December 19, 2008

Louis N. Haas, Esquire

Haas Najarian LLP

58 Maiden Lane, 2^nd^ Floor

San Francisco, CA 94108

Re: FOIA Appeal dated December 8, 2008

Dear Mr. Haas:

On October 6, 2008, you made a Freedom of Information Act (FOIA) request
for a copy of all communications and documents relating to Kaiperm
Federal Credit Union contained in NCUA's files, including any of its
regional offices, originated during the time period from September 9
through October 6, 2008. We received your request on October 8^th^.
Staff attorney Linda Dent responded to your request on November 7^th^
releasing 30 pages, some of which were partially redacted, and
withholding 19 full pages pursuant to exemptions 2, 4, 5, 6, and 8 of
the FOIA (5 U.S.C. §552(b)(2), (4), (5), (6), and (8)). We received your
December 8^th^ appeal on December 10^th^. You appeal the application of
the exemptions to the pages that were withheld in full. You also believe
you should have been given more specificity concerning the types of
documents withheld. Your appeal is denied. We address the specific
exemptions as well as your argument for more specificity in the types of
documents withheld below.

[Nature of Material Withheld]{.underline}

You seem to argue that because we did not give you a page-by-page
listing of records withheld and the exemption(s) applicable to each,
NCUA has waived its right to use those exemptions. The law does not
require us to give a description of the documents withheld at this
point, only an estimate of the amount of records and the reasons for
withholding the records (applicable exemptions) as well as your right to
appeal and the name and title of the person(s) responsible for the
denial. 5 U.S.C. §552(a)(6)(A)(i), (a)(6)(C)(i). All of the required
information was given to you in Ms. Dent's letter. A specific listing of
the nature of records withheld and the applicable FOIA exemptions is
known as a Vaughn index. *See* [Vaughn v. Rosen]{.underline}, 484 F.2d
820 (D.C. Cir. 1973). It is well-settled law that a requester is not
entitled to receive a Vaughn index during the administrative process.
[Schwarz v. United States Department of Treasury]{.underline} 131 F.
Supp. 2d, 142 (D.D.C. 2000). Courts generally do not require the
submission of a Vaughn index prior to the time at which a dispositive
motion (motion for summary judgment) is filed. [Tannehill v. Department
of the Air Force]{.underline}, No. 87-1335, slip op. at 1 (D.D.C. Aug.
20, 1987). We note that the responsive records withheld include e-mail,
internal NCUA memoranda, NCUA routing sheets some with internal
notations, a draft letter, and schedule F to the Purchase and Assumption
Agreement that you received.

As noted, the documents were withheld pursuant to exemptions 2, 4, 5, 6
and 8 of the FOIA. Some of the documents contained information withheld
pursuant to more than one of the noted exemptions. The exemptions are
discussed below.

[Exemption 2]{.underline}

The nature of the material withheld under this exemption was limited to
agency routing information. Exemption 2 of the FOIA exempts from
mandatory disclosure records that are "related solely to the internal
personnel rules and practices of an agency." 5 U.S.C. §552(b)(2). The
courts have interpreted exemption 2 to encompass two distinct categories
of information: trivial matters referred to as \"low 2\" information and
more substantial internal matters referred to as \"high 2\" information.
*See* [Schiller v. NLRB]{.underline}, 964 F.2d 1205, 1207 (D.C. Cir.
1992). The information withheld under exemption 2 in this case was "low
2" information. In addition, at least one of the documents that
contained low 2 information also contained information withheld under
exemptions 5. (*See* discussion below.) Since there was no substantive
information withheld pursuant to exemption 2, we have determined not to
go through the process of producing those documents, redacting out
information withheld pursuant to other exemptions and granting a
discretionary release of routing information. The routing information
continues to be withheld pursuant to exemption 2.

[Exemption 4]{.underline}

Information withheld pursuant to Exemption 4 includes financial data
concerning Kaiperm FCU including Schedule F to the Purchase and
Assumption Agreement. Exemption 4 protects, in part, commercial or
financial information obtained from a person that is privileged or
confidential. 5 U.S.C. §552(b)(4). The term "commercial" has been
broadly interpreted to include anything "pertaining or relating to or
dealing with commerce." [American Airlines, Inc. v. National Mediation
Board]{.underline}, 588 F.2d 863, 870 (2d Cir. 1978). All information
withheld meets this standard of commercial/financial information.
Information "obtained from a person" has been held to include
information obtained from a wide range of entities including
individuals, associations, corporations and public and private entities,
other than agencies. [Nadler v. FDIC]{.underline}, 92 F.3d 93, 95 (2d
Cir. 1996). All of the commercial/financial information withheld
pursuant to exemption 4 meets the standard of obtained "from a person"
under [Nadler]{.underline}. In [Critical Mass Energy Project v.
NRC]{.underline}, 975 F2d 871 (D.C. Cir. 1992), [cert.
denied]{.underline}, 507 U.S. 984 (1993), the court established two
distinct standards to be used in determining whether
commercial/financial information submitted to an agency is
"confidential" under exemption 4. According to [Critical
Mass]{.underline}, information that is voluntarily submitted is
categorically protected provided it is not customarily disclosed to the
public by the submitter. Information required to be submitted to an
agency is confidential if its release would (1) impair the Government's
ability to obtain necessary information in the future; or (2) cause
substantial harm to the competitive position of the person from whom the
information was obtained. *See* [National Parks & Conservation
Association v. Morton]{.underline}, 498 F.2d 765 (D.C. Cir. 1974). We
have looked to the stricter two-prong [National Parks]{.underline}
standard to determine whether the commercial/financial information
should be withheld pursuant to exemption 4. We believe that release of
the commercial/financial information would impair NCUA's authority to
obtain necessary information in the future. The commercial/financial
information continues to be withheld pursuant to exemption 4.

