Court Opinion

ID: 2662562
Source: CourtListenerOpinion
Date Created: 2014-04-03 12:28:37.812813+00
Date Added: 2024-06-11T12:40:29.499236
License: Public Domain

UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF COLUMBIA
______________________________
SECURITIES AND EXCHANGE        )
COMMISSION,                    )
                               )
          Plaintiff,           )
                               )
     v.                        )    Civil Action No. 04-2070 (GK)
                               )
AMERICAN INTERNATIONAL GROUP, )
INC.,                          )
                               )
          Defendant.           )
______________________________)

                        MEMORANDUM OPINION

     This civil action brought by the Securities and Exchange

Commission (“SEC”) against the American International Group (“AIG”)

under the Securities Act of 1933, 15 U.S.C. § 77a et seq., the

Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq., and Rules

promulgated pursuant to the Securities Exchange Act, is now before

the Court on Sue Reisinger’s Motion for Leave to Intervene for

Access to Monitor’s Reports (“Reisinger Mot.”) [Dkt. No. 18]. Upon

consideration of the Motions, Opposition, Reply, and the entire

record herein, and for the reasons stated below, Reisinger’s Motion

is granted.

I. Background

     On November 30, 2004, the SEC filed a Complaint against AIG,

alleging violations of federal securities laws [Dkt. No. 1]. On the

same date, the SEC submitted to the Court the Consent of Defendant

American International Group, Inc. (“Consent Order”) [Dkt. No.
1-1]. In this document, AIG consented to entry of Final Judgment

without admitting or denying the allegations of the Complaint. The

Court entered Final Judgment, incorporating the Consent Order, on

December 7, 2004 [Dkt. No. 2].

     Under the terms of the Consent Order, AIG agreed to take on

two main responsibilities. First, AIG consented to establish a

Transaction Review Committee to review transactions taking place

after the entry of Final Judgment. The Committee was charged with

setting up procedures to identify transactions that would involve

heightened legal, reputational, or regulatory risk. Under the

Consent Order, these transactions require review and approval by

the Committee before they can be completed.

     Second,   AIG    agreed      to    retain   an   independent    consultant,

selected by the Fraud Section of the Department of Justice and

acceptable to the SEC, to review the Transaction Review Committee’s

policies and procedures as well as all transactions that AIG

entered into between January 1, 2000, and the date of the Final

Judgment and that had “a primary purpose of enabling a Reporting

Company to obtain an accounting or financial reporting result.”

Consent   Order   ¶   3.a.1.      The    purpose      of   the   review    of   past

transactions   was    for   the    Independent        Consultant    to    determine

whether they were used or designed to permit counter-parties to

violate generally accepted accounting principles (“GAAP”) or rules

                                         -2-
promulgated by the SEC. These transactions formed the basis of the

SEC’s Complaint.

      At the conclusion of his or her review, the consultant was

required to provide copies of reports of his or her findings (“IC

Reports”) to the SEC, the DOJ, and AIG’s Audit Committee. AIG was

then required to implement all reasonable recommendations made by

the consultant. If AIG violated certain designated provisions of

the Consent Order, the SEC was permitted to petition the Court to

vacate the Final Judgment and restore the action to its active

docket, i.e., to proceed with litigating the Complaint. Further,

the Court retained jurisdiction over the case in order to enforce

all terms of the Final Judgment, including provisions related to

the IC Reports.

      More than a year and half later, on June 14, 2006, the SEC and

AIG filed a Joint Motion for Clarification of Consent of American

International Group, Inc. (“Joint Mot. for Clarification”) [Dkt.

No. 3]. According to this Joint Motion, “[i]t was not the parties’

intent that [the information provided by AIG to the independent

consultant] be disseminated or available to anyone outside of the

entities identified in the Consent.” Joint Mot. for Clarification

3. Accordingly, the SEC and AIG requested that the Court “clarify”

the   Consent   Order   by   adding    a    provision   prohibiting   public

dissemination of the IC Reports.

                                      -3-
     The Court granted the Joint Motion for Clarification on June

14, 2006 [Dkt. No. 4]. Since that time, the Court has twice granted

requests to release IC Reports: once on October 23, 2007, to the

Office of Thrift Supervision at the request of the SEC and AIG

[Dkt.   No.   8],   and    once   on   May   4,    2009,   to   the    House   of

Representatives Committee on Oversight and Government Reform at the

request of the SEC [see Dkt. No. 11].

     According to Reisinger’s Motion, she filed a Freedom of

Information Act request with DOJ on January 6, 2011, requesting

disclosure of the IC Reports. Reisenger Mot. 5. The DOJ told her

that they could not find the IC Reports, but that they had also

been filed with the SEC. Id. On March 9, 2011, Reisinger filed a

FOIA request with the SEC. Id. On April 21, 2011, the SEC denied

the request, citing this Court’s June 14, 2006 Order restricting

dissemination of the IC Reports. Id.

