Caryl A. Wheeler, Senior Legal Assistant

Mark Fajfar, Special Counsel

Fried, Frank, Harris, Shriver & Jacobson, LLP

1001 Pennsylvania Avenue, NW

Washington, DC 20004-2505

Re: FOIA Appeal dated October 20, 2006

Dear Ms. Wheeler and Mr. Fajfar:

On May 12, 2006, Ms. Wheeler made a Freedom of Information Act (FOIA)
request for all documents concerning or related to: 1) identified
litigation involving DFCU\
Financial Federal Credit Union (the DFCU Litigation); 2) contacts or
communications with any of twelve named persons regarding DFCU, the DFCU
litigation, DFCU Owners United, or credit union conversions to another
type of financial institution generally; and 3) FOIA requests relating
to DFCU, its attorneys, and other related parties. Staff attorney Linda
Dent responded to your request on October 5, 2006. You received
approximately 70 pages in response to your request. Only a few minor
redactions were made from the pages you received including redaction of
brief internal notes, e-mail addresses and one home address and
telephone number. These redactions were made pursuant to exemptions
(b)(5) and (b)(6) of the FOIA, 5 U.S.C. §552(b)(5) & (6). (*See*
discussion of exemptions below.) Approximately 242 pages of responsive
documents were withheld in full. The documents were withheld pursuant to
exemptions (b)(4), (5), (6), and (8) of the FOIA.

We received your October 20, 2006 FOIA appeal letter, without noted
enclosures, on October 20^th^. We received the enclosures to your appeal
on October 23^rd^. You appeal Ms. Dent's response in the following
aspects: 1) the response should have provided some indication of the
nature of the material that was withheld; 2) the response should have
provided segregable portions of the requested records that did not
contain protected information; 3) the response should have provided
substantiation of the fee for professional hours in relation to
coordination/approval/denial; and 4) the response should have provided
all of the information responsive to your FOIA request. Your appeal is
granted in part and denied in part. Discussed below are the first three
aspects of your appeal. The fourth aspect of your appeal asks that all
requested information be provided. We address why various records were
withheld in our specific discussion of applicable FOIA exemptions below.
Approximately 24 additional pages are released (some in full, most in
part with portions redacted) and are enclosed. The remaining
approximately 218 pages withheld and the redacted portions of the 24
pages released remain withheld pursuant to exemptions 4, 5, 6 and 8 of
the FOIA.

[Nature of Material Withheld and Segregable Portions of Responsive
Records]{.underline}

In your appeal, you request an index of the withheld material that lists
briefly the nature of each document that has been withheld and the
provision of the FOIA under which such document qualifies for
protection. This 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). Hence we have not
prepared a Vaughn index at this time. We do note that most of the
responsive records withheld consist of e-mail and traditional
correspondence both within NCUA staff and between NCUA staff and other
parties, drafts of various NCUA documents, and internal memoranda. With
regard to NCUA contacts or communications with the twelve parties named
in your initial request, we found no NCUA contacts or communications
with J. Ronald Unger, Thomas Maylan, James Blaine or Wendell "Bucky"
Sebastian involving DFCU, the DFCU litigation, DFCU Owners United or the
conversion of credit unions to another type of financial institution. We
did find responsive records to the other categories of your request; all
records not provided are withheld pursuant to the exemptions discussed
below. Most of the 24 newly released pages contain portions of pages
previously withheld in full. These are the segregable portions of
records that are not protected by a FOIA exemption.

[Substantiation of Fee for Professional Hours]{.underline}

You requested substantiation for the \$1000 fee for professional staff
hours spent on coordination/approval/denial of your FOIA request. As you
know, NCUA charges \$50 per hour for certain professional time spent on
an initial FOIA request. The \$1000 fee, as noted on the invoice you
received, was for 20 hours of professional time spent on
coordination/approval/denial of your request. NCUA professional staff
spent in excess of 20 hours on coordination/approval/denial of this
request. Although you received 70 pages of responsive documents and
approximately 242 pages were withheld, Ms. Dent reviewed several hundred
additional pages of potentially responsive documents that were gathered
from multiple offices. Each document was individually reviewed. A
determination first had to be made whether each document was responsive
to one of the 17 categories of documents that you requested. Once
documents were determined to be responsive, Ms. Dent considered whether
the documents should be released (in full or in part) or withheld
pursuant to one of the FOIA exemptions. This process was a time
consuming one and it took Ms. Dent in excess of 20 hours to complete.

