Opinion
Opinion By: Albert B. Chandler III, Attorney General; James M. Ringo, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether the Transportation Cabinet properly relied on KRS 61.878(1)(a) and KRS 61.878(1)(c) in partially denying Courier-Journal reporter Tom Loftus's September 22, 2002 request for certain records relating to ST Construction LLC. For the reasons that follow, we affirm the Cabinet's denial of the request for the financial records under KRS 61.878(1)(a) and KRS 61.878(1)(c).
In his request, Mr. Loftus asked for copies of the following records relating to ST Construction LLC:
. Any records within the Office of Minority Affairs relating to ST Construction other than those provided to us on Tuesday Sept. 17. This may include: financial disclosure reports showing the net worth of Tina Conner and/or Seth Conner; any memos about ST within the former files of Ronald Derricks.
. Minutes of the committee meeting where ST Construction's applications to be certified as a DBE [disadvantaged business enterprise] were considered.
. Any records relating to ST Construction's application in 2000 to become prequalified as a state contractor including its application, any records relating to consideration of that application, and related documentation, and any records relating to approval of this application for prequalification.
By letter dated September 23, 2002, Ed Roberts, Commissioner, Department of Administrative Services and Custodian of Records, responded to Mr. Loftus's request on behalf of the Cabinet. In partially denying the request, Mr. Roberts advised:
Please find enclosed the minutes of the committee meeting where ST Construction's application to be certified as a DBE was considered. Please also find copies of documents contained within the file relating to ST Construction's becoming prequalified as a state contractor in 2000. Please be advised that certain documents have been redacted from this prequalification file. These documents consist of personal information (i.e. Social Security numbers, telephone numbers, personal addresses, personal financial information, etc.) which is prohibited from disclosure under KRS 61.878(1)(a) and company financial information which is prohibited from disclosure under KRS 61.878(1)(c).
?
See, Marina Management, Inc. v. Commonwealth of Kentucky, Ky. 906 S.W.2d 318 (1995) (holding that records containing confidential audited financial reports of privately owned corporation which were submitted to a public agency pursuant to a license agreement with the state are exempt from disclosure because disclosure would give an unfair advantage to competitors, and reports were disclosed confidentially) .
Pleased be advised that no records other than those provided to you previously on September 17, 200[2] are available from the certification files of ST Construction. Financial disclosure reports showing the net worth of Tina Conner and/or Seth Conner are prohibited from disclosure by KRS 61.878 (See (1) (c) 1.2. Above). To our knowledge, there are no additional memos about ST Construction within the former files of Ronald Derricks.
Subsequent to the Cabinet's partial denial of Mr. Loftus's request, attorney Jon L. Fleischaker initiated this appeal on behalf of his client, The Courier-Journal. In his appeal, Mr. Fleischaker specifically requested that this office review the Cabinet's denial of access to the financial records relating to Tina Conner, Seth Conner, and ST Construction. In his letter of appeal, Mr. Fleischaker argues that the Cabinet improperly relied on KRS 61.878(1)(a) and KRS 61.878(1)(c) as a basis for denying access to the financial records. In support of his argument referencing KRS 61.878(1)(a), Mr. Fleischaker states, in part:
Tina Conner has recently filed suit against Governor Patton claiming, in part, that she and one of her business enterprises were persecuted by agencies of the Commonwealth after she ended an affair with the governor. In connection with these claims, she has made numerous appearances and statements in the mass media, some of which have dealt either directly or indirectly with her and Mr. Conner's finances. For example, Tina Conner has accused the governor and Kentucky administrative agencies of driving one of her businesses into bankruptcy. As such, the Conners have largely forfeited much, if not all, of their privacy interests in the personal financial records at issue.
Likewise, the public's legitimate interest in these records is now exponentially increased. In addition to the public's interest in monitoring the actions of the Transportation Cabinet, including certification by the Office of Minority Affairs of construction companies as DBEs for special consideration on road projects, the public now has a legitimate interest in seeing that its Transportation Cabinet has not been improperly influenced either in favor of or against such certification. To that end, the public's interest in the disclosure of these financial records is crucial. This is especially true now that both Ronald Derricks and Norris Beckley, of the Office of Minority Affairs, have made allegations that they felt undue pressure to approve ST Construction's application. Thus, the public's interest now outweighs any remaining personal privacy interests that Tina Conner and/or Seth Conner may have in the records that they have disclosed to the Transportation Cabinet to be certified as a DBE and to be pre-qualified as a state contractor.
