FINAL ENFORCEMENT DECISION ISSUED BY THE BOARD OF GOVERNORS.

In the Matter of Incus Co., Ltd. Tortola, British Virgin Islands and Carlos Hank Rhon

An Institution-Affiliated Party Of Incus Co., Ltd., and Laredo National Bancshares, Laredo, Texas

Docket No. 98-038-B-FHC, 98-038, B-I, 98-038-CMP-FHC, 98-038-CMP-I, 98-038-E-I

Determination on Request for Interlocutory Review

Respondents Incus Co., Ltd. and Carlos Hank Rhon have requested interlocutory review of an order dated June 8, 2000, issued by administrative law judge ("ALJ") Arthur L. Shipe, denying Respondents' motions to amend a stipulated confidentiality order, to strike from the record a motion filed by Board Enforcement Counsel, and to order Enforcement Counsel to show cause why they should not be ordered to cease and desist from "abusing the public record." The Board denies the request for interlocutory review.

Requests for interlocutory review of pre-hearing orders of an ALJ are governed by section 263.28 of the Board's Rules of Practice for Hearings, 12 C.F.R. 263.28 ("Rule 28"). Under that rule, the Board "may exercise interlocutory review" of an ALJ order if the Board finds that at least one of four circumstances exists:

(1) The ruling involves a controlling question of law or policy as to which substantial grounds exist for a difference of opinion;

(2) Immediate review of the ruling may materially advance the ultimate termination of the proceeding;

(3) Subsequent modification of the ruling at the conclusion of the proceeding would be an inadequate remedy; or

(4) Subsequent modification of the ruling would cause unusual delay or expense. 12 C.F.R. 263.28(b).

As the Board has previously had occasion to rule in this matter, interlocutory review is discretionary, and the scope within which such discretion should be exercised is extremely narrow. In the Matter of Incus Co., 86 Federal Reserve Bulletin 246 (2000). Thus, a finding of one of the four circumstances identified in Rule 28 is necessary, but may not be sufficient, to justify interlocutory review by the Board. Id. Rather, the Board will exercise its discretion to grant interlocutory review "where at least one of the prerequisites is met, using all of the prerequisites as guideposts in the exercise of that discretion."Id.

Here, Respondents have objected in a variety of ways to the consequences of the Board's prior decision not to close the hearing in this matter to the public. See In the Matter of Incus Co., 85 Federal Reserve Bulletin 284 (1999). First, they claim that Enforcement Counsel's reference in filings in this proceeding to financial information relating to various individuals is an "abuse" of the record, designed to embarrass Respondents and the Hank Rhon family. From this premise they conclude that a stipulated protective order must be revised by the Board to provide protection for deposition testimony, and that Enforcement Counsel must be ordered to "cease and desist" such alleged abuse.

Respondents provide no support for their allegation of abuse apart from the fact that certain information contained in Enforcement Counsel's filings was picked up in press reports. Press coverage is one of the consequences of the Congressional mandate that, absent extraordinary circumstances, enforcement proceedings such as these be open to the public. Moreover, Respondents have not established that this alleged abuse meets any of the criteria for interlocutory review of an ALJ's order. While they argue that the ALJ's decision not to amend the stipulated protective order was based on an erroneous reading of the law, their legal arguments are not persuasive. The Board's regulations relating to release of confidential financial information pursuant to the Freedom of Information Act or in response to a third-party request have no application to these enforcement proceedings and would provide no basis for amending the protective order in this case. And no case cited by Respondents suggests that a court or agency is constitutionally required to seal the record of a public proceeding to protect personal financial information relevant to the proceeding.(1)

Similarly, the Board sees no basis to disturb the ALJ's decision not to strike the so-called "Halmos Motion" from the record. Respondents claim that the text of the motion as submitted by Enforcement Counsel mischaracterizes a witness's declaration. The declaration speaks for itself and is included in the record; moreover, Respondents have pointed out in the record the areas in which they consider the characterizations to be inaccurate. There is no need to strike a filing on this basis.

For these reasons, Respondents' request for interlocutory review is denied.

So ordered, this 11th day of October, 2000.

Board of Governors of the Federal Reserve System 

JENNIFER J. JOHNSON Secretary of the Board

(1.) Indeed, Respondents' own cases establish that to whatever extent personal financial information is entitled to constitutional protection, that protection is frequently overridden by legitimate governmental interests. See Strathoros v. New York City Taxi and Limousine Comm'n, 198 F.3d 317 (2d Cir. 1999); AFGE v. Dep't of Housing and Urban Dev., 118 F.3d 786 (D.C. Cir. 1997), reversing AFGE v. US. Dep't of Housing and Urban Dev., 924 F. Supp. 225 (D.D.C. 1996). In this case, Congress has made the judgment that the public interest in open proceedings outweighs the privacy interests of the individuals and third parties involved. In the Matter of Incus, 85 Federal Reserve Bulletin 284, 285 (1999).