Legal Opinion: GMP-0112

Index: 7.340, 7.570

Subject: FOIA Appeal: Available Records Under Part 245 Regs

August 24, 1992

Mark Andrew Sherman, Esq.

The Harrison Institute for Public Law

Georgetown University Law Center

111 F. St., N.W. - Suite 102

Washington, D.C. 20001-2095

Dear Mr. Sherman:

This is in response to your Freedom of Information Act

(FOIA) appeal dated May 13, 1992. You appeal the partial denial

issued by the Washington, D.C. Field Office on April 13, 1992

which denied the release of certain information pertaining to the

Edgewood Terrace I Apartments, HUD Project #000-55095. The

following items were withheld by the D.C. Field Office pursuant

to Exemption 4 of the FOIA, 5 U.S.C. Section 552(b)(4):

1.The most recent audited Profit and Loss Statement;

2.The annual budget submitted in support of the 1991 rent

increase;

3.The audited financial statement for the past three

years;

4.Information regarding monthly receipts, disbursements

and reserve account balances;

5.All documents relating to the approval of the 1991 rent

increase; and

6.Documents relating to the proposed Section 241

rehabilitation loan.

In addition to appealing the denial of the above-noted

documents, you also state that the D.C. Field Office\'s initial

decision failed to cover some of the documents contained in your

FOIA request. In particular, you state that the following

documents were not addressed in the agency\'s initial decision:

7.the management plan, if any;

8.the management agreement;

9.a narrative statement submitted by the landlord in

support of the proposed 1991 rent increase;

10.a statement submitted by the landlord reflecting the

general condition of the property, the frequency of

redecoration, an itemization of the existing equipment

and services presently included in the rents, and a

justification of any unusual expenses or unusual

increases in such expenses;

11.rental computation forms from prior years;

12.any documentation received by the Field Office

regarding the intentions of the owners of HUD Project

#000-55095;

13.the contracts of insurance for the HUD-insured

mortgages on HUD project #000-55095

I have determined to affirm the initial denial of items 2

through 5 under Exemption 4 of the FOIA. I am reversing the

initial denial of item 1 and partially reversing the denial of

some documents under item 5 because these documents have lost

their confidentiality as a result of their disclosure to the

tenants of the subject project pursuant to 24 C.F.R. Part 245.

I have also determined that items 6 through 13 should be remanded

to the Washington, D.C. Field Office for additional processing of

your request.

Exemption 4 of the FOIA, 5 U.S.C. Section 552(b)(4), exempts

from mandatory disclosure \"trade secrets and commercial or

financial information obtained from a person and privileged or

confidential.\" The courts have interpreted Exemption 4 as

protecting confidential commercial or financial information the

disclosure of which is likely to: (1) impair the Government\'s

ability to obtain necessary information in the future or (2)

cause substantial harm to the competitive position of the entity

from whom the information was received. National Parks and

Conservation Ass\'n. v. Morton, 498 F.2d 765, 770 (D.C. Cir.

1974).

Title 24 C.F.R. Part 245 of the Department\'s regulations

requires a mortgagor of a subsidized project to disclose various

documentation to tenants in connection with the project\'s

application to HUD for a rent increase. See 24 C.F.R.

Section 245.310 and Section 245.315. The information required to

be made available by the mortgagor for inspection and copying by

the tenants is set forth at 24 C.F.R. Section 245.315. Pursuant

to this regulation, when owners file for a rent increase under

Section 245.315(a), tenants are entitled to inspect and reproduce

the following documents:

1.A copy of the notice to tenants;

2.An annual Statement of Profit and Loss, Form HUD-92410,

covering the project\'s most recently ended accounting

year (this statement must have been audited by an

independent public accountant if the project is

required by HUD to prepare audited financial

statements), and Form HUD-92410 for the intervening

period since the date of the last annual statement if

more than four months have elapsed since that date;

3.A narrative statement of the reasons for the requested

increase in maximum permissible rents; and

4.An estimate of the reasonably anticipated increases in

project operating costs that will occur within twelve

months of the date of submission of materials under

this section.

