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PRESSOFFlO:Tel: (518)474-4015Fax: (518) 473-8940
THOMAS P. DiNAPOLISTATE COMPTROI1.ER
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER110 STATE STREET
ALBANY, NEW YORK 12236
January 5, 2015
Mr. Louis FloresProgress
[email protected]
Re: FOIL Request #2014-540
Dear Mr. Flores:
This is in reply to your Freedom of Information Law (FOIL)
request dated November 26,2014, in which you requested 1) names of
investment managers providing investment advisoryservices on the
New York State Common Retirement Fund (CRF), and 2)
agreements,amendments and due diligence collected by the State
Comptroller's Office with respect to suchmanagers.
Consistent with its commitment to transparency and openness in
the operations of theCRF, this Office provides extensive disclosure
of its holdings, earnings and expenses. Dataregarding funds in
which the CRF invests are provided, in the aggregate, in the
Comptroller'sComprehensive Annual Financial Report (CAFR) published
annually. Such data is available onthe Comptroller's web site at
www.osc.state.ny.us under "Pension Fund" and then CAFR, andthen
under the specific asset class list. In addition, monthly
transaction summaries are availableon the website under "Pension
Fund" and then "Disclosure of Investments and Transactions".
It is the position of this office that neither the New York
State and Local RetirementSystem (NYSLRS) nor the CRF is subject to
FOIL, as neither falls within the definition of"agency" pursuant to
FOIL. Nevertheless, this office responds voluntarily to FOIL
requests forrecords of these entities, subject to statutory
exceptions and to the Comptroller's fiduciary duty tothe members,
beneficiaries and retirees of the NYSLRS.
In this regard, the names of investment managers providing
advisory services to the CRFare published in the CAFR. You may
refer to the site under "Our Office" and then "PensionFund
Management" and then CAFR. After choosing the CAFR for the year you
seek, go tomanagement fees for the various asset classes to find
the names of respective managers and thefees that they earned.
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FOIL provides that an agency shall make all records available
for public inspection andcopying, except to the extent that records
or portions thereof fall within one or more of thegrounds for
denial set forth in that statute (POL 87). POL 87(2)(d) authorizes
an agency todeny access to records or portions thereof that "are
trade secrets or are submitted to an agency bya commercial
enterprise or derived from information obtained from a commercial
enterprise andwhich if disclosed would cause substantial injury to
the competitive position of the subjectenterprise." Case law
defines "trade secret" as any formula, pattern, process or
compilation ofinformation that is not published or divulged and
which gives an advantage over competitorswho do not have access to
such data ( Sunset Energy Fleet v NYS Dept of
EnvironmentalConservation, 285 AD2d 865, (3d Dept.[2001]).
Based on the foregoing, it has been recognized that competition
in business turns on therelative costs and opportunities faced by
members of the same industry, and that there is apotential
windfall, not contemplated as part of FOIL's principal aim of
promoting openness ingovernment, for competitors to whom valuable
information is released under FOIL (EncoreCollege Bookstores, Inc.
v Auxiliary Service Corp. of State University of New York
atFarmingdale, 212 AD2d 418, lv granted, 85 NY2d 811[1995], affd as
mod 87 NY2d 410[1995]).The Court of Appeals has declined to compel
release of trade secret records where FOILdisclosure is the sole
means by which competitors can obtain the requested
information.
Further, the CRF, as the investment arm of the NYSLRS which
holds all of its assets,carries out its duties as an entity in
competition with private firms in the investment industry. TheCRF
is a major institutional investor, and the disclosure of
information concerning its specificinvestment strategies and
objectives could prove harmful to any competitive advantage it
mayhave in the marketplace. Case law holds that when a governmental
entity performs functionsessentially commercial in nature in
competition with private, profit making entities, it maywithhold
records pursuant to POL 87(2)(d) (Syracuse & Oswego Motor
Lines, Inc. v Frank,Sup. Ct. Onondaga Cty., Oct. 15, 1985, Comm on
Open Gov't FOIL-AO-I0225).
In this regard, the records you request including investment
management agreements andamendments thereto, contain proprietary
business information pertaining to various funds andmanagers, which
is not publicly available in the marketplace and which could, if
disclosed, beharmful to the competitive position of such funds and
managers and the CRF in the marketplace.CRF and each
fund's/manager's bargaining position with respect to certain terms
and conditionsand financial information could be substantially
weakened if other investors have knowledge ofthis information. In
addition, records could reveal the CRF's and the manager's strategy
in theinvestments. Once such strategy is available to industry
competitors, this information couldsubject both the CRF and the
managers to a competitive disadvantage by, for example,
enablingcompetitors to replicate the types and sizes of investments
made. This office has determined thatthese records contain
proprietary information and trade secrets and, accordingly, will
bewithheld.
POL 87(2)(g) authorizes an agency to withhold records or
portions thereof that areinter-agency or intra-agency materials
which are not: (i) statistical or factual tabulations or data;(ii)
instructions to staff that affect the public; (iii) [mal agency
policy or determinations; or (iv)
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external audits, including but not limited to audits performed
by the comptroller and the federalgovernment. Based on the
foregoing, it has been held that inter-agency or intra-agency
materialsthat constitute expressions of opinions or recommendations
or are non-final may be withheldfrom disclosure (see Gould v New
York City Police Department, 89NY2d 267; David vLewisohn, 142 AD2d
305, Iv denied 74 NY2d 610; Polansky v Regan, 81 AD2d 102).
Further, arecord may be considered "inter or intra-agency
material", notwithstanding that it was authoredby an outside
consultant, if it was prepared at the behest of the agency as part
of the agency'sdeliberative process (Xerox v Town of Webster, 65
NY2d 131[1985]). Advisory opinions of theCommittee on Open
Government, issued pursuant to POL 89(1 )(b)(i), (ii), confirm
thatinter-agency and intra-agency materials that are reflective of
opinion, advice, recommendationand the like can be withheld (see,
e.g., Comm on Open Gov't FOIL-AO-6794).
The records you request pertaining to due diligence materials
generated by the CRFconcerning investment managers constitute
intra-agency materials that reflect pre-decisionalopinions and
recommendations to which access may be denied under POL 87(2)(g).
Therefore,such records are being withheld.
In addition, disclosure of such records could reveal the CRF's
internal deliberativeprocesses and strategy regarding various
categories of investments. Once such strategy isavailable to
industry competitors, this information could harm the CRF's
competitive position inthe investment area by, for example,
enabling competitors to replicate the types and sizes ofinvestments
made. Based on this analysis, such records are denied pursuant to
the trade secretexception to FOIL discussed below, as well.
In the event that you do not agree with this determination to
deny access to some of therecords requested pursuant to Public
Officers Law 87(2), please be advised that you have theright,
within thirty days of the receipt of this letter, to appeal, in
writing, to Records Appeals
thOfficer, Office ofthe State Comptroller, 110 State Street, 14
Floor, Albany, New York 12236.
Sincerely, ~
Records Access OfficerJH/HJN
