Tuesday, October 6, 2015

Pershing Square Involved in On-Going Enforcement Proceedings

A series of FOIA requests have confirmed that Pershing Square is involved in "on-going enforcement proceedings". These FOIA requests specifically sought investigatory records regarding Pershing Square from 2013 through the Summer of 2015. The initial FOIA responses from the SEC cited SEC 7(a) exemptions to the information sought. I feel like ProbesReporter and I have beaten this issue to death already, but 7(a) exemptions specifically exempt from disclosure information that could interfere with either prospective or on-going proceedings. This means that in many circumstances, 7(a) could be invoked even if there is no "on-going" actions because it could interfere with a future action. Based upon the invocation of the initially cited 7(a) exemptions to the requested investigatory records, the FOIA decisions were then appealed to the SEC's Office of the General Counsel.

The SEC's OGC confirmed by letter that the FOIA official that initially exempted the responsive documents had correctly made this determination for each request. The SEC's Associate General Counsel noted in their reply:

"I have determined that the FOIA Officer correctly asserted Exemption 7(A). There is a
two-step test to determine whether information is protected under Exemption 7(A), whether: (1) a law enforcement proceeding is pending or prospective, and (2) release of information about it could reasonably be expected to cause some articulable harm.' We have confirmed with staff that releasing the withheld information could reasonably be expected to interfere with on-going enforcement proceedings." (emphasis added)
What was not included in the inital responses, but were confirmed in the OGC's letter is the addition that this relates to an on-going enforcement proceeding, not prospective. It should be noted that the requests were agnostic with respect to other related companies and did not request investigatory records that were related to Herbalife, Valeant, Allergan, Pershing Square Holdings, Target, JC Penney, etc. ad nauseam...

The requested records were described as: (1) any matter under inquiry summary regarding Pershing
Square; (2) any case closing recommendations regarding Pershing Square; (3) any investigation
recommendations regarding Pershing Square; (4) any investigation reports regarding Pershing Square; (5) any investigation opening reports regarding Pershing Square; (6) any investigation closing reports regarding Pershing Square; (7) any orders of formal investigation regarding Pershing Square; (8) any wells notices sent to Pershing Square; (9) any subpoenas sent to Pershing Square; (10) any correspondence between third parties and the commission related to the investigation of Pershing Square; and (11) any correspondence between Pershing Square and the Commission related to the investigation of Pershing Square.

What is also VERY interesting with respect to the requested records is that not a single requested item generated a "no responsive records" reply. When questioned about this, the SEC further confirmed that if in fact there were no responsive records that the 7(a) exemption would not have applied and thus could not have been invoked.

So, go down the list; this means that there are responsive records which involve Pershing Square for each one of these eleven types of records requested. It could very well be that many of these records exist without Pershing Square's knowledge, so you couldn't really count on them to disclose something that may not have been disclosed to them. I mean, it's not like there's a Weekly/Monthly investigatory disclosure report, but even if there was, I hope they'd honor it more than they're NAV reporting guidelines. In Pershing's disclosure defense, I'll pre-emptively point out that it'd be doubtful they'd be informed regarding the SEC's internal investigation recommendations, however, we could conclude that Pershing likely knows about the Wells Notices or subpoenas sent to Pershing Square, and correspondence from Pershing Square to the SEC that exist.

It should be noted that the SEC is not stating that Pershing Square has or has not done anything wrong, they are merely acknowledging the existence of such records and on-going proceedings that the release of these records could interfere with. The question that arises from the SEC's response is to what extent Pershing Square knows about the above referenced records and just how deeply Pershing Square is "involved".  We won't know until the SEC either stops exempting such records, or they or the DOJ take action. It could be nothing or it could be everything.