The U.S.'s Securities and Exchange Commission recently released documents related to its probe into the near-collapse of American International Group Inc. AIG +2.47% with hundreds of redactions to keep information secret.
SEC officials blacked out information more than 800 separate times in one transcript of a witness interview that lasted less than three hours. On one page, redactions left just four words remaining: "okay," "by," "in" and "did." On another page, "um hmm" is one of three short phrases left untouched.
Among the blacked-out details: the names of witnesses, their lawyers, the SEC enforcement officials and even the proofreaders who checked the transcripts.
The SEC released the documents in response to a public-records request by The Wall Street Journal that sought copies of interviews conducted under oath by the agency during its probe into the events leading up to the public bailout of AIG. The Journal this month appealed the SEC's broad use of redactions.
A spokesman for the SEC said the agency is committed to complying with freedom-of-information laws "to make sure we are transparent and accountable to those we serve." He added that, "Last year…we invoked withholding exemptions in fewer than 10% of those requests where records were available."
A representative for The Wall Street Journal said, "We appealed because we believe our readers have a right to know more about the SEC's probe, and we look forward to the SEC's prompt decision."
Taxpayers committed tens of billions of dollars to bailing out AIG, in one of the defining moments of the 2008 financial crisis; the money has since been repaid. The Journal sought documents related to federal investigations into three former AIG executives from the London unit that nearly brought down the insurer— Joseph Cassano, Andrew Forster and Thomas Athan. The probes closed in the first half of 2010 with no charges being brought.
In response to a March 2013 request made by the Journal under the Freedom of Information Act, the SEC last month released three transcripts, without identifying who was interviewed in each instance. The three interviews were conducted "in the matter of AIG credit default swaps," which are complex financial products, at the SEC's Manhattan office, according to the documents. Two were held in February 2010, and the date of the third interview is unknown. (It was redacted by officials.)
The records released are so heavily redacted that they offer few clues into the SEC's conduct of the probe or reasons for closing it. The documents exclude many interviews the SEC conducted jointly with the Justice Department, according to people familiar with the matter.
In addition to the more-than-800 deletions in the transcript of the first interview, there were more than 800 other deletions combined in the other two interview transcripts that cited personal privacy as the reason for the redactions, according to an analysis by the Journal. SEC officials cited commercial confidentiality as a reason for redacting information in more than 340 instances.
In one instance, the deletions reduced a question by an SEC investigator to: "Is he right about the [[redacted]] in [[redacted]] ahead of the [[redacted]]". The answer: "Yes. I think that's accurate that the [[redacted]] at a faster [[redacted]] than [[redacted]] was [[redacted]]."
One question-and-answer sequence reads:
Q: [[redacted]] in the [[redacted]] did [[redacted]]
A: [[redacted]]
Q: [[redacted]] in the [[redacted]] did [[redacted]]
A: [[redacted]]
Legal experts who reviewed the redacted documents for the Journal said the SEC appeared to have allowed the perceived interests of AIG and the witnesses to outweigh the public interest in the information.
"What the agency has done here is highly questionable and vulnerable to challenge," said Daniel J. Metcalfe, who ran the Justice Department's office of information and privacy for more than 25 years.
Mr. Metcalfe said he wasn't aware of case law that would support the redaction of all the lawyers' names on the documents. "It makes you wonder: What's the big secret here?"
It is "hard to fathom what [SEC officials] were thinking" in deciding to redact the date of one of the interviews on the grounds of personal privacy, added Mr. Metcalfe, now a law professor at American University in Washington and director of the school's Collaboration on Government Secrecy project.
The SEC, in its response to the Journal's public-records request, said it had applied the exemptions required by law, including keeping information private if its release would lead to an "unwarranted invasion of personal privacy" or could cause substantial competitive harm to a company.
Most of the redactions were requested by lawyers for the three witnesses, according to a person familiar with the matter. SEC officials told the Journal in October they were "in the process of incorporating…observations" made by "outside equity holders" on the transcripts.
In a statement, an SEC spokesman said the decisions on applying exemptions required a "careful balance," guided by "extensive…precedent and a close analysis of individual facts and circumstances."
Clay Calvert, a professor and freedom-of-expression expert at the University of Florida, said privacy and other exemptions "often and unfortunately tend to be abused and misused in the name of keeping information that is public private and secret."
Commenting on the Journal's request, Mr. Calvert, who directs the Marion B. Brechner First Amendment Project, added: "The public has a need and a right to know the information in question, especially as the investigation has been closed."
An SEC spokesman said the agency received 143 appeals regarding information released in response to freedom-of-information requests in the 12 months through September 2013, or just over 1% of the total 12,275 freedom-of-information requests received.
Only five of the 29 appeals that were remanded for further consideration by SEC officials involved personal-privacy exemptions, the spokesman added.