Opinion
Opinion By: Jack Conway, Attorney General; Michelle D. Harrison, Assistant Attorney General
Open Records Decision
At issue in this appeal is whether the Public Protection Cabinet -- Department of Financial Institutions violated the Kentucky Open Records Act in denying Laurence J. Zielke's request for "copies of all reports of notification of fraud, defalcation, misfeasance or violation of statute provided by any officer, director or Board of Directors of American Founders Bank, Inc. in 2007 and 2008 under KRS 286.3-490(3)." 1 Although the Department responded in a timely manner by letter dated September 24, 2008, the Department initially misread the request, and therefore denied access on bases that were improper; however, the Department has remedied this error on appeal. In accordance with
Bowling v. Lexington-Fayette Urban County Government, Ky., 172 S.W.3d 333, 340-341 (2005), and prior decisions including 07-ORD-190, this office affirms the agency's ultimate disposition of Mr. Zielke's request as to any reports which do not exist. Having reviewed the federal laws upon which the Department otherwise relies, the Attorney General finds no reason to deviate from the general practice of deferring to public agencies with regard to interpretation of binding confidentiality provisions, incorporated into the Open Records Act by operation of KRS 61.878(1)(l), or in this case, (k), in the absence of authority to the contrary.
Upon receiving notification of Mr. Zielke's appeal from this office, David L. Reichert, General Counsel, supplemented the agency's response, initially acknowledging that denial on the bases originally cited was improper "and was the result of a misreading" of the request. Having apologized for this error, Mr. Reichert advises that the Department "has no reports that would be responsive to the request and subject to disclosure. " In addition, one method a bank may use to notify the Department of "fraud, defalcation, misfeasance, or violation of [the] subtitle" in compliance with KRS 286.3-490(3) is by "submitting a copy of a Suspicious Activity Report ("SAR"). As explained by Mr. Reichert:
SARs are reports filed by financial institutions with the Financial Crimes Enforcement Network ("FinCEN") as required by the Secretary of the Treasury under the authority of the Bank Secrecy Act of 1970, 31 U.S.C. Section 5311, et. seq. Pursuant to federal law, SARs are confidential and not to be disclosed. See, 12 CFR Section 353.3(g) (as relates to banks); 12 CFR Section 21.11(k) (as relates to national banks); and 12 CFR Section 563. 180(12) (as relates to savings and loans). Indeed, 31 CFR Section 103.21(e) advises that "? any person subpoenaed or otherwise requested to disclose a SAR[C] or the information contained in a SAR[C], except where such disclosure is requested by FinCEN or an[other] appropriate law enforcement or bank supervisory [regulatory] agency, shall decline to produce the SAR[C] or to provide any information that would disclose that a SAR[C] has been prepared or filed. . . ." (emphasis added). 2
Pursuant to KRS 61.878(1)(k), "[a]ll public records or information the disclosure of which is prohibited by federal law or regulation" is exempt from disclosure. Therefore, to the extent that SARs would be filed by a financial institution like the Bank, they would be exempt from disclosure.
By e-mail October 15, 2008, the undersigned counsel asked Mr. Reichert to clarify the Department's position by explaining whether the agency was denying the existence of any reports which might be responsive, or was arguing that any existing reports would be protected in asserting that the Department "has no reports that would be responsive to the request and subject to disclosure. " (Emphasis added.) In his view, the federal regulations and statutes preclude the Department "from even acknowledging whether reports ("suspicious activity reports") exist or that such reports are in [the agency's] possession." Also, the Department "possesses no other reports which would be responsive to the request." 3 Accordingly, the Department simply indicated that it "did not have reports responsive to the inquiry." To clarify, the Department "cannot acknowledge the existence or possession of such reports, if any. If suspicious activity reports were in [the agency's] possession, they would be exempt from disclosure for the reasons stated." In closing, Mr. Reichert emphasized that any vagueness was not attributable to "desire to hide anything but rather a desire to comply with federal law in this important and confidential area." Because the record on appeal is devoid of evidence to refute the Department's assertion that reports other than SARs exist which are responsive, and this appeal presents no reason to deviate from the approach historically taken by this office with regard to agency interpretation of binding confidentiality provisions, the Department's ultimate disposition of Mr. Zielke's request is affirmed.