In support of his argument that the Cabinet improperly relied on KRS 61.878(1)(c) in denying access to the requested financial records, Mr. Fleischaker stated, in part:
Roberts also cited KRS 61.878(1)(c) as another reason the Transportation Cabinet continues to withhold the records insofar as they disclose the net worth of Tina Conner and/or Seth Conner. Roberts cited this statutory provision as the sole reason the Transportation Cabinet withheld the financial information relating to ST Construction. This exemption is inapplicable. The portion that Roberts excerpted of subsection 2 of that section deals with licenses to do business, but the Office of Minority Affairs does not grant or review such licenses. Rather, that office grants or denies status as a DBE for the purpose of giving companies preference on road construction projects. While this may be a manner of government-bestowed privilege, it is not a "license to do business" as that term is normally meant, and especially not under the strict construction of exemptions that the Open Records act mandates. KRS 61.871 .
Likewise subsection 1 of KRS 61.878(1)(c) deals with confidentially disclosed records which, if openly disclosed, would permit unfair commercial advantages to competitors of the entities that disclosed the records. We simply do not see how open disclosure of the net worth of Tina Conner or Seth Conner would permit unfair commercial advantage to competitors of ST Construction, if any competitors indeed exist. As a limited liability company, ST Construction is an entity separate from Tina Conner and Seth Conner, as individuals, presumably with completely separate assets. We know of no advantage any competitors of ST Construction might reap from knowing Tina or Seth Conner's net worth. And Roberts did not specify any such advantage. In any event, the release of this information can hardly be characterized as an unfair commercial advantage. Therefore, the personal financial information requested by The Courier-Journal should be disclosed.
For the same reasons, the financial information of ST Construction contained in the requested public records is not subject to the exemptions provided by KRS 61.878(1)(c) . First, the company financial information was not required to be disclosed to the agency. Rather, it was disclosed voluntarily in exchange for an economic benefit from the government, namely DBE certification and pre-qualification as a state contractor. As such, because it was not required to be disclosed by the agency, it must have been disclosed by ST Construction with no expectation of confidentiality and no expectation of confidentiality and no expectation that the information would fall under KRS 61.878(1)(c).
After receipt of notification of the appeal and a copy of the letter of appeal, Todd Shipp, Assistant General Counsel, on behalf of the Cabinet, provided this office with a response to the issues raised in the appeal. In his response, Mr. Shipp advised:
For the record, the Kentucky Transportation Cabinet has provided full access to the records Mr. Loftus has requested with the exception of financial records that pertain to Mr. Seth Conner, Mrs. Tina Conner and their company ST Construction. Included, but not limited to, in these records are personal income tax returns, audit records, lists of equipment and existing values, and business related tax returns. Mr. Fleischaker is correct that the Cabinet denied this request on two grounds, KRS 61.878(1)(a) and KRS 61.878(1)(c).
There may be nothing that an individual wishes to protect more and prevent from public disclosure than his or her financial records. This agency can think of nothing more personal to a person (with the exception of his Social Security Number, which is included within these records) than these documents. The Conners nor ST Construction most certainly would not have disclosed these to us but for their interest in first becoming certified as a Disadvantaged Business Enterprise, and second to become qualified to do business with the Cabinet generally. Tina Conner may have talked to the media, but she has not waived her privacy interests with the Cabinet. We would also remind Counsel for the Courier-Journal that Seth Conner has not spoken with the press.
As well, Ms. Conner has not discussed personal financial information with the media. Lastly, nowhere in the Open Records Law does it state that talking to the media about a personal relationship with the Governor gives the public access to and the unfettered right to put on public display this type of information. If public disclosure of individual customer billing records of a public utility constitutes a clearly unwarranted invasion of personal privacy, this most certainly does. See, 96-ORD-176.
Second, counsel for the Courier-Journal is mistaken in his position that the financial records of the Conners and ST Construction were not required to be disclosed to this Cabinet. By both Federal and State law, there must be a determination if an individual applying for a Disadvantaged Business Enterprise has a personal net worth in excess of $ 750,000. See, 49 CFR Part 26 and 601 KAR 4:010. Likewise, proof and/or documents must be presented and reviewed which show that the company does not exceed certain threshold amounts set by federal law. Id. The financial records (including the three prior tax years) are what are used to establish these figures. The second area of this Cabinet that requires the disclosure of financial records is in prequalification to do business generally with the Cabinet. All companies and individuals have to go through this process whether they are DBE's or not. Without prequalification, a business cannot bid, and to do so would result in an immediate rejection of the bid. See, KRS 176. If this is not a granting of authority to do business or a license to conduct business, then nothing is.
