OML-AO-3931

January 31, 2005

The staff of the Committee on Open Government is authorized to issue advisory opinions. The ensuing staff advisory opinion is based solely upon the facts presented in your correspondence.

Dear

I have received your letter in which you questioned the propriety of certain executive sessions held by the boards of New York City’s five pension funds, as well as denials of access to their records.

According to your letter, five separate pension funds have been established for categories of City employees, their holdings are valued at approximately 83 billion dollars, and they are known collectively as the New York City Retirement System. Each board is independent, but each relies on the office of the City Comptroller for oversight of asset management and staff support.

Having attended meetings of the boards of the three largest funds on various occasions, you indicated that reviews of a fund’s investment performance generally occur in public and that you are given a copy of a "flash report", a one page summary. Often, however, discussions involve "quarterly reports or particular investment classes", and you are excluded from them. Executive sessions have also been held to discuss " a 12 month plan", "investment advisor updates", quarterly reports on "private equity" and real estate, "investment policy", emerging markets, compliance with ethics laws, a selection process for investment counsel, a "post-trade" analysis, and a status report on "large cap growth."

Additionally, in response to a request for a report on the performance of a particular fund, you were told that the report was "privileged." A request for a copy of an investment policy adopted during an executive session was denied, and you were told that you should obtain it from the Comptroller’s office. In another instance, after the Board provided authority to enter negotiations with two private equity consultants, your request for their names was rejected based on a contention that disclosure "could impair the ability of the City Comptroller’s office to negotiate terms of [a] deal and actually place the investment."

In this regard, I offer the following comments.

First, the Open Meetings Law is based on a presumption of openness. Stated differently, meetings of public bodies must be conducted open to the public, except to the extent that an executive session may properly be conducted in accordance with paragraphs (a) through (h) of §105(1). Consequently, a public body, such as the boards that are the subject of your correspondence, cannot enter into an executive session to discuss the subjects of their choice. From my perspective, the grounds for entry into executive session are based on the need to avoid some sort of harm that would arise by means of public discussion, and that is so with respect to the basis for entry into executive session to which you referred and which is pertinent to several of the matters that you described.

Specifically, §105(1)(h) of the Open Meetings Law permits a public body to enter into executive session to discuss:

"the proposed acquisition, sale or lease of real property or the proposed acquisition of securities, or sale or exchange of securities held by such public body, but only when publicity would substantially affect the value thereof."

In my opinion, the language quoted above, like the other grounds for entry into executive session, is based on the principle that public business must be discussed in public unless public discussion would in some way be damaging, either to an individual, for example, a business enterprise or to a government in terms of its capacity to perform its functions appropriately and in the best interest of the public. It is clear that §105(1)(h) does not permit public bodies to conduct executive sessions to discuss all matters that may relate to the acquisition, sale or exchange of securities; only to the extent that publicity would "substantially affect the value of the property" can that provision validly be asserted.

When the boards at issue focus on a particular enterprise and consider whether to purchase or sell securities associated with that enterprise, because they purchase and sell securities involving a great deal of money, public discussion could have a significant effect on the value of the securities. If the effect of a public discussion would result in a substantial change in the price of securities considered for acquisition or sale, I believe that an executive session could properly be held. In those circumstances, a board would be focusing on a particular security or securities, and its discussion would involve prospective action. From my perspective, §105(1)(h) may be invoked in instances in which the discussion focuses on particular purchases or sales yet to be made. Discussions regarding past purchases or sales would not appear to "substantially affect" the value of securities. As you are well aware, there are circumstances too numerous to count or identify that deal with the strengths and weaknesses, both actual and predicted, of entities that are the subjects of the purchase and sale of securities. That being so, unless a discussion by a board involves particular entities, as opposed to sectors, it is doubtful in my view that it can be justifiably be contended that publicity would "substantially" affect the value of securities

Moreover, the five funds, although large, are among thousands of institutional purchasers and sellers of securities. That being so, discussions by the boards of the funds involving their policy, pertaining to certain sectors, i.e., emerging markets or large cap companies, updates regarding previous transactions, or "post-trade" analyses would appear to have perhaps minimal or perhaps no effect on the value of securities. If that is so, §105(1)(h), in my view, could not be asserted as a basis for consideration in executive session.

