Federal court rules SEC can withhold investigation notes

A three-judge panel of the U.S. Court of Appeals in Washington, D.C. ruled that a federal agency's release of documents in a criminal prosecution did not require another agency to release the same or related documents under the federal Freedom of Information Act.

Friday’s ruling affirmed the decision of a lower court that the U.S. Securities and Exchange Commission can still withhold 114 sets of handwritten notes from release under a federal Freedom of Information Act request even though the U.S. Department of Justice had previously released 11 of the 114 sets in a criminal trial.

The notes were taken by SEC staff members during the agency’s 1999-2000 investigations of two former executives of Cendant Corp. accused of committing accounting fraud that boosted executive pay by millions of dollars and cost shareholders billions.

After the SEC’s investigation, Justice successfully prosecuted former Cendant Corp. chairman Walter Forbes for securities fraud. During the criminal proceedings, the department gave Forbes' defense counsel 11 sets of the investigation notes pursuant to rules of criminal procedure as they were either material to the executive’s case or would be used at trial.

Both during and after the criminal proceedings, Williams & Connolly, the law firm that represented Forbes, filed FOIA requests with the SEC for, among other documents, the 114 sets of notes. The firm sued after the SEC refused to release them because the notes fell under Exemption 5 of FOIA, which protects materials that would be privileged in civil discovery. Specifically, the SEC claimed the notes were privileged as attorney work product – materials prepared in anticipation of trial or litigation by or for another party.

Williams & Connolly agreed the notes constituted work product, but argued that the Justice Department's disclosure of some of the notes during the criminal proceedings waived work product protection for the previously released – as well as the unreleased – notes.

The court disagreed, ruling that with respect to the 11 released sets, the SEC had no obligation to give them to the firm since it had already received them from Justice, and the issue was moot. Additionally, the court ruled that the work product protection in the remaining 103 sets had not been waived by the department's partial disclosure of the notes during the criminal proceedings.

As an initial matter, the court noted that in some cases, partial disclosure of trial-related documents might constitute a waiver of other, related documents. For example, said the court, if a party to a lawsuit volunteered part of a document prepared for trial that contained a conversation with witnesses, the party could not then hide the rest of that document on the claim that it was protected by the work product privilege.

However, in this case, the court said, “Williams & Connolly never provides us with a persuasive reason why the disclosure of documents by one government agency waives work product protection for other documents held by another government agency.”

A Williams & Connolly attorney who represented the firm in the case declined to comment.

Bill Miller, Public Information Officer for the U.S. Attorney's Office in Washington, D.C., said in a written statement that "[t]he U.S. Attorney's Office for the District views the decision as a straightforward, non-controversial resolution to the FOIA issues presented. Beyond that, the office has no comment at this time."