellers and the potential manipulation of the Bear Stearns’ stock in 2008.”
On May 8, in a partial response to my request, Denise Moody, at the S.E.C., wrote: “We need a written commitment to pay search and review fees associated with processing your request under the FOIA.” That same day, I wrote back to Ms. Moody and explained that I would pay for all the S.E.C.’s research expenses up to $2,500. The next day, she wrote back to say the S.E.C. would continue processing my request.
That is the last I’ve heard from the S.E.C. about this request, which has still not been filled. Nor has the S.E.C. released any information about the role short-sellers played in the collapse of Bear Stearns, or who it was that spent millions of dollars buying far-out-of-the-money, short-dated puts the week Bear Stearns collapsed. On Dec. 18, 2008, I reiterated my request to the S.E.C. but received no answer. “House of Cards” was published in March 2009; the paperback edition, with a new afterword, came out in February 2010.
The year 2009 brought Obama to office, and his new FOIA directive. In early August, I made an FOIA request to the S.E.C. about Goldman Sachs. I then received an acknowledgment form. On Sept. 9, Jason Luetkenhaus, a research specialist, wrote to tell me that my request failed to “reasonably describe” the records I requested. I tried again in early December and, again, received an acknowledgment form. In January 2010, I sent several e-mails wondering why it had been six months and I had not received anything from the S.E.C. except acknowledgment letters. On Jan. 12, I spoke with Brenda Fuller, branch chief, and together we narrowed the scope of my Goldman request after she told me that my request was “still too broad.” I also agreed to pay $224 to have the S.E.C. staff research documents that might be responsive to my request. On Jan. 20, I received a letter from the S.E.C., with regard to one specific request, saying that because of the agency’s first-in, first-out policy, it would be 12 months “or more” before “we can process this request.”
In February came a new missive from the S.E.C. relating to my request for documents about Goldman. “The boxes containing the investigative records are not labeled for their contents so we will not be able to provide the records relating to Goldman Sachs until the boxes have been reviewed for responsive material,” Felicia Taylor wrote me. “Because the records are voluminous, they must be processed on a first-in, first-out track as explained in our response to you. Note, your request has been closed and removed from our pending caseload.” I was invited to start all over again. Incredulous, I called Ms. Taylor, but honestly have no idea where my request stands. I assume it is dead.
On April 18, two days after the S.E.C. filed its now-famous civil lawsuit against Goldman Sachs, I sent in a new FOIA request seeking the S.E.C.’s documents about the case, including copies of transcripts of depositions. Nine days later, I received a letter from the SEC: “We are withholding the non-public records that are responsive to your request,” it read, and then cited a regulation that “protects from disclosure records compiled for law enforcement purposes, the release of which could reasonably be expected to interfere with enforcement activities,” an exemption the S.E.C. cites two-thirds of the time in denying access to records, according to the September 2009 audit. In his letter, Dave Henshall, the FOIA branch chief, invited me to try again in six months. Except for the fact that, on April 27, the U.S. Senate released some 900 pages of Goldman documents that could also “reasonably be expected to interfere with enforcement activities,” Henshall’s letter made sense to me.
Of course, as I kept reading his letter, I became flummoxed again. “The total cost incurred for processing this request is $28.00, as indicated on the enclosed invoice,” Henshall continued. “Please send your payment and the enclosed invoice to our Office of Financial Management.”
Thanks for nothing.
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