5.A status report on the project\'s implementation of its

current Energy Conservation Plan.

Ordinarily, the above-noted financial and commercial

information requested under the FOIA would be withholdable under

Exemption 4. However, this information loses its confidentiality

when disclosed to the tenants under Part 245 and may, therefore,

be released to FOIA requesters. The documents relating to the

1991 rent increase for the subject project in items 1 and 5 of

your request have previously been provided to the tenants of the

project and I am releasing them to you under the FOIA. These

documents are listed as follows:

1.Letter dated April 17, 1992 from Charlyne J. Fields,

Acting Chief, Loan Management Branch, Washington, D.C.

Office, to David Barr, District Manager, Security

Property Management, Inc., with attached HUD Rent

Schedule, HUD Form 92458;

2.Letter dated August 23, 1991 from John M. Taylor,

Chief, Loan Management Branch, Washington, D.C. Office,

to David Barr;

3.Letter dated July 31, 1991 to John Taylor from David

Barr, with attached Owner\'s Certification As To

Compliance With Tenant Comment Procedures In 24 C.F.R.

Section 245;

4.Exchange of letters dated July 6 and 31, 1991 between

Security Management and a tenant concerning the

proposed rent increase. The name and address of the

tenant have been deleted from the letters under

Exemption 6 to protect the tenant\'s personal privacy;

5.Letter dated July 2, 1991 from David Barr to John

Taylor, with attached: (1) Notice to Residents of

Intention to Submit a Request to HUD for Approval of an

Increase in Maximum Permissible Rents; and (2)

Explanation of Expense Estimates, with Profit and Loss

Statement for 1990, HUD Form 92410.

The other requested documents under items 2, 3, 4, and 5,

which are not specifically required to be released pursuant to

Part 245, are not disclosable under Exemption 4. These documents

include the project\'s budget, financial statements, monthly

receipts, disbursements and reserve account balances, and their

disclosure would cause substantial harm to the competitive

position of the person from whom the information is obtained. We

do not agree with your contention that the project owner would

not be competitively harmed by disclosure of this information.

Moreover, the Trade Secrets Act, 18 U.S.C. Section 1905,

makes it a criminal offense for an officer or employee of the

United States to disclose information relating to the trade

secrets or confidential business information of any person, firm,

partnership, corporation or association except when disclosure is

authorized by law. The statute classifies as confidential

commercial or financial information, the \"amount or source of any

income, profits, losses, or expenditures of any person, firm,

partnership, corporation or association.\" Thus, HUD is

prohibited from releasing financial information of the type you

requested unless authorized to do so by law. Since there is no

law, as required by the Trade Secrets Act, that authorizes

release of such information, we find that the documents were

properly withheld pursuant to Exemption 4 of the FOIA.

With respect to the request for documents as defined in

items 7 through 13, it appears that the Washington, D.C. Field

Office did not consider these items in its initial decision.

Accordingly, we will ask the Washington, D.C. Field Office to

address these items and render a decision concerning their

releasability under FOIA.

Also, it is my determination that the request for documents

as defined in item 6 is too broad. Pursuant to the FOIA, the

agency must be provided with a request for an identifiable

record. The present request does not identify what records

pertaining to the Section 241 loan for the subject project are

being requested. Accordingly, we will ask the Washington, D.C.

Field Office to work with you to identify the documents sought in

connection with this matter and to subsequently make a

determination concerning their releasability under the FOIA.

You are advised that you have a right to judicial review of

this determination under 5 U.S.C. Section 552(a)(4).

Very sincerely yours,

George L. Weidenfeller

Deputy General Counsel (Operations)

Enclosures

cc: Yvette Magruder

Peter Campanella, 3G

I. Toni Thomas, 3.5S