As long recognized by this office, a public agency is not required to honor a request for nonexistent records or those which the public agency does not possess. 04-ORD-036, p. 5. With regard to statutory obligations of a public agency when denying access due to nonexistence (or lack of possession) of the records, the analysis contained in 07-ORD-190 is controlling; a copy of that decision is attached hereto and incorporated by reference (along with a copy of 07-ORD-188 upon which the former decision was premised). Assuming the Department made "'a good faith effort to conduct a search using methods which [could] reasonably be expected to produce the records requested,'" the agency cannot be said to have violated the Act in failing to produce such records. 07-ORD-023, p. 8 (citation omitted). 4 See 05-ORD-108. Having affirmatively indicated to Mr. Zielke in writing that no reports exist aside from those which are protected under federal law, if any, the Department has discharged its duty in this regard. In the absence of the requisite prima facie showing, the Attorney General must affirm the denial of Mr. Zielke's request as to reports matching the description provided other than SARs in accordance with
Bowling v. Lexington-Fayette Urban County Government, Ky., 172 S.W.3d 333, 340-341 (2005), and prior decisions of this office such as 07-ORD-190 and 07-ORD-188. To hold otherwise would result in the Department "essentially hav[ing] to prove a negative" in order to refute any claim that such records exist. 07-ORD-190, p. 7. In light of this determination, the remaining question is whether the Department erred in declining to confirm or deny the existence of any responsive SARs.
As a rule of general application, this office will defer to a public agency with regard to interpretation of confidentiality provisions which are binding upon the agency in the absence of authority to the contrary. 98-ORD-78, p. 3 (deferring to then Revenue Cabinet as to interpretation of KRS 131.190); 04-ORD-252 (deferring to Department of Workers' Claims as to interpretation of KRS 342.229); 97-ORD-33 (deferring to Department of Corrections as to interpretation of KRS 197.025(1)); 94-ORD-76 (deferring to then Cabinet for Human Resources as to interpretation of KRS 620.050(4)). See also 08-ORD-177; 08-ORD-118. Having reviewed the cited regulations, which are incorporated into the Open Records Act by operation of KRS 61.878(1)(k), this office finds the Department's position that SARs are confidential, as well as the information contained therein, and information that would reveal even the preparation or filing of such a report, is entirely credible. In the absence of binding authority which is contrary to the Department's position regarding application of the relevant federal regulations, the denial of Mr. Zielke's request as to any responsive SARs, which may or may not exist, is affirmed.
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 Pursuant to KRS 286.3-490(3):
Any director, or board of directors of a bank or trust company shall immediately notify the executive director concerning any information relating to that financial institution of which they have personal knowledge, involving fraud, defalcation, misfeasance, or violations of this subtitle. Failure to so notify the executive director shall be grounds for officer or director removal pursuant to KRS 286.3-690.
2 Although 31 CFR § 103.21 actually governs the filing of Suspicious Activity Reports by Casinos (SARS), as indicated by the brackets, all of the other sections relied upon contain similar language prohibiting the bank/institution or person "subpoenaed or otherwise requested to disclose a SAR or the information contained in a SAR" from disclosing not only the actual reports but "any information that would disclose that a SAR has been prepared or filed."
3 Mr. Reichert subsequently confirmed that submission of a SAR is one method by which a bank is permitted to comply with KRS 286.3-490(3), and that by "other reports" he was referring to any reports aside from SARs that would be responsive, i.e., submitted in compliance with KRS 286.3-490(3) via another method.
4 Although the Department does not identify the steps taken to locate any of the responsive letters, and this office is therefore precluded from assessing the adequacy of the search, the record on appeal is devoid of any reason to question whether a good faith effort was made.