As of this moment, ST Construction is still a company recognized by law. It is not up to this Cabinet, nor the Courier-Journal to determine if release would create an unfair commercial advantage. Do we not risk being accused of persecuting one of her other businesses by release of this type of information? Ms. Conner has taken steps to protect her legal rights to date. The Cabinet does not wish to expose itself to legal action for release of personal and business related financial records. Therefore, this Cabinet respectfully requests affirming its denial.
We are asked to determine whether the Cabinet's denial of the request for the financial records of Tina Conner, Seth Conner, and ST Construction violated the Open Records Act. For the reasons that follow, we conclude it did not.
We address first the denial of the financial records under authority of KRS 61.878(1)(c)1. KRS 61.878(1)(c) 1. excludes from public inspection:
This office has consistently recognized that in order to qualify for exclusion under KRS 61.878(1)(c)1., public records must be:
1) confidentially disclosed to an agency or required by an agency to be disclosed to it;
2) generally recognized as confidential or proprietary; and
3) of such a character that disclosure would permit an unfair commercial advantage to competitors of the entity that disclosed them.
See, e.g., 96-ORD-135; 97-ORD-66; 97-ORD-132. On at least two occasions, the Kentucky Supreme Court has analyzed this provision, concluding that the public agencies which had invoked it met their statutory burden of proof. In Marina Management Services, Inc. v. Cabinet for Tourism, Ky., 906 S.W.2d 318 (1995), the Court held that records containing financial information of privately owned marina operators were exempt from disclosure. The Court reasoned that disclosure would provide an unfair advantage to competitors by allowing them to ascertain the economic status of the marina operators. At page 319 of that opinion, the Court observed:
The records submitted to the Parks Department include information on asset values, notes payable, rental amounts on houseboats, related party transactions, profit margins, net earnings, and capital income. These are records of privately owned marina operators, disclosure of which would unfairly advantage competing operators. The most obvious disadvantage may be the ability to ascertain the economic status of the entities without the hurdles systematically associated with acquisition of such information about privately owned organizations. Further, the facts on the record indicate that the audit statements were disclosed confidentially to Tourism and the Auditors Office. On these facts alone, the exemption clearly applies.
Thus, the Parks Department adduced sufficient proof to support invocation of the exemption.
Similarly, in Hoy v. Kentucky Industrial Revitalization Authority, Ky., 907 S.W.2d 766 (1995), the Court found:
The financial information required to be submitted by GE in its application to KIRA detailed the company's business and revitalization project. Under administrative regulations adopted by KIRA, such information included a financial history of the corporation, projected cost of the project, the specific amount and timing of capital investment, copies of financial statements and a detailed description of the company's productivity, efficiency and financial stability. . . . It does not take a degree in finance to recognize that such information concerning the inner workings of a corporation is "generally recognized as confidential or proprietary" and falls within the wording of KRS 61.878(1)(c)(2).
Again, the public agency from which access to confidentially disclosed records of a private corporation was sought established that those records were generally recognized as confidential or proprietary.
We conclude the Cabinet's responses adequately demonstrate that financial records of Tina Conner, Seth Conner, and ST Construction were required to be disclosed to the Cabinet to determine, as required by both state and federal law, eligibility for DBE certification and prequalification to do business with the Cabinet generally. Records, such as personal income taxes, audit records, lists of equipment and existing values, and business related tax returns, are records of a private corporation generally recognized as confidential or proprietary and constitute the "inner workings" of the company, the release of which could unfairly advantage competitors. Hoy, supra, at 768. "The most obvious disadvantage may be the ability to ascertain the economic status of the entities without the hurdles systematically associated with the acquisition of such information about privately owned organizations." Marina Management Services, supra at 319. Accordingly we conclude the Cabinet properly withheld disclosure of the financial records under authority of KRS 61.878(1)(c).
The Cabinet also denied access to the financial records under KRS 61.878(1)(a). That section authorizes the nondisclosure of:
Public records containing information of a personal nature where the public disclosure thereof would constitute a clearly unwarranted invasion of personal privacy.