# Exemption 5

Internal notations, memoranda, e-mail, and a draft letter were withheld
pursuant to exemption 5. Exemption 5 of the FOIA protects "inter-agency
or intra-agency memorandums or letters which would not be available by
law to a party ... in litigation with the agency." 5 U.S.C. §552(b)(5).
Included within exemption 5 is information subject to the deliberative
process privilege, attorney work product privilege and attorney client
privilege. The information withheld in this case falls under the
deliberative process privilege. The purpose of the deliberative process
privilege is "to prevent injury to the quality of agency decisions."
[NLRB v. Sears, Roebuck & Co.]{.underline}, 421 U.S. 132, 151 (1975).
Any one of the following three policy purposes have been held to
constitute a basis for the deliberative process privilege: (1) to
encourage open, frank discussions on matters of policy between
subordinates and superiors; (2) to protect against premature disclosure
of proposed policies before they are finally adopted; and (3) to protect
against public confusion that might result from disclosure of reasons
and rationales that were not in fact ultimately the grounds for an
agency's action. [Russell v. Department of the Air Force]{.underline},
682 F.2d 1045 (D.C. Cir. 1982). Policies (1) and (3) as enumerated in
[Russell]{.underline} apply to the documents withheld pursuant to the
deliberative process privilege of exemption 5 in this case. Therefore
the material withheld pursuant to the deliberative process privilege of
exemption 5 remains exempt from disclosure.

# Exemption 6

Minimal information including a few home and e-mail addresses was
withheld pursuant to exemption 6. Exemption 6 protects information about
an individual in "personnel and medical files and similar files" where
the disclosure of such information "would constitute a clearly
unwarranted invasion of personal privacy." 5 U.S.C. 552(b)(6). The
courts have held that all information that applies to a particular
individual meets the threshold requirement for privacy protection.
[United States Department of State v. Washington Post Co.]{.underline},
456 U.S. 595 (1982). It includes any personal information. Once a
privacy interest is established, application of exemption 6 requires a
balancing of the public's right to disclosure against the individual's
right to privacy. [Department of the Air Force v. Rose]{.underline}, 425
U.S. 352, 372 (1976). The withheld information meets the requirement for
exemption 6 protection. There is minimal, if any, public interest in
disclosing this personal information. The individuals' privacy interests
outweigh any public interest in disclosure. Therefore the minimal
personal information continues to be withheld pursuant to exemption 6.

# Exemption 8

Information withheld pursuant to exemption 8 consists of credit union
examination and related information, found in internal memoranda and
other documents. Exemption 8 applies to information "contained in or
related to examination, operating or condition reports prepared by, on
behalf of, or for the use of an agency responsible for the regulation or
supervision of financial institutions." 5 U.S.C. §552(b)(8). Courts have
interpreted exemption 8 broadly and have declined to restrict its
all-inclusive scope. [Consumers Union of United States, Inc. v.
Heimann]{.underline}, 589 F.2d 531 (D.C. Cir. 1978). Examination reports
as well as their follow-up and internal memoranda containing specific
information about named financial institutions have been withheld
pursuant to exemption 8. *See* [Atkinson v. FDIC]{.underline}, No.
79-1113, 1980 U.S. Dist. LEXIS 17793, (D.D.C. Feb. 13, 1980) and
[Wachtel v. Office of Thrift Supervision]{.underline}, No. 3-90-833,
slip op. (M.D. Tenn. Nov. 20, 1990). In general, all records, regardless
of the source, of a financial institution's financial condition and
operations that are in the possession of a federal agency responsible
for their regulation or supervision are exempt. [McCullough v.
FDIC]{.underline}, No. 79-1132, 1980 U.S. Dist. LEXIS 17685, at \*\*7-8
(D.D.C. July 28, 1980). *See also* [Snoddy v. Hawke]{.underline}, No.
99-1636, slip op. at 2 (D. Colo. Dec. 20, 1999). Courts have generally
not required agencies to segregate and disclose portions of documents
unrelated to the financial condition of the institution. *See*
[Atkinson]{.underline} at \*4-5. Therefore any document withheld
pursuant to exemption 8 can be withheld in full. The courts have
discerned two major purposes for exemption 8 from its legislative
history: 1) to protect the security of financial institutions by
withholding from the public reports that contain frank evaluations of a
bank's stability; and 2) to promote cooperation and communication
between employees and examiners. *See* [Atkinson v. FDIC]{.underline} at
\*4. Courts have held that information pertaining to closed financial
institutions can be withheld to serve the purposes of exemption 8.
[Gregory v. FDIC]{.underline} 631 F.2d 896, 899 (D.C. Cir. 1980). The
information withheld is within the scope of exemption 8 pursuant to
[Consumers Union]{.underline}, [McCullough]{.underline} and
[Gregory]{.underline}. Withholding the information meets the purposes of
exemption 8; therefore, the information continues to be withheld
pursuant to exemption 8. We also note that some of the material withheld
pursuant to exemption 8 is also withheld pursuant to other exemptions
discussed in this appeal. Any record which contains exemption 8
information is withheld in full.

Pursuant to 5 U.S.C. 552(a)(4)(B) of the FOIA, you may seek judicial
review of this determination by filing suit against the NCUA. Such a
suit may be filed in the United States District Court where you reside,
where your principal place of business is located, the District of
Columbia, or where the documents are located (the Eastern District of
Virginia).

Sincerely,

/S/

Robert M. Fenner

General Counsel

GC/HMU:bhs

08-1215

09-FOI-00007

09-APP-00005