     On   April     29,   2011,   Reisinger       sent   the   Court   a   letter

requesting release of the IC Reports [Dkt. No. 12-1]. On May 4,

2011, the Court posted the letter on the docket and ordered the

parties to file responses [Dkt. No. 12]. On June 6, 2011, upon

consideration of the responses, the Court notified all relevant

parties that any request to unseal and release the IC Reports must

be made by formal motion [Dkt. No. 17].

     On February 7, 2012, Reisinger filed her Motion to Intervene

for Access to Monitor’s Reports. On February 28, 2012, the SEC and

                                       -4-
AIG filed a Joint Opposition (“Joint Opp’n”) [Dkt. No. 20]. On

March 16, 2012, Reisinger filed a Reply [Dkt. No. 22].

II.   Analysis

      Reisinger argues that the Court should order the SEC to make

the IC Reports publicly available on two grounds: (1) a First

Amendment right of access to judicial proceedings and (2) a common

law right of access to judicial records. Reisinger Mot. 5. Each

argument will be addressed in turn.

      A.    First Amendment Right of Access

      In Richmond Newspapers, Inc. v. Virginia, the Supreme Court

held that “the right to attend criminal trials is implicit in the

guarantees of the First Amendment.” 448 U.S. 555, 580 (1980). The

Supreme Court fleshed out this right in Press-Enterprise Co. v.

Superior Court, 478 U.S. 1 (1986). In that case, the court held

that a qualified First Amendment right of public access attaches to

criminal proceedings and related materials where (1) “the place and

process have historically been open to the press and general

public” and (2) “public access plays a significant positive role in

the functioning of the particular process in question.” Id. at 8.

      Once a presumptive right attaches, “the proceedings cannot be

closed     unless   specific,   on   the   record   findings   are   made

demonstrating that closure is essential to preserve higher values

and is narrowly tailored to serve that interest.” Id. at 13-14

(internal quotations omitted). Reisinger argues that the IC Reports

                                     -5-
are analogous    to   documents supporting      a plea    agreement   in a

criminal trial and are therefore entitled to a presumption of

access under the First Amendment. Reisinger Mot. 6-7.

     The limits of this First Amendment right of access are clear

in this Circuit. As the Court of Appeals has stated, “neither this

Court nor the Supreme Court has ever indicated that it would apply

the Richmond Newspapers test to anything other than criminal

judicial proceedings.” Ctr. for Nat’l Sec. Studies v. DOJ, 331 F.3d

918, 935 (D.C. Cir. 2003) (emphasis in original); accord Flynt v.

Rumsfeld, 355 F.3d 697, 704 (D.C. Cir. 2004). The SEC brought a

civil, not criminal, action against AIG.

     Moreover, even if the First Amendment right of access were to

be extended to proceedings in civil actions, as other circuits have

done, Reisinger has not even attempted to make the requisite

showing   that   “such   access   has    historically    been   available.”

Washington Post v. Robinson, 935 F.2d 282, 288 (D.C. Cir. 1991);

Press-Enterprise, 478 U.S. at 8. Because “it is impossible to say

that access to such a document has historically been available

. . . intervenor[’s] claim fails to satisfy the first of the two

necessary criteria for a First Amendment right of access.” United

States v. El-Sayegh, 131 F.3d 158, 161 (D.C. Cir. 1997). Therefore,

there is no First Amendment right of access to the IC Reports.

                                   -6-
     B.     Common Law Right of Access

     Reisinger also argues that the IC Reports should be publicly

available   under     the   common   law   right   of   access   to   judicial

records.1 As courts are quick to observe, “[t]he common law right

of access to judicial records antedates the Constitution.” El-

Sayegh, 131 F.3d at 161 (citing Leucadia, Inc. v. Applied Extrusion

Techs., Inc., 998 F.2d 157, 161 (3d Cir. 1993)). This right of

access reflects “the citizen’s desire to keep a watchful eye on the

workings of public agencies.” Nixon v. Warner Commc’ns, Inc., 435

U.S. 589, 598 (1978); El-Sayegh, 131 F.3d at 161. “The presumption

of access is based on the need for federal courts, although

independent--indeed, particularly because they are independent--to

have a measure of accountability and for the public to have

confidence in the administration of justice.” United States v.

Amodeo, 71 F.3d 1044, 1048 (2d Cir. 1995) (“Amodeo II”); see also

El-Sayegh, 131 F.3d at 162-63.

     In order to determine whether a document should be accessible

to the public, a court must proceed in two steps. First, the court

must determine whether the document is a judicial record. El-

Sayegh, 131    F.3d    at 162-63;     Washington Legal Found.         v.   U.S.

