It is deeply disturbing that a public agency — whose compliance with state transparency laws is found by the Kentucky Auditor of Public Accounts to fall “drastically short” — concludes its response to the auditor’s examination with the statement that it “compl[ies] with all governing statutes *to the extent possible.*”
This is how the Kentucky Retirement Systems responded to Auditor Mike Harmon’s special examination.
Make no mistake: It is an admission of noncompliance. External forces, the statement suggests, prevent it from fully complying.
Those external forces are the investment managers who, KRS unapologetically acknowledges, determine the extent to which it complies with state law. They — and not KRS — decide what the public is permitted to know about their fees and investment contracts.
And what possible impetus do the managers have to be transparent? They are not subject to the open records law or SB 2. They will resist transparency at all costs.
Auditor Mike Harmon
The Auditor’s special examination confirmed this by identifying completely innocuous information that KRS treated as confidential at the investment managers’ behest.
I repeat, the open records law places the burden on the KRS to critically analyze the investment managers’ proposed redactions and to determine if those redactions are legally defensible.
The standard is the same under the open records law and SB 2. Unless KRS independently concludes that information designated confidential by the investment managers is 1) confidentially disclosed to KRS, 2) generally recognized as confidential or proprietary, and 3) will permit an unfair commercial advantage to the investment managers’ competitors if disclosed, KRS has a legal obligation to make fees and contracts accessible under the open records law and to post fees and contracts on its website under SB 2.
It is the same analysis applied any time a private entity does business with a public agency. Vendors submitting proposals to a public agency in response to a request for proposals may designate portions of the proposal “confidential” or “proprietary,” but the agency must independently verify that designation and be prepared to demonstrate to the attorney general or to the court how disclosure will give an unfair commercial advantage to the vendor’s competitors.
I do not know how, where, or on what authority the notion first emerged that the private entity “must determine what information to redact” and that the agency “cannot be the legal arbitrator of what should, and should not be, redacted.” But that view is contrary to forty-plus years of open records analysis. KRS is, in fact and in law, the “legal arbitrator” even at the risk of litigation.
I do, however, know that 16-ORD-273 does not support KRS’s position as it claims. At best, that decision recognizes that KRS met its burden of proving that investment strategies contained in KKR Prisma’s contract 1) were confidentially disclosed, 2) are generally recognized as confidential or proprietary, and 3) would give competitors of KKR Prisma an unfair commercial advantage if disclosed.
The open records decision flatly rejects redaction of all other “claimed categories of ‘other proprietary information.’”
“We find,” the attorney general concludes, “that KRS’s burden of proof under KRS 61.880(2)(c) has been met only as to the information pertaining to KKR Prisma’s investment strategy.”
The decision goes on to state that “the mere existence of a confidentiality agreement between KRS and KKR Prisma does not render the partnership agreement entirely exempt from the open records act.”
Quoting from a 2003 open records decision, the attorney general recognized that:
“The open records act does not allow public records to be exempt from disclosure by contract. Accordingly, we find the [agency’s] argument that it could withhold certain information in the contract under a confidentiality agreement alone is misplaced. If they are exempt from disclosure, it must be under authority of a statutorily recognized exemption, such as KRS 61.878(1)(c)1., or other applicable exceptions set forth in KRS 61.878(1).”
Nowhere in 16-ORD-273 does the attorney general even remotely suggest that the burden does not rest with KRS but instead rests with KKR Prisma.
16-ORD-273 does not support KRS’s strained construction of the open records law that would improperly shift responsibility from the public agency statutorily assigned that duty to a private investment manager.
Heaven help us if this construction of the open records law ever finds approval with the attorney general or the courts. or otherwise gains traction. Can you imagine if all such records access decisions involving private entities were left to those entities?
As for KRS’s attempt to distinguish contracts executed before the passage of SB 2 in 2017 and contracts executed after 2017, this is a false dichotomy.
The open records law was enacted in 1976. It applied to contracts executed before and after 2017. SB 2 mandated posting of the contracts and fees after 2017 but did not distinguish between pre- and post-2017 contracts. “All contracts or offerings for services, goods, or property purchased or utilized by the system” must, perforce, be posted.
KRS’s defense that “it is impossible to get the required permission from managers, general partners, and all of the limited partners to *let* us post what are otherwise confidential contracts” in place prior to 2017 is premised on this false dichotomy.
On and before the effective date of SB 2, investment managers, general partners and limited partners knew they were contracting with a state governed by a robust open records law and should have known that they could not evade the law by entering into a confidentiality agreement with the state.
It is no exaggeration to state that KRS has abdicated it statutory duties under the open records law and SB 2. Nothing, certainly not 16-ORD-273 or threats of litigation from its investment managers (real or imagined), can excuse it from full compliance with governing transparency statutes.
Another thought:
Consider the question of whether private entities should make decisions on release of public records in this factual context.
In June, visitors to Volcano Bay at Universal Orlando reported being shocked by an electrical current that surged through the water park. No serious injuries were reported but experts advised that the incident might have had deadly consequences.
Shortly thereafter, the Orlando Sentinel requested records relating to the incident from Orlando Utilities Commission, a public agency. OUC immediately forwarded the request to Universal’s attorneys “to decide what information should be exempt from public records law.”
OUC and Universal, it seems, have a “confidentiality agreement” that permits Universal to block access to public records. Universal “helped” draft the public agency’s response to the Sentinel’s records request.
Asked for comment, First Amendment attorney and director of the University of Florida’s Beecher Center for Freedom of Information Frank Lomonte observed:
“It’s probably within the law for an agency to check with a private business to see if they want to claim confidentiality before documents are released, [b]ut you can’t let the private company make that decision.”
The only document ultimately released was a “bare bones ‘trouble report’ that says OUC was notified that Universal had bad underground secondary cables,” but gives no indication of how OUC responded.
Who decides what the public is entitled to know?
Draw your own conclusions.
Amye Bensenhaver is a retired assistant attorney general, open government advocate, and blogger for the University of Kentucky Scripps Howard First Amendment Center. Along with Jennifer P. Brown, former editor of the Kentucky New Era and publisher of an online news site in her hometown of Hopkinsville, she recently helped establish the Kentucky Open Government Coalition to provide a voice for all citizens who support government transparency and accountability. This article first appeared on the Kentucky Open Government’s Facebook page.
