When an agency isn’t quite an agency

From the Fall 2008 issue of The News Media & The Law, page 21.

Let’s say you send an open records request to the Smithsonian Institution, the Corporation for Public Broadcasting or the U.S. Postal Service. Chances are the request will get a reasonable response.

None of those entities fits the traditional definition of a government agency, though. Each has its unique way of dealing with Freedom of Information Act requests — just like various other “quasi-governmental entities” scattered throughout the executive branch.

But they all respond to records requests in some capacity, even if it’s not required by law.

The Smithsonian’s FOIA policy has drawn attention recently as the institution came under fire amid a series of Washington Post articles, one set focusing on the deaths of animals at the National Zoo, another on the Smithsonian head’s splurge on home and office remodeling using $2 million in institution funds.

A federal court ruled in 1997 that the Smithsonian is not an “agency” under FOIA, which means it doesn’t have to respond to records requests. Even so, the Smithsonian has long had a policy that requester groups consider “FOIA-like.”

James Grimaldi, an investigative reporter at The Post, used that policy to request the expense reports of then-Smithsonian Secretary Larry Small. But Grimaldi ran into a critical problem with the policy — Small, as the person in charge, could refuse to release the records.

And unlike a traditional FOIA request, Grimaldi could not turn around and sue over the records when the Smithsonian, or any quasi-governmental entity, denied a request.

That lack of an enforcement mechanism is the driving force behind many efforts over time to place different entities under FOIA. Without the threat of court action, there is no incentive for any entity to release information — the very dilemma that led Congress to create FOIA, experts said.

Grimaldi said he was able to get the information he wanted anyway, after turning to other reporting tools: Congress leaned on the Smithsonian to release the data, disgruntled Smithsonian employees leaked some pieces of it to him and The Post published a few embarrassing stories — including one on the privacy rights claimed for animals.

“The Smithsonian Institution’s National Zoo has taken the position,” The Post reported in that particular article, “that viewing animal medical records would violate the animal’s right to privacy and be an intrusion into the zookeeper-animal relationship.”

“Our lawyers often tell us if you can get the documents another way, that’s better than going to court to sue for them,” Grimaldi said in an interview. “I teach about FOIA (for the non-profit Investigative Reporters and Editors group) and I always say, ‘Use embarrassment in order to get’” documents from their hunkered-down custodians.

Changes at the Smithsonian

In no small part thanks to Grimaldi’s work, the Smithsonian has a new FOIA policy in the works, one that may include a third-party mediator to settle disputes between requesters and the institution.

In fact, the latest Smithsonian policy is modeled on FOIA. A spokesperson for the institution said its drafters aim to include in the policy an independent arbitrator who would decide disputes between requesters and the institution.

But the museum complex is just one of more than a dozen entities that courts wrestled with in considering whether to apply FOIA beyond strictly governmental bodies. In each of those cases, the central issue boils down to whether the entity is an “agency” under the definition used by FOIA.

There are a few unsurprising rulings — the American Red Cross isn’t an agency, and neither are states that receive federal funding. But there are also a few surprises. The National Security Council is not an agency because it is under the umbrella of the Executive Office of the President, which is not subject to FOIA, one court found. On the other hand, the Council of Environmental Quality, which advises the president, is. Even the Office of the Pardon Attorney, with the president’s nearly unlimited power to pardon people, has been deemed by courts to fall under FOIA.

In deciding these cases, courts typically look at how independent the entity is — does it have the authority to make decisions? Does it deal directly with those people who are subject to its decisions?

In a handful of situations, Congress has also weighed in, specifying in committee reports or legislation whether a specific entity is subject to FOIA. That is how the U.S. Postal Service and Amtrak both became subject to FOIA — and the Corporation for Public Broadcasting was deemed exempt.

But Tom Susman, who worked extensively on FOIA issues on Capitol Hill and as an attorney at Ropes and Gray in Washington, cautions that history is not the most reliable guide for what qualifies as an agency under FOIA. Some of the congressional pronouncements on FOIA’s applicability were the result of good lobbying, rather than a principled policy distinction.

The law also has its flaws, he said. “The language of the act isn’t necessarily well crafted to accommodate government-owned corporations that carry out government activities.”

To Patrice McDermott, director of OpenTheGovernment.org, some entities ought to be obligated to operate transparently regardless of their official place within or beyond FOIA.

“I think that any time taxpayer money is involved and any time there is an institution that has been created and maintained as a public trust . . . that institution has an obligation to be accountable to the public for how it’s conducting its business and how it’s expending the public money,” McDermott said, referring to the Smithsonian specifically.

At the same time, McDermott said the open-government community understands that some entities, including the Smithsonian, also have a profit-making side: When it comes to “some sorts of things, like who they charge what for advertising, there is a logic to keeping that confidential for their business interests.”

Susman suggested lawmakers and judges think globally in their search for a model of rational distinctions. Most countries consider whether an entity receives government funds or performs a government function in deciding if the agency has to comply with public records laws.

“You can’t just say anything that receives government money is subject to freedom of information because that’d be all of us,” Susman said. “A lot of the beasts that we now conclude are subject to the Freedom of Information Act didn’t think they were” when FOIA first became law.

The list of quasi-governmental entities may keep growing. The latest proposal to create these types of part-corporation, part-government institutions was a bill in the Senate proposing a “Nuclear Fuel Management Corporation.” It includes a curious provision, exempting the proposed corporation from the part of FOIA that prevents agencies from withholding information from Congress — section 552(d).

Fannie, Freddie and the economy

The entire debate over non-governmental entities found new life this fall as the financial crisis hit, and the government took over the mortgage giants Fannie Mae and Freddie Mac, placing them in a conservatorship — similar to what happens in a bankruptcy proceeding. So would they now be subject to FOIA?

Their regulator, the Federal Housing Finance Agency, is subject to the law, and it now directly controls Fannie and Freddie. Freddie itself was once subject to FOIA under a 1976 D.C. Circuit Court of Appeals ruling. But that changed in 1989, when Freddie’s ownership structure was modified; since then neither it nor Fannie has complied with FOIA.

Which is not to say that it has been difficult getting information from the two entities. Both Fannie and Freddie are publicly traded companies, meaning they are subject to a host of reporting requirements imposed by the Securities and Exchange Commission. In fact, access to information that would take weeks to get with a FOIA request can sometimes be had almost immediately if the SEC requires Fannie or Freddie to file the relevant paperwork through its online reporting system, EDGAR.

For example, a publicly traded company files with the SEC annual and quarterly reports known as the 10k and 10q. The most useful form, though, is likely to be the 8k — a current update covering “materially important events,” most of which are newsworthy to anyone following a company closely.

For Freddie Mac and Fannie Mae, the 8k provides a window to their government oversight. On Sept. 30, for instance, Freddie told the SEC it “received a federal grand jury subpoena from the United States Attorney’s Office for the Southern District of New York.” The filing went on to indicate the SEC was conducting a regulatory investigation into Freddie’s operations.

And on Sept. 11, Fannie filed the details of its conservatorship with the SEC — from how much senior preferred stock the Treasury Department got to how much common stock it could buy. The paperwork supplied a list of things Fannie can’t do under the stock-purchase agreement with the Treasury, such as issue equity securities or rid itself of assets for less than fair market value.

All that was disclosed within days of the conservatorship — far more quickly than any FOIA request would be processed.