Sentencing Comm’n, 89 F.3d 897, 902 (D.C. Cir. 1996). Second, the

     1
       Reisinger alternatively contends that the common law right
of access should extend to the IC Reports on the theory that they
are public records. Reisinger Mot. 10-11. It is not necessary to
reach this question, since, as explained below, the IC Reports are
disclosable as judicial records.

                                     -7-
court must balance the competing interests in publicity and in

secrecy. Nixon, 435 U.S. at 602; Washington Legal Found., 89 F.3d

at 902.

           1. Judicial Records

     Our Court of Appeals defined the contours of judicial records

in El-Sayegh. In this circuit, “what makes a document a judicial

record and subjects it to the common law right of access is the

role it plays in the adjudicatory process.” El-Sayegh, 131 F.3d at

163. According to this standard, a document must relate to a

judicial decision bearing on the litigants’ substantive rights to

constitute a judicial record. Id. at 162. Hence, a repudiated plea

agreement in a case where the indictment has been dismissed--i.e.,

where there is nothing further for the court to do--is not a

judicial record, id. at 163, but an exhibit submitted in support of

a motion for summary judgment--i.e., where the court has to decide

the motion--is. Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110,

121 (2d Cir. 2006).

     For the following reasons, the Court concludes that the IC

Reports are relevant to the judicial function and therefore are

properly considered judicial records. El-Sayegh, 131 F.3d at 163;

Lugosch, 435 F.3d at 119. First, the IC Reports themselves may well

give rise to a substantive judicial decision in this case. See

Lugosch, 435 F.3d at 121-22 (documents that may be relied upon in

deciding   a   motion   for   summary    judgment   constitute   judicial

                                   -8-
records). The Reports may provide information leading the SEC to

return to this Court to secure further relief. In other words, the

Consent Order empowers the Court to retain jurisdiction for the

purposes of enforcing the Consent Order, including compliance with

the IC Reports. Consent Order ¶ 14.

      In this sense, this case is analogous to United States v.

Amodeo. 44 F.3d 141 (2d Cir. 1995) (“Amodeo I”). There, the Court

of Appeals for the Second Circuit held that reports generated

pursuant to a consent decree by an independent court officer, which

the officer did not intend to make public, were judicial records

subject to a common law right of access because the consent decree

made the reports “relevant to the performance of the judicial

function   and   useful     in   the   judicial     process.”    Id.     at   146.

Specifically, the consent decree permitted the officer “to apply

for necessary and appropriate assistance to execute her powers, and

the progress report certainly would be germane in assessing such an

application.” Id. Additionally, the consent decree allowed “any

party to seek enforcement of, or relief from, any of the provisions

of   the   Decree,”   and    empowered       the   court   “to   grant    relief

‘consider[ing] the record of all proceedings . . . to the date of

the application.’” Id. (quoting consent decree).

      Just as the officer in Amodeo I could apply to the court for

assistance in executing her powers, so too the SEC may apply to

this Court to enforce the provisions of the Consent Order. Just as

                                       -9-
the officer’s reports in Amodeo I could prove useful to that

court’s evaluation of compliance with the consent decree, so too

the IC Reports may prove critical to this Court’s assessment of

conformity to the Consent Order.

     The SEC and AIG attempt to distinguish Amodeo I on the ground

that “[t]he IC here is in no way analogous to a ‘Court Officer’

with court appointed Receiver powers.” Joint Opp’n 8. However,

neither the holding of Amodeo I nor any other case that the SEC and

AIG have pointed to suggests that the powers of the author of the

document in question have any bearing on whether that document is

a judicial record. The sole question, as explained above, is

whether the document is relevant to the adjudicatory process. El-

Sayegh, 131 F.3d at 163; Amodeo I, 44 F.3d at 146.

     Second, the central role the IC Reports play in the operation

of the Consent Order makes them precisely the kind of documents

that must be open to the public in order for the federal courts “to

have a measure of accountability and for the public to have

confidence in the administration of justice.” Amodeo I, 71 F.3d at

1048; see also Nixon, 435 U.S. at 598; El-Sayegh, 131 F.3d at 162-

63. As explained above, the Final Judgment and Consent Order

replaced a full adjudication on the merits in this case. Though

filed after, rather than before, the Consent Order itself, the IC

Reports are an integral part of the Consent Order because they are

intended to document and ensure AIG’s compliance with the IC’s

                               -10-
investigation and final recommendations. Such compliance is central

to the effectiveness of the Consent Order. Indeed, for this very

reason, the Court retains jurisdiction to enforce AIG’s adherence

to the Consent Order’s terms. Consent Order ¶ 14.

