Opinion: Should Companies Be Free to Hide Their Misconduct?

(June 30) -- Imagine if the public didn't know about all the corporate wrongdoing leading to BP's oil spill or Goldman Sachs' role in the financial collapse. Without the ensuing public outrage, would the government have responded the same way?

Under a recent court ruling, such information may no longer be public.

In an unprecedented move overlooked by mainstream media, a federal appellate court ruled that corporations can conceal misconduct uncovered by the government from the public -- such as pollution, hazardous work, and health and safety violations -- simply because they're embarrassed.

Previously, such information had always been available thanks to the Freedom of Information Act, a 1966 federal law ensuring public access to government records. FOIA makes certain information routinely available and provides a mechanism for citizens to request other documents not readily available. There are some exceptions, however, that allow for withholding information from the public.

One exception for law enforcement records is "personal privacy," which was primarily enacted to protect key players in an investigation from suffering harm by precluding documents identifying those individuals from being publicized.

The 3rd U.S. Circuit Court of Appeals in Philadelphia ruling, issued late last year, held in AT&T v. Federal Communications Commission that "personal privacy" -- which had only been available to individual people who feared danger and embarrassment in the literal sense -- now applies to collective entities like corporations that might experience embarrassment in the abstract sense. AT&T initiated the lawsuit to halt the release of FCC records detailing an investigation into whether the telecommunications company over-billed the government.

Although the effect of the court's ruling is limited to its own jurisdiction, it's nonetheless significant because the new law is binding on New Jersey, Pennsylvania and Delaware -- the nation's corporate capital.

While courts have long recognized that corporations have some rights that are at least akin to individual privacy rights -- for example, trade secrets and attorney-client privilege -- the ruling vastly expands the scope of corporate privacy, giving corporations equal footing with individuals.

"Corporations, like human beings, are routinely involved in law enforcement investigations," the court explained. "Corporations, like human beings, face public embarrassment, harassment, and stigma because of their involvement."

Somewhere, our judicial forefathers are turning in their graves.

As legal scholar William Blackstone, whose philosophies serve as a foundation for American jurisprudence, said, "a corporation ... has no soul." How can an entity without a soul be embarrassed?

Indeed, the Supreme Court has held corporations cannot "plead an unqualified right to conduct their affairs in secret ... Corporations can claim no equality with individuals in the enjoyment of a right to privacy ... They are endowed with public attributes. They have a collective impact upon society, from which they derive the privilege of acting as artificial entities."

The Obama administration has recently asked the Supreme Court to overturn the ruling, which, interestingly, Solicitor General Elena Kagan appealed shortly before her nomination to the Court. Without public knowledge of corporate misbehavior, public interest groups worry government officials may be less likely to impose appropriate punishment since public opinion often motivates lawmakers' actions.

But relying on the Supreme Court to fix this bad ruling is dubious at best. Keep in mind, this is the same court that earlier this year ruled corporations have the same political speech rights as people, overturning its own 2003 decision. And the Court may not even hear the case.

A safer bet is Congress. Because the Philadelphia court's ruling is based on its interpretation of FOIA's wording, Congress can pass legislation clarifying that "personal privacy" applies to only individuals and not corporations. At the moment, personal privacy is undefined, leaving jurists to speculate on Congress' intentions.

Knowledge is power, and citizens need to be in the know for democracy to work. As a judge once told a tobacco company attempting to censor government warnings about its cigarettes: "Common sense tells us that the greater the motivation a corporation has to shield its operations, the greater the public's need to know."


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