The courts have developed a two-part analysis for determining the propriety of an agency's invocation of this exception. In Zink v. Commonwealth of Kentucky, Ky.App., 902 S.W.2d 825, 828 (1995), the Court of Appeals adopted the test first set forth by the Supreme Court in Kentucky Board of Examiners of Psychologists v. Courier-Journal and Louisville Times Company, Ky., 826 S.W.2d 324, (1992):
[O]ur analysis begins with a determination of whether the subject information is of a "personal nature." If we find that it is, we must then determine whether public disclosure "would constitute a clearly unwarranted invasion of personal privacy. " This latter determination entails a "comparative weighing of antagonistic interests" in which the privacy interest in nondisclosure is balanced against the general rule of inspection and its underlying policy of openness for the public good. Id. at 327. As the Supreme Court noted, the circumstances of a given case will affect the balance. Id. at 328.
The Zink court noted that in weighing the public interest in disclosure against the privacy interests involved, "the only relevant public interest to be considered is the extent to which disclosure would serve the principal purpose of the Open Records Act." Zink at 828. "The purpose of disclosure, " the court continued, "focuses on the citizens' right to be informed as to what their government is doing." Id. Disclosure of records which do not subject agency action to public scrutiny may not be required where there is a competing privacy interest.
The Cabinet, in its response to the letter of appeal, indicated that the requested financial records included such records as personal income tax returns, audit records, lists of equipment and existing values, and business related tax returns. A person's personal finances and business obligations are generally considered information of a personal nature to which a person has a cognizable privacy interest. See 92-ORD-1238; OAG 82-275. Information that reveals the affairs of the business, such as profits, taxes, deductions, and salaries, are also exempt. 01-ORD-63. The public cannot have access to information about tax records that are made expressly confidential. 1 To the extent that disclosure of the amount of tax paid or owing, or the penalty assessed reveals the private details of the taxpayer's business, it is generally not subject to disclosure. See 94-ORD-64. Moreover, it is commonly recognized that records disclosed to a public agency, such as when an individual or business, in order to obtain an occupational license or collect a license fee, provides a social security number and federal identification numbers, such information remains confidential, and exempt from public inspection. OAG 82-2; OAG 84-93. In sum, the Court of Appeals has declared "few things in our society are deemed of a more intimate nature than one's income," and extended the protection to such information under KRS 61.878(1)(a). Zink at 829.
Having found the existence of a cognizable privacy interest in the requested records, we proceed to the second part of our analysis to determine whether an invasion of privacy is nonetheless warranted because the public interest in disclosure outweighs the privacy interest.
In support of disclosure, Mr. Fleischaker argues that because Tina Conner has filed suit against the Governor claiming she and one of her businesses has been persecuted by agencies of the Commonwealth and has aired her affair with the Governor in the media, she has forfeited the privacy interest of herself, Seth Conner, and ST Construction. Additionally, Mr. Fleischaker argues that the public's interest in disclosure of the financial records is necessary for the public to monitor the certification process and whether the Cabinet has been improperly influenced either in favor of or against such certification.
We are unwilling to impute to Ms. Conner a waiver of her privacy interest in her personal financial information, as well as that of Seth Conner and ST Construction. The public may or may not be able to monitor, in some way, the certification process and whether any undue influence was exerted by disclosure of the financial information. To advance this argument one step further, all financial records of all companies and individuals, including income tax returns, could be subject to disclosure. However, we are reluctant to read into the course of conduct Ms. Conner pursued or statements made by her to the media, a waiver of her privacy interests in the personal financial information disclosed to the Cabinet, or that of Seth Conner, or ST Construction, particularly where there has been no express waiver of this privacy interest by the affected parties. See 02-ORD-197, pp. 5, 6. Of course if Ms. Conner or other parties affected wished to do so, they could provide the media with copies of the financial records or notify the Cabinet that they have no objection to disclosure.
Given, as noted above, the courts' and this office's long recognition of an individual' s strongly substantiated privacy interests in his or her personal financial affairs, we find that disclosure of the requested financial information would constitute an unwarranted invasion of personal privacy. 02-ORD-197, p. 6. We affirm the Cabinet's denial of the request for the financial records under KRS 61.878(1)(a) .
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.
Footnotes
Footnotes
1 For example,KRS 131.190(1) prohibits the release of certain tax records, and provides:
No present or former secretary or employee of the revenue cabinet, member of a county board of assessment appeals, property valuation administrator or employee thereof, or any other person, shall divulge any information acquired by him of the affairs of any person, or information regarding the tax schedules, returns or reports required to be filed with the department or other proper officer, or any information produced by a hearing or investigation, insofar as the information may have to do with the affairs of the person's business.
(Emphasis added.)