The Accessibility of Reports Prepared Under SEC Consent Decrees

Reports prepared by a special consultant are frequently part of the remedies included in an SEC consent decree. The purpose of the report is typically to make findings and recommendations that become the predicate for improved policies and procedures. The report can be expected to contain confidential information regarding the entity that was named in the Commission’s action. The business may thus understandably wish to keep the report confidential. Since it has been prepared in connection with an enforcement action the question is whether it can be kept confidential or must be available to the public. This is the issue resolved by the Court in SEC v. American International Group, Case No. 12-5141 (Decided: Feb. 1, 2013).

The case arose out of the 2004 settlement of a Commission enforcement action against insurance giant AIG. The consent decree called for the entry of an injunction against future violations, the payment of disgorgement, establishment of a restitution fund and the creation of a committee to review future transactions. It also required the retention of an independent consultation who was charged with reviewing a number of AIG’s completed transactions and preparing pertinent reports documenting the findings and recommendations. The consent decree did not specify if the reports were confidential or contain any provision regarding disclosure.

In 2011 Sue Reisinger, a reporter for Corporate Counsel and American Lawyer magazine, requested access to the reports citing a common law right of access and the First Amendment. Previously, the district court had found good cause to permit access to the reports under a post-decree “clarification” to the settlement agreed to by the partiers which limited access to those persons and entities specified in the Consent or as permitted by the Court for good cause. In one instance good cause was found to make the papers available to the office of Thrift Supervision and in another to the House of Representatives. In both cases the parties agreed with granting access.

The district court granted Ms. Reisinger’s request. It concluded that the reports are judicial records to which she had a common law right of access. The D.C. Circuit reversed.

The critical issue is whether the reports are considered to be a judicial record. The public has a fundamental interest in viewing the work of public agencies, the Court noted. Accordingly, courts have long recognized a common law right to inspect and copy public records. Those are records created and kept for the purpose of memorializing official actions, decisions, statements or other matters of significance. Viewed in that context the critical question regarding judicial records is the role they play in the adjudicatory process. If the record is part of that process there is a right of access, although it is not unfettered. Rather, disclosure will ultimately hinge on balancing the government’s interest in secrecy and the public’s in disclosure.

In this case the Court found it unnecessary to balance the rights involved in view of its conclusion that the reports sought are not judicial records. The reports in this case have nothing to do with the court’s decision to enter the consent decree or the relief ordered at the time. The independent consultant had no relationship with the court and did not exercise any judicial powers. Indeed, at the time the decree was entered the reports did not exist – they were prepared later. Disclosure of the reports would thus “do nothing to further judicial accountability” the Court concluded.

In reaching its conclusion the Court distinguished the Second Circuit’s decision in U. S. v. Amodeo, 44 F. 3d 141 (2nd Circ. 1995). There a consent decree appointed a “Court Officer” who was “authorized to exercise a number of judicial powers and whose very role depended on a relationship with the district court.” Under those circumstances the Court conducted that in fact the records were judicial records subject to disclosure.

Here, however, the consultant was not a court officer and did not exercise powers dependent on the court. If, however, the district court were called on to enforce the consent decree and the reports became relevant to that process, AIG concedes that they may become judicial records. That has not occurred to date. To the contrary, in this case the reports to date are not judicial records and are thus not subject to disclosure

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