Legal Opinion: GMP-0002

Index: 7.340, 7.360

Subject: FOIA Appeal: Financial and Marketing Research

October 14, 1991

Neil L. Shapiro, Esq.

Brobeck, Phleger & Harrison

One Market Plaza

San Francisco, California 94105

Dear Mr. Shapiro:

This is in response to your letter dated September 18, 1991

requesting reconsideration of my decision dated September 9, 1991

to Jonathan Littman affirming the withholding of various

documents under Exemption 4 of the Freedom of Information Act

(FOIA), 5 U.S.C. 552(b)(4), pertaining to the Cabazon Band of

Mission Indians. You assert that the commercial and financial

documents being withheld under Exemption 4 do not constitute

confidential business information and request that they be

disclosed under the FOIA.

I cannot agree with your contentions that the withheld

documents fail to qualify for protection from disclosure under

Exemption 4 and I am reaffirming the Department\'s administrative

determination to withhold them. The documents contain sensitive

commercial and financial information which has been accorded

protection under the authority of Exemption 4. My analysis of

each of these documents is described below.

Exhibit D is an analysis of off-track wagering conducted for

the Cabazon Band of Mission Indians by Claremont Research

Associates. It involves extensive market research of the off-

track betting industry in Southern California and provides

marketing recommendations. You assert that it is difficult to

identify competitors of the Cabazon Band of Mission Indians with

respect to off-track wagering in California and dispute the

notion that disclosure of this document would cause competitive

disadvantage. However, the market analysis contained in

Exhibit D identifies a number of facilities which conduct off-

track wagering in southern California, analyzes their operations,

and provides a determination of the market potential of an off-

track wagering facility by the Cabazon Indians. Courts have

recognized that research data constitutes confidential commercial

and financial information. See, i.e., Timken Co. v. United

States Custom Service, 531 F. Supp. 194, 198 (D.D.C. 1981) (price

and market data). I conclude that Exhibit D contains sensitive

market research data pertinent to the business considerations of

the Cabazon Band of Mission Indians and that its disclosure would

cause substantial competitive harm if released.

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Exhibit E contains an accountant\'s compilation report of the

personal financial statement of Pete and Patricia Ortiz, a

balance sheet of Pete Ortiz Construction Incorporated, including

related statements of income and cash flows, and information

pertaining to potential investment of the company in the off-

track betting facility of the Cabazon Indians. The financial

breakdown of a business operation involves the most sensitive

type of commercial information protected from disclosure by

Exemption 4. See, National Parks Association v. Morton, 498 F.2d

765 (D.C. Cir. 1974) subsequent opinion, 547 F.2d 673 (D.C. Cir.

1976); Sterling Drug, Inc. v. FTC, 450 F.2d 698 (D.C. Cir. 1971);

McCoy v. Weinberger, 386 F. Supp. 504 (W.D. Ky. 1974). You state

that you find it difficult to imagine how disclosure of such

information would place the Cabazon Indians at a competitive

disadvantage. I conclude that disclosure of financial

information of a potential business partner of the Cabazon

Indians would have a deleterious effect to the Cabazon Indians\'

proposed business venture and I also conclude that disclosure of

Ortiz\'s financial information would have substantial adverse

consequences to Ortiz.

I have also determined at this time to withhold the personal

financial statement of Pete and Patricia Ortiz under Exemption 6

of the FOIA, 5 U.S.C. 552(b)(6), in addition to withholding it

under Exemption 4.

Exemption 6 protects information in medical and personnel

files and \"similar files.\" The Supreme Court, in Department of

State v. Washington Post, 456 U.S. 595 (1982), gave \"similar

files\" a broad meaning under Exemption 6 to cover detailed

Government records and files on an individual which can be

identified as applying to that individual. The Court stated that

the protection of an individual\'s privacy \"was not intended to

turn upon the label of the file which contains the damaging

information.\" 456 U.S. at 601 (citing H.R. Rep. No. 1497, 89th

Cong., 2d Sess. 11 (1966)). Rather, the Court made clear that

all information which \"applies to a particular individual\" meets

the threshold requirement for Exemption 6 protection. Id. at

602\.

