Case: 08-10642 Document: 00511377001 Page: 1 Date Filed: 02/09/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
February 9, 2011
No. 08-10642 Lyle W. Cayce
Clerk
MONTE HASIE; HASIE FINANCIAL GROUP,
Plaintiffs–Appellants,
v.
OFFICE OF THE COMPTROLLER OF THE CURRENCY OF THE UNITED
STATES,
Defendant–Appellee.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 5:07-CV-208
Before BENAVIDES, OWEN, and HAYNES, Circuit Judges.
PRISCILLA OWEN, Circuit Judge:
The Office of the Comptroller of the Currency (OCC) denied Monte Hasie’s
request for disclosure of suspicious activity reports (SARs) for use in civil
litigation. Hasie challenged that decision in district court, and the district court
granted summary judgment in favor of the OCC. We affirm.
I
Following an investigation by the United States Attorney’s Office (USAO),
Hasie and other individuals were indicted on numerous counts of conspiracy,
money laundering, bank fraud, and making false statements to a bank. During
discovery in that criminal case, the USAO produced numerous boxes of
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documents and allowed all defendants and their counsel to copy the materials.
These documents included certain SARs filed by State National Bank (State
National) with the OCC and the drafts and notes used in preparation of the
SARs. The USAO did not seek a protective order for these documents, nor did
it seek return of the documents upon conclusion of the criminal trial. However,
there is no evidence in the administrative record before us that any of the
documents disclosed by the USAO to the defendants in the criminal proceedings
were entered into evidence, although one of Hasie’s co-defendants did identify
on his exhibit list at least five SARs pertaining to Dan Nelson.
The district court in the criminal case rendered a judgment
notwithstanding the jury’s guilty verdict, acquitting Hasie on all twenty-two
counts. Hasie then filed suit in a Texas state court against State National,
asserting claims of malicious prosecution, abuse of legal process, negligence,
intentional infliction of emotional distress, and tortious interference with
business relations. Hasie alleged that State National actively sought his
criminal prosecution despite its possession of information demonstrating Hasie’s
innocence, asserting that the bank was driven by an “ulterior motive.”
During discovery in the state-court litigation of these civil claims, Hasie
produced documents disclosed by the USAO in the criminal case, including the
SARs State National transmitted to the OCC. Upon production of these
documents, State National filed a motion to compel Hasie to return the SARs
and SAR-related materials and notified the OCC. Both the OCC and the
Financial Crimes Enforcement Network (FinCEN) concluded that the OCC did
not waive its nondisclosure rights notwithstanding the prior disclosure by the
USAO and that Hasie’s use of the information would be contrary to the Bank
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Secrecy Act (BSA)1 and strong public policies in favor of maintaining the secrecy
of the SARs.
The OCC then wrote Hasie’s counsel (1) asserting that the documents were
covered by the BSA, (2) threatening criminal charges if Hasie did not relinquish
the documents to the OCC immediately, and (3) stating that Hasie must file an
administrative request to gain lawful access to the documents. The OCC also
asserted in that communication that SARs and SAR-related documents fall
within the definition of non-public OCC information in 12 C.F.R. § 4.32(b); are
confidential and privileged; “[are] the property of the Comptroller,” as provided
in 12 C.F.R. § 4.32(b)(2); and that the OCC had a right to control the subsequent
use and dissemination of this information pursuant to 12 C.F.R. § 4.37(d) that
was not waived by Hasie’s possession of the SARs as a result of the criminal
proceedings.
Hasie returned the documents at issue to the OCC, and the Texas state
court stayed the civil litigation pending resolution of whether Hasie was entitled
to obtain the SARs from the OCC. Meanwhile, Hasie submitted a written
request for limited disclosure of documents, including the previously disclosed
SARs, pursuant to the OCC’s Touhy regulations.2 The OCC denied Hasie’s
request for the SARs, concluding that Hasie’s “showing of relevance is negated
completely by the statutory safe harbor [31 U.S.C. § 5318(g)(3)] accorded a bank
that files a SAR,” Hasie’s need for the requested information did not outweigh
the public interest in maintaining its confidentiality, public policy considerations
supported prohibiting disclosure in this case, and the OCC had not waived
privileges attached to the SARs.