I point out that a different ground for entry into executive session might apply in the context of the functions of the boards. Section 105(1)(f) authorizes public bodies to enter into executive session to discuss:

"the medical, financial, credit or employment history of a particular person or corporation, or matters leading to the appointment, employment, promotion, demotion, discipline, suspension, dismissal or removal of a particular person or corporation."

Insofar as a board discusses the "financial history" of a particular corporation, for example, I believe that §105(1)(f) could properly be cited as a basis for conducting an executive session.

With respect to your efforts in obtaining records, the Freedom of Information Law is pertinent. In brief, that statute is based upon a presumption of access. Stated differently, all records of an agency are available, except to the extent that records or portions thereof fall within one or more grounds for denial appearing in §87(2)(a) through (i) of the Law. Further, the Court of Appeals, the state’s highest court, confirmed its general view of the intent of the Freedom of Information Law in Gould v. New York City Police Department [87 NY 2d 267 (1996)], stating that:

"To ensure maximum access to government records, the 'exemptions are to be narrowly construed, with the burden resting on the agency to demonstrate that the requested material indeed qualifies for exemption' (Matter of Hanig v. State of New York Dept. of Motor Vehicles, 79 N.Y.2d 106, 109, 580 N.Y.S.2d 715, 588 N.E.2d 750 see, Public Officers Law § 89[4][b]). As this Court has stated, '[o]nly where the material requested falls squarely within the ambit of one of these statutory exemptions may disclosure be withheld' (Matter of Fink v. Lefkowitz, 47 N.Y.2d, 567, 571, 419 N.Y.S.2d 467, 393 N.E.2d 463)" (id., 275).

There is nothing in the Freedom of Information Law that authorizes a person or agency to claim, promise or engage in an agreement conferring confidentiality or a "privilege" absent a statutory authority to do so. The Court of Appeals has held that a request for, a claim or a promise of confidentiality is all but meaningless; unless one or more of the grounds for denial appearing in the Freedom of Information Law may appropriately be asserted, the record sought must be made available. In Washington Post v. Insurance Department [61 NY2d 557 (1984)], the controversy involved a claim of confidentiality with respect to records prepared by corporate boards furnished voluntarily to a state agency. The Court of Appeals reversed a finding that the documents were not "records" subject to the Freedom of Information Law, thereby rejecting a claim that the documents "were the private property of the intervenors, voluntarily put in the respondents' 'custody' for convenience under a promise of confidentiality" (id., 564). Moreover, it was determined that:

"Respondent’s long-standing promise of confidentiality to the intervenors is irrelevant to whether the requested documents fit within the Legislature’s definition of ‘records’ under FOIL. The definition does not exclude or make any reference to information labeled as ‘confidential’ by the agency; confidentiality is relevant only when determining whether the record or a portion of it is exempt (see Matter of John P. v Whalen, 54 NY2d 89, 96; Matter of Fink v Lefkowitz, 47 NY2d 567, 571-572, supra; Church of Scientology v State of New York, 61 AD2d 942, 942-943, affd 46 NY2d 906; Matter of Belth v Insurance Dept., 95 Misc 2d 18, 19-20). Nor is it relevant that the documents originated outside the government...Such a factor is not mentioned or implied in the statutory definition of records or in the statement of purpose..." (id., 565-566).

The Open Meetings and Freedom of Information Laws frequently relate to one another, as in the case of matters involving access to minutes of executive sessions. The Open Meetings Law contains direction concerning minutes of meetings and provides what might be viewed as minimum requirements pertaining to their contents. Specifically, §106 states that:

"1. Minutes shall be taken at all open meetings of a public body which shall consist of a record or summary of all motions, proposals, resolutions and any other matter formally voted upon and the vote thereon.

2. Minutes shall be taken at executive sessions of any action that is taken by formal vote which shall consist of a record or summary of the final determination of such action, and the date and vote thereon; provided, however, that such summary need not include any matter which is not required to be made public by the freedom of information law as added by article six of this chapter.

3. Minutes of meetings of all public bodies shall be available to the public in accordance with the provisions of the freedom of information law within two weeks from the date of such meetings except that minutes taken pursuant to subdivision two hereof shall be available to the public within one week from the date of the executive session."

In view of the foregoing, as a general rule, a public body may take action during a properly convened executive session [see Open Meetings Law, §105(1)]. If action is taken during an executive session, minutes reflective of the action, the date and the vote must generally be recorded in minutes pursuant to §106(2) of the Law. If no action is taken, there is no requirement that minutes of the executive session be prepared.