In determining whether information can be withheld within

Exemption 6, the public interest purpose for disclosure of

personal information must be balanced against the potential

invasion of privacy to determine whether release would constitute

a clearly unwarranted invasion of privacy. Wine Hobby, USA,

Inc., v. U.S. Internal Revenue Service, 502 F.2d 133 (3rd Cir.

1974). Any stated purpose for release of personal privacy

information must satisfy the new public interest determination of

United States Department of Justice v. Reporters Committee for

Freedom of the Press, 489 U.S. 749 (1989) (hereinafter \"Reporters

Committee\"). Reporters Committee establishes a new framework for

analyzing the public interest under Exemptions 6 and 7(C) by

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establishing that only the furtherance of FOIA\'s core purpose of

informing citizens about \"what their government is up to\" can

warrant the release of information implicating individual privacy

interests. Reporters Committee, 489 U.S. at 772-73. Under

Reporters Committee disclosure of information about an individual

does not serve the \"public interest\" merely because it is

interesting or socially beneficial in some broad sense. Id. at

772 n. 20.

The personal financial statement of Pete and Patricia Ortiz

contains highly personal information on their financial holdings.

Disclosure of this information would not further the public

interest purpose of revealing the Department\'s administration of

its statutory responsibilities. I have therefore concluded under

the balancing test of Exemption 6 that disclosure of the

information would constitute a clearly unwarranted invasion of

personal privacy.

Exhibit F is a financial analysis of the Cabazon Indians\'

proposed off-track wagering facility. It contains information

pertaining to sources and uses of funds, project leverage,

pro formas, rate of return calculations, debt service analysis,

mortgage amortization spreadsheet, off-track betting pro forma

hour and wage assumptions and speed bingo and french bingo

assumptions. This information provides detailed financial

assumptions and considerations pertaining to the Cabazon Indians\'

business venture and I cannot agree with your contention that

there would be no competitive disadvantage from its disclosure.

Exhibit YZ, subexhibit (a), contains information on the

gross sales and profits from french and speed bingo and sales

contributions per attendee. This subexhibit contains additional

detailed information related to the information in the financial

analysis of Exhibit F and I cannot agree with your argument that

it is not relevant to the business considerations applicable to

off-track wagering.

Exhibit YZ, subexhibit (b), is the financial statement of

the Cabazon Band of Mission Indians, including their balance

sheet, statement of revenue, expenditures, encumbrances and fund

balance, administration and general expenses, cash receipts and

disbursements and general fixed assets. My analysis concerning

similar financial background information contained in Exhibit F

is applicable here and I have determined that the information of

this subexhibit is withholdable under Exemption 4.

You state that Congress is in the process of commencing an

investigation into grants of this nature and that it will most

likely seek the documents in issue here and make them available

to the public. The fact that Congress may obtain files from the

Department pursuant to an investigation does not affect the

availability of those same files to an individual FOIA requestor.

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Further, I cannot base a decision to release these records under

the FOIA on the basis of speculation that Congress may, in the

future, make such records available to the public.

You also assert that there is a public interest that

outweighs the protection accorded to this business information.

Normally, a Federal agency has the authority to determine as a

matter of policy to release information which falls within an

exemption under the FOIA. However, the Trade Secrets Act,

18 U.S.C. 1905, makes it a criminal offense for any employee of

the United States, or one of its agencies, to release trade

secrets and certain other forms of confidential commercial or

financial information except when disclosure is authorized by

law. The statute classifies as confidential commercial or

financial information, the \"trade secrets, processes, operations,

style of work, or apparatus or . . . the identity, confidential

statistical data, amount or source of any income, profits,

losses, or expenditures of any person, firm, partnership,

corporation or association.\" Thus, HUD is prohibited from

releasing the commercial and financial information of the type

you have requested here unless authorized to do so by law.

There is no law, pursuant to the requirement of the Trade

Secrets Act, that authorizes release of such information.

Therefore, I have concluded that the information was properly

withheld pursuant to Exemption 4 of the FOIA and the Trade

Secrets Act.

I have also determined pursuant to 24 C.F.R. 15.21 that the

public interest in assuring the personal privacy of individuals

militates against release of the personal privacy information of

Pete and Patricia Ortiz.

Please be advised that you have the right to judicial review

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

Very sincerely yours,

Shelley A. Longmuir

Deputy General Counsel