1
31 U.S.C. § 5311 et seq.
2
See United States ex rel. Touhy v. Ragen, 340 U.S. 462, 468 (1951) (approving federal
agencies’ use of regulations to govern administrative requests for production of agency
documents and testimony); 12 C.F.R. § 4.31 et seq.
3
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Hasie sought review of the OCC’s decision in the district court. On the
parties’ cross-motions for summary judgment, the district court granted the
OCC’s motion. Hasie timely appealed. Hasie also moved this court to unseal the
administrative record.
II
Judicial review of the OCC’s decisions is governed by the Administrative
Procedure Act (APA).3 Under the APA, “the reviewing court [decides] all
relevant questions of law.”4 Agency actions, findings, and conclusions, however,
may be set aside only if they are arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.5 The scope of review under this standard
is narrow, and a court is not to substitute its judgment for that of the agency.6
“Nevertheless, the agency must examine the relevant data and articulate a
satisfactory explanation for its action including a ‘rational connection between
the facts found and the choice made.’”7 We review the district court’s grant and
denial of summary judgment de novo.8
III
We first note that amendments to some of the regulations at issue became
effective January 3, 2011, and as of that date, disclosure by the OCC of SARs or
information that would reveal the existence of a SAR is addressed specifically
in 12 C.F.R. § 21.11(k). None of these amendments were in effect when the
events at issue transpired. Accordingly, all references in this opinion to the Code
3
5 U.S.C. § 706.
4
Id.
5
Id.
6
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
7
Id. (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)).
8
James v. Tex. Collin Cnty., 535 F.3d 365, 373 (5th Cir. 2008).
4
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of Federal Regulations will be to the regulations that governed prior to January
3, 2011.
Hasie argues that the SARs and related documents are not “non-public”
information within the meaning of 12 C.F.R. § 4.32(b)(1) because the USAO
produced them to Hasie and the other defendants in the criminal prosecution
without a protective order or restrictions on their use or dissemination.
Relatedly, Haise asserts that the government waived any privilege regarding
these documents when the USAO produced them in the criminal proceedings.
The OCC’s regulations define “non-public information” as “information
that the OCC is not required to release under the [Freedom of Information Act]
(5 U.S.C. § 552) or that the OCC has not yet published or made available
pursuant to 12 U.S.C. § 1818(u) and includes . . . (vii) A Suspicious Activity
Report filed by . . . a national bank.”9 A SAR falls within this definition. A
SAR’s release cannot be required under the Freedom of Information Act, and the
OCC’s disclosure of information to the USAO that prosecuted Hasie was not
pursuant to 12 U.S.C. § 1818(u). The SARs are “non-public information.”
The gravamen of Hasie’s argument is that the USAO’s production of SARs
to him and the other defendants in his criminal prosecution waived their
classification as non-public information. We first examine the OCC’s release of
the disputed information to the USAO.
The OCC’s regulations permit the Comptroller to disclose non-public
information to “certain other government agencies of the United States and
foreign governments, [and] state agencies with authority to investigate
violations of criminal law . . . for their use, when necessary, in the performance
of their official duties.”10 That subsection further provides that “[a]ll non-public
9
12 C.F.R. § 4.32(b) (2010).
10
12 C.F.R. § 4.37(c).
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OCC information made available pursuant to this paragraph is OCC property,
and the OCC may condition its use on appropriate confidentiality protections,
including the mechanisms identified in § 4.37.” The OCC’s disclosure to the
USAO was authorized by this regulation. Because the regulation provides that
the OCC “may” condition use of non-public on appropriate confidentiality
protections, we construe this regulation to permit but not require the OCC to
employ confidentiality protections when disclosing non-public information to law
enforcement agencies. The OCC’s failure to do so does not automatically render
non-public information discoverable by private litigants.