     Therefore, the IC Reports are not just relevant to a future

adjudicatory     function,       but   are    necessary    to    ensure   public

accountability for the actual adjudication of this case--namely,

the approval of the original Consent Order. Nixon, 435 U.S. at 598;

El-Sayegh, 131 F.3d at 162-63; Amodeo I, 71 F.3d at 1048. In this

sense,   the    IC    Reports    are   no    different    than   executed     plea

agreements with their statements of facts to which the defendant

pleads and motions for summary judgment with their many attached

exhibits, both of which substitute for a full adjudication of the

litigants’      rights    on     the   merits,   and     both    of   which    are

presumptively available to the public. Robinson, 935 F.2d at 292;

Lugosch, 435 F.3d at 121.

     In sum, the IC Reports are relevant to both the potential

compliance adjudication contemplated by the Consent Order and the

original Final Judgment in this matter. Hence, the IC Reports are

judicial records. El-Sayegh, 131 F.3d at 163.

           2.        Balancing

     “At this point, [the Court is] faced with the task of weighing

the interests advanced by the parties in light of the public

interests and the duty of the courts.” Nixon, 435 U.S. at 602; see

                                       -11-
also Washington Legal Found., 89 F.3d at 902 (“the court should

proceed   to   balance     the   government’s     interest     in    keeping    the

document secret against the public’s interest in disclosure”). The

decision to grant access to judicial records is left to the trial

judge’s discretion, “to be exercised in light of the relevant facts

and circumstances of the particular case.” Nixon, 435 U.S. at 599;

accord El-Sayegh, 131 F.3d at 160.

      The SEC and AIG advance two interests that they contend urge

non-disclosure. First, the SEC and AIG argue that “[b]oth the

Commission and AIG expected at the signing of the Consent that the

information provided to the IC, and the IC Reports, would remain

confidential.”     Joint    Opp’n    12-13.     Therefore,    they    argue,    the

Reports   should    remain   confidential        in   order   to    protect    this

expectation as well as the SEC’s ability to enter into similar

agreements in the future. Id.

      The SEC and AIG’s position is belied by a simple fact: it took

over a year and half after entry of the Final Judgment and Consent

Order--which included no confidentiality provision--for the SEC and

AIG to return to this Court and request modification of the Consent

Order to prevent disclosure of the IC Reports. It is true, as the

SEC and AIG point out, that their June 2006 Joint Motion for

Clarification states that “[i]t was not the parties’ intent that

this information be disseminated or available to anyone outside of

the   entities     identified       in    the   Consent.”     Joint    Mot.     for

                                         -12-
Clarification 3. But it is hard to believe that confidentiality was

very significant to the parties at the time the Consent Order was

signed, if such an important provision was forgotten or overlooked

by all the high powered and highly paid attorneys on both sides.

      Whatever the parties may have said they intended, with the

benefit of hindsight, when jointly requesting the confidentiality

provision, the original Consent Order does not demonstrate that it

was predicated on confidentiality. In light of this fact, the SEC

and AIG’s argument that cooperation between the SEC and future

defendants will be jeopardized by the release of the IC Reports

rings hollow.

      Second, “AIG believes that disclosure of the IC Reports here

would cause competitive commercial harm to AIG and to the customers

whose transactions were reviewed by the IC.” Joint Opp’n 13.

Reisinger has already offered a compromise to answer this concern:

the IC Reports can be redacted. Reisinger Mot. 12-15. Limited

redactions   to   withhold   proprietary   information    that    would   be

valuable to AIG’s competitors--exactly the information the Joint

Motion for Clarification purported to protect--would allay fears

that AIG’s position would be negatively affected while advancing

the public’s interest in disclosure.

      As to the public’s interest in favor of disclosure of the IC

Reports, it is overwhelming. First, as Reisinger states, “access to

the   Independent   Consultant   Reports   will   allow   the    public   to

                                  -13-
evaluate the contents and see that the consent agreement process is

legitimate and fair.” Reisinger Mot. 14. Second, and most important

of all, given the financial meltdown of 2008, the recession it

spawned, and the suffering the country has endured because of it,

and given the role that AIG played in that financial meltdown, the

public needs to know whether the obligations AIG undertook in the

Consent Order were complied with, whether the SEC was carrying out

its enforcement and monitoring responsibilities under the Consent

Order, and what, if any, role the compliance--or noncompliance--

with the Consent Order may have played in the devastating events of

2008.

     For these reasons, there is no question that the public

interest   far    outweighs   AIG’s     or   the   SEC’s   interest   in

confidentiality, especially given the availability of redaction.

III. Conclusion

     For the reasons set forth above, Sue Reisinger’s Motion for

Leave to Intervene for Access to Monitor’s Reports is granted, and

the parties must make the redacted IC Reports available to the

public.

     An Order will issue with this opinion.

                                 /s/
April 16, 2012                  Gladys Kessler
                                United States District Judge

Copies via ECF to all counsel of record

                                 -14-