As noted, the documents both fully withheld as well as portions of
documents not released were withheld pursuant to exemptions 4, 5, 6 and
8 of the FOIA. Many of

the documents contained information withheld pursuant to more than one
of the noted exemptions. The exemptions are discussed below.

[Exemption 4]{.underline}

Commercial and financial information (mostly in the form of e-mail and
traditional correspondence between NCUA staff and other parties) was
withheld pursuant to exemption 4 of the FOIA. 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 information
withheld pursuant to exemption 4 falls into the category of
commercial/financial information. 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). 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). The
commercial/financial information withheld was voluntarily submitted and
is categorically protected pursuant to the [Critical Mass]{.underline}
decision. Therefore, the commercial/financial information continues to
be withheld pursuant to exemption 4.

# Exemption 5

Internal notations, memoranda, e-mail, correspondence, drafts of NCUA
documents and predecisional documents 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 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). All three
policies enumerated in [Russell]{.underline} apply to various documents
withheld pursuant to the deliberative process privilege of exemption 5
in this case. In addition, this privilege protects not merely documents,
but also the integrity of the deliberative process itself where the
exposure of that process would result in harm. *See* [National Wildlife
Federation v. United States Forest Service]{.underline} 861 F.2d 1114,
1119 (9^th^ Cir. 1988) and [Greenberg v. United States Department
of]{.underline} Treasury, 10 F. Supp. 2d 3, 16, n.19 (D.D.C. 1998).
Therefore the material withheld pursuant to the deliberative process
privilege of exemption 5 remains exempt from disclosure.

The attorney work product privilege protects documents prepared by an
attorney in contemplation of litigation. [Hickman v.
Taylor]{.underline}, 329 U.S. 495 (1947). Courts have accorded the
work-product protection to materials prepared by non-attorneys who are
supervised by attorneys. [Hertzberg v. Veneman]{.underline}, 273 F.
Supp. 2d 67, at 76 (D.D.C. 2003). The privilege attaches when a claim,
likely to lead to litigation, has arisen. [Coastal States Gas Corp. v.
Department of Energy]{.underline}, 617 F.2d 854 (D.C. Cir. 1980). NCUA
attorneys and a paralegal have been involved in preparing work in
contemplation of litigation involving DFCU. These attorney-generated
documents continue to be withheld pursuant to the attorney work product
privilege.

The attorney-client privilege concerns confidential communications
between an attorney and his client relating to a legal matter for which
the client has sought professional advice. [Mead Data Center, Inc. v.
United States Department of the Air Force]{.underline}, 566 F.2d 242,
252 (D.C. Cir. 1977). This privilege, unlike the attorney work product
privilege, is not limited to the context of litigation. *See*
[Mead]{.underline} at 252-253. Communications between NCUA attorneys and
their NCUA clients continue to be withheld pursuant to this privilege of
exemption 5.

# Exemption 6

Home addresses, e-mail addresses and telephone numbers were 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). 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 personal
information continues to be withheld pursuant to exemption 6.

# Exemption 8

Documents withheld pursuant to exemption 8 consist of e-mail and
correspondence pertaining to exemption 8 information. 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). 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 v.
FDIC]{.underline}, No. 79-1113, 1980 U.S. Dist. LEXIS 17793, at \*4-5
(D.D.C. Feb. 13, 1980). 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. The responsive records
concern DFCU's operations and are in the possession of NCUA. They are
within the scope of exemption 8 pursuant to [Consumers
Union]{.underline} and [McCullough]{.underline}. Withholding the
responsive documents meets the purposes of exemption 8. Therefore, the
documents continue to be withheld pursuant to exemption 8.

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,

Michael J. McKenna

Deputy General Counsel

Enclosures

GC/HMU:bhs

06-1027

06-FOI-00179

07-APP-00001