The paragraph succeeding subsection 4.37(c) in the regulations confirms
this construction.11 It reflects that the OCC does not intend to waive its rights
by providing non-public information to those investigating potential criminal
violations:
(d) Intention of OCC not to waive rights. The possession by any of
the entities or individuals described in paragraph[] . . . (c) of this
section of non-public OCC information does not constitute a waiver
by the OCC of its right to control, or impose limitations on, the
subsequent use and dissemination of the information.12
The confidentiality mechanisms available to the OCC include “entry of a
protective order by the court or administrative tribunal presiding in the
particular case or, in non-adversarial matters, on a written agreement of
confidentiality.”13 There is no indication in the record that a court case was
pending when the OCC produced non-public information to the USAO. The OCC
did not, however, obtain a written agreement with the USAO. But here again,
we do not think this stripped the information of its non-public status. The
11
12 C.F.R. § 4.37(d).
12
Id.
13
12 C.F.R. § 4.38(a).
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regulations provide that the OCC may condition its release of non-public
information on a protective order or confidentiality agreement.14 The regulations
do not require the OCC to employ any of these procedures, although it would
appear that in many cases, including those similar to the present case, that
would be a prudent practice.
The question remains whether the USAO’s production of non-public
information to Hasie and the other criminal defendants rendered the
information public. We conclude that it did not. The governing regulations
appear to contemplate that the OCC retains the “right to control, or impose
limitations on, the subsequent use and dissemination of the information” after it
provides non-public information to law enforcement entities such as the USAO.15
The dissemination of the non-public information by the USAO was also
limited in scope. The information was produced as part of discovery in a
criminal case to the criminal defendants. It was not broadcast to the public or
made generally available. There is no indication that the SARs were to be used
for anything other than the purposes of the criminal litigation. Moreover, there
is no indication that the OCC was aware that the information at issue was
produced by the USAO to Hasie and the other defendants, much less that Hasie
continued to possess the SARs after the conclusion of the criminal litigation.
The OCC asserted its control over dissemination and use of the SARs at the first
available opportunity. Under these circumstances, we cannot say that the OCC’s
conclusion that its control over the SARs was not waived was “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law.”
14
Id.
15
12 C.F.R. § 4.37(d) (emphasis added).
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IV
Hasie contends that the OCC abused its discretion in denying his request
for the SARs because (1) the OCC pre-determined that his request would be
denied, (2) the factors set forth in 12 C.F.R. § 4.33 all weigh in favor of granting
his reqest, (3) the OCC should not have considered the BSA’s safe harbor
provision, and (4) the OCC failed to individualize the assessment of Hasie’s
administrative request.
A
A claim of bias based on pre-determination carries with it a high burden
of persuasion.16 To prevail, Hasie must “overcome a presumption of honesty and
integrity in those serving as adjudicators” and must “convince that, under a
realistic appraisal of psychological tendencies and human weakness, conferring
investigative and adjudicative powers on the same individuals poses such a risk
of actual bias or prejudgment that the practice must be forbidden if the
guarantee of due process is to be adequately implemented.” 17
Hasie points to OCC communications with State National and Hasie’s
counsel. Hasie claims that these communications establish that, months prior
to his request and without knowledge of the relevant facts, the OCC had already
concluded that the SARs would not be disclosed. While these communications
do express the OCC’s belief that the protections and public policy considerations
regarding SARs continued to apply despite the prior disclosure, they do not
establish that the OCC had pre-determined the merits of any future requests for
disclosure.
16
See Withrow v. Larking, 421 U.S. 35, 47 (1975); Baran v. Port of Beaumont
Navigation Dist., 57 F.3d 436, 446 (5th Cir. 1995) (“The contention that a tribunal is
unconstitutionally biased because it has prejudged the facts of a particular dispute carries a
more difficult burden of persuasion than a claim based on actual bias.”).
17
Withrow, 421 U.S. at 47.
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B
Hasie asserts that the OCC gave dispositive effect to the BSA’s safe harbor
provision for banks that prepare SARs18 in assessing the relevance of the
documents requested by Hasie and that the OCC should not have considered the
safe harbor’s liability shield for banks as a factor in the Touhy analysis.