It is noted that minutes of executive sessions need not include information that may be withheld under the Freedom of Information Law. From my perspective, when a public body makes a final determination during an executive session, that determination will, in most instances, be public. For example, although a discussion to hire or fire a particular employee could clearly be discussed during an executive session [see Open Meetings Law, §105(1)(f), a determination to hire or fire that person would be recorded in minutes and would be available to the public under the Freedom of Information Law. On other hand, if a public body votes to initiate a disciplinary proceeding against a public employee, minutes reflective of its action would not have include reference to or identify the person, for the Freedom of Information Law authorizes an agency to withhold records to the extent that disclosure would result in an unwarranted personal privacy [see Freedom of Information Law, §87(2)(b)].

As indicated earlier, you referred to an executive session during which a board conferred authority to enter into negotiations with certain private equity consultants. When you requested the names of the consulting firms, the request was denied on the ground that disclosure would "impair the ability" of the City Comptroller to negotiate in an optimal manner. The provision in the Freedom of Information Law upon which the board appears to have relied, §87(2)(c), permits an agency to deny access to records to the extent that disclosure "would impair present or imminent contract awards or collective bargaining negotiations." The key word in that provision in my opinion is "impair", and the question under that provision involves whether or the extent to which disclosure would "impair" the process by diminishing the ability of the government to reach an optimal agreement on behalf of the taxpayers. That a contract has not been signed or ratified, in my view, is not determinative of rights of access or, conversely, an agency's ability to deny access to records. Rather, I believe that consideration of the effects of disclosure is the primary factor in determining the extent to which §87(2)(c) may justifiably be asserted.

As I understand its application, §87(2)(c) generally encompasses situations in which an agency or a party to negotiations maintains records that have not been made available to others. For example, if an agency seeking bids or proposals has received a number of bids, but the deadline for their submission has not been reached, premature disclosure for the bids to another possible submitter might provide that person or firm with an unfair advantage vis a vis those who already submitted bids. Further, disclosure of the identities of bidders or the number of bidders might enable another potential bidder to tailor his bid in a manner that provides him with an unfair advantage in the bidding process. In such a situation, harm or "impairment" would likely be the result, and the records could justifiably be denied. However, after the deadline for submission of bids or proposals are available after a contract has been awarded, and that, in view of the requirements of the Freedom of Information Law, "the successful bidder had no reasonable expectation of not having its bid open to the public" [Contracting Plumbers Cooperative Restoration Corp. v. Ameruso, 105 Misc. 2d 951, 430 NYS 2d 196, 198 (1980)]. Similarly, if an agency is involved in collective bargaining negotiations with a public employee union, and the union requests records reflective of the agency's strategy, the items that it considers to be important or otherwise, its estimates and projections, it is likely that disclosure to the union would place the agency at an unfair disadvantage at the bargaining table and, therefore, that disclosure would "impair" negotiating the process.

I point out that the Court of Appeals sustained the assertion of §87(2)(c) in a case that did not clearly involve "contract awards" or collective bargaining negotiations. In Murray v. Troy Urban Renewal Agency [56 NY2d 888 (1982)], the issue pertained to real property transactions where appraisals in possession of an agency were requested prior to the consummation of a transaction. Because premature disclosure would have enabled the public to know the prices the agency sought, thereby potentially precluding the agency from receiving optimal prices, the agency's denial was upheld [see Murray v. Troy Urban Renewal Agency, 56 NY 2d 888 (1982)].

If there is no possibility that other consulting firms may be involved in the negotiations, it is difficult to envision how disclosure of the names of the two firms would "impair" the ability of a fund to reach an optimal agreement. This is not to suggest that other records involved in negotiations might not justifiably be withheld, but rather that the names of the two firms with which authority has been conferred to negotiate should be disclosed, unless there is justification for claiming that disclosure would impair a fund’s ability to reach an optimal agreement on behalf of its members.

In an effort to enhance understanding of open government laws, copies of this opinion will be forwarded to the boards to which you referred.

I hope that I have been of assistance.

Sincerely,

Robert J. Freeman
Executive Director

RJF:tt

cc: Board of Education
Fire Department
NYC Employees
Police Pension Fund
Teachers’ Retirement Board