Under the Touhy regulations, a requestor must show, among other things,
that (1) the information is relevant to the purpose for which it is sought,
(2) other evidence reasonably suited to the requestor’s needs is not available
from another source, and (3) the need for the information outweighs the public
interest considerations in maintaining the confidentiality of the OCC
information.19 The OCC may deny a request based on the failure by a requestor
to make any one of these showings.20
We conclude that the OCC’s findings regarding the balance between
Hasie’s interests and the public policy considerations were not arbitrary,
capricious, or an abuse of discretion, and therefore we do not consider the
requirement in 12 C.F.R. § 4.33(a)(3)(iii)(A) “that the information is relevant to
the purpose for which it is sought.” The OCC concluded that disclosing the SARs
18
31 U.S.C. § 5318(g)(3)(A). That subsection provides:
Any financial institution that makes a voluntary disclosure of any
possible violation of law or regulation to a government agency or makes a
disclosure pursuant to this subsection or any other authority, and any director,
officer, employee, or agent of such institution who makes, or requires another
to make any such disclosure, shall not be liable to any person under any law or
regulation of the United States, any constitution, law, or regulation of any State
or political subdivision of any State, or under any contract or other legally
enforceable agreement (including any arbitration agreement), for such
disclosure or for any failure to provide notice of such disclosure to the person
who is the subject of such disclosure or any other person identified in the
disclosure.
19
See 12 C.F.R. § 4.33(a)(3)(iii); BizCapital Bus. & Indus. Dev. Corp. v. Comptroller of
the Currency of the U.S., 467 F.3d 871, 872 n.2 (5th Cir. 2006).
20
12 C.F.R. § 4.35(a)(1)-(2).
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to aid a private litigant in proving a case against a bank “may adversely affect
timely, appropriate and candid reporting by institutions. If institutions believe
that information in a SAR can be used for purposes unrelated to law
enforcement purposes, they will have an incentive to adjust the nature of their
reporting to respond to the risks they perceive from the other uses.”21 The OCC
then listed several examples of such possible adjustments, including the
possibility that an institution might “delay or forego filing a SAR” if it believed
that private litigants would be able to use a SAR in litigation against it.22
The OCC also considered Hasie’s need for the SARs in its suit against
State National. The OCC concluded that other sources of evidence were
available to Hasie,23 and that “[u]nder the circumstances, when the strong public
policy interest in maintaining the confidentiality of SARs is considered, I
conclude the public interest is paramount.”24 Hasie has not demonstrated “that
other evidence reasonably suited to the requestor’s needs is not available from
any other source.”25 The OCC was not arbitrary or capricious and did not abuse
its discretion in assessing the strength of Hasie’s showing or balancing public
policy considerations.
21
Appellant’s R. Excerpts Tab 4, at 3.
22
Id.
23
Id. at 2 (“It is also apparent that you could, through the testimony of bank employees,
gather evidence on any improper animus on the bank’s part toward Mr. Hasie, apart from the
preparation and filing of any SARs. Beyond this, you are entitled to discover the bank’s
records created in the ordinary course of business, and we understand that the bank has
produced or made available 15 boxes of documents.”).
24
Id. at 2-3.
25
12 C.F.R. § 4.33(a)(3)(iii)(B).
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C
An administrative agency abuses its discretion if it reaches its decision
“procedurally without a full, good faith, individualized consideration.” 26 A review
of the OCC’s decision reflects that Hasie’s request received a good faith,
individualized assessment. The OCC demonstrated that it knew the particular
facts pertaining to Hasie’s request and utilized those facts in its analysis of the
balance between Hasie’s need and the public interest. The OCC acknowledged
in its brief in this court that “when a requestor can convincingly show a strong
need, such as where no evidence suitable to his needs is available, the weight
accorded the public policy considerations may be offset.” The OCC’s decision to
deny Hasie’s request reflects that the need in Hasie’s particular case did not
offset public policy considerations.
V
Finally, Hasie moves to have the administrative record unsealed. The
OCC does not oppose this motion to unseal except with respect to one sentence
in the record, which it asks permission to redact. We agree that the sentence at
issue may reference confidential material under the BSA. Therefore, we grant
Hasie’s motion to unseal provided that the OCC is given the opportunity to
redact the sentence at issue before the record is unsealed.
* * *
The district court’s grant of summary judgment in favor of the OCC is
AFFIRMED. Hasie’s motion to unseal the record is GRANTED.
26
Sierra Club v. Morton, 510 F.2d 813, 829 (5th Cir. 1975).
11