The Center for Investigative Reporting et al v. Treasury, Dept of Document 1: Complaint

Filed December 16, 2019

BackBack to The Center for Investigative Reporting et al v. Treasury, Dept of, California Northern District Court Case No. 3:19-cv-08181-JCS

COMPLAINT against Treasury, Dept of ( Filing fee $ 400, receipt number 0971-13985079.). Filed byAaron Glantz, The Center for Investigative Reporting. (Attachments: # (1) Exhibit, # (2) Civil Cover Sheet)(Baranetsky, Diana) (Filed on 12/16/2019)

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D. Victoria Baranetsky (SBN 311892)
THE CENTER FOR INVESTIGATIVE REPORTING 65th St., Suite 200
Emeryville, CA 94608
Telephone: (510) 809-3160
Fax: (510) 849-6141
vbaranetsky @revealnews.org
Attorney for Plaintiffs
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
OAKLAND DIVISION


THE CENTER FOR INVESTIGATIVE ) Case No.
REPORTING and AARON GLANTZ, )
) COMPLAINT FOR INJUNCTIVE
Plaintiffs, RELIEF
)
Vv. )
UNITED STATES DEPARTMENT OF THE .
TREASURY, )
)
Defendant. )
INTRODUCTION
ib This is an action under the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552,
for injunctive and other appropriate relief. The Center for Investigative Reporting (“CIR”) and its
reporter, Aaron Glantz (collectively “Plaintiffs”), seek records requested from the Financial Crimes
Enforcement Network (“FinCEN”), a bureau within the United States Department of Treasury
(“Treasury”).
2s On July 17, 2019, Plaintiffs submitted a FOIA request to FinCEN seeking records
that contain information about the actual owners, also known as “beneficial owners,” of residential
real estate purchased wholly with cash between 2016 and July 2019.
, On July 29, 2019, Defendant sent a letter in which it denied Plaintiffs’ request in full,
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providing a Glomar response! and invoking 5 U.S.C. § 552(b)(3) (“Exemption 3”).
, On August 1, 2019, Plaintiffs sent a letter to Defendant appealing the denial.
. On October 17, 2019, the Deputy Director of FinCEN remanded the matter to
FinCEN’s FOIA office for further processing.
. To date, Defendant has not issued any further response and has produced no records.
Defendant has failed to comply with FOIA’s statutory deadlines, 5 U.S.C. § 552(a)(6)(A)(ii),
improperly issued a Glomar response, and failed to enumerate a foreseeable harm that would result
from disclosure. 5 U.S.C. § 552(a)(8)(A)(i).
ds The requested records are of particular interest to Plaintiffs, who have reported
extensively on issues related to the lack of transparency in the identities of some residential real
estate owners. Homewreckers, REVEAL, Oct. 19, 2019,
https://www.revealnews.org/episodes/homewreckers/.
. In recent years, there has been an increase in purchases of residential properties by
shell companies, which obfuscate the identities of residential real estate owners, shielding important
ownership information from public view. FinCEN, FIN 2017-A003, Advisory to Financial
Institutions and Real Estate Firms and _ Professionals, Aug. 22, 2017,
https://www.fincen.gov/resources/advisories/fincen-advisory-fin-2017-a003. This lack of
transparency is especially concerning where shell companies not only thwart public accountability
but often “obscure the illicit origin of their funds[.]” Jd.
B, Plaintiffs now ask the Court for an injunction requiring FinCEN to promptly disclose
all relevant portions of the withheld records.
//
//

' The term “Glomar response” originates from the Central Intelligence Agency’s (“CIA”) refusal to
confirm or deny the existence of records in response to a FOIA request relating to the Hughes
Glomar Explorer, a ship used in a classified [CIA] project used to ‘to raise a sunken Soviet
submarine from the floor of the Pacific Ocean to recover the missiles, codes, and communications
for United States military and intelligence experts. Roth v. U.S. Dep’t of Justice, 642 F.3d 1161, (D.C. Cir. 2011) (internal citation omitted). Usually, Glomar responses have been reserved
for withholding national security and classified records.
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JURISDICTION
. The Court has subject matter jurisdiction over this action and personal jurisdiction
over the parties pursuant to 5 U.S.C. §§ 552(a)(4)(B) and 552(a)(6)(C)(i). This Court also has
jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1436, and 5 U.S.C. §§ 701-706.
VENUE AND INTRADISTRICT ASSIGNMENT. Venue is proper in this district under 5 U.S.C. § 552(a)(4)(B) and 28 U.S.C. §§
(e) and 1402. Plaintiff CIR has its principal place of business in this district. Plaintiff Aaron
Glantz lives in San Francisco.
. Assignment to the Oakland Division is proper pursuant to Local Rule 3-2(c) and (d)
because a substantial portion of the events giving rise to this action occurred in Alameda County,
where CIR’s principal place of business is located and most actions in this case occurred.
PARTIES
. Plaintiff CIR publishes Reveal, an online news site at revealnews.org, and Reveal, a
weekly public radio show and podcast with approximately 1 million listeners a week. Founded in as the nation’s first nonprofit investigative news organization, CIR has received multiple
awards for its reporting. CIR is a non-profit established under the laws of the State of California,
with its primary office in Emeryville, California.
. Plaintiff Aaron Glantz is a staff reporter for Reveal and an employee of CIR.
. Defendant Treasury is a department of the executive branch of the U.S. government
and an “agency” for the purposes of FOIA. 5 U.S.C. § 552(f)(1). FinCEN is a component of the
Treasury. Both Treasury as a whole and FinCEN specifically have their headquarters in Washington,
Bx.
FACTUAL BACKGROUND
Sharing Information with the Public is Central to FinCEN’s Mission. | FinCEN was established in April 1990 as a component of the Office of the Assistant
Secretary of the Treasury by Order 105-08. Dep’t of Treasury, 105-08, Establishment of the
Financial Crimes Enforcement Network, Apr. 2), 1990,
https://www.fincen.gov/sites/default/files/shared/EstablishingFinCEN.pdf. Many of FinCEN’s
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responsibilities stem from the administration of the Bank Secrecy Act of 1970 (“BSA”), 31 U.S.C.
§§ 5311 et seqg., the country’s primary anti-money laundering law. The BSA “requires financial
institutions to keep records of cash purchases of negotiable instruments . . . and to report suspicious
activity that might signify money laundering, tax evasion, or other criminal activities.” FinCEN,
FinCEN’s Mandate from Congress, https://www.fincen.gov/resources/fincens-mandate-congress;
see also California Bankers Ass'n v. Shultz, 416 U.S. 21, 22 (1974).
. Today, FinCEN’s mission includes the “dissemination of financial intelligence” in
addition to its other responsibilities. FinCEN, Mission, https://www.fincen.gov/about/mission
(emphasis added); see also FinCEN, About,
https://www.treasury.gov/about/history/Pages/fincen.aspx (stating the “original” mission of FinCEN
was to “provide a governmentwide, multisource intelligence and analytical network in support of the
detection, investigation, and prosecution of domestic and international money laundering and other
financial crimes by . . . law enforcement agencies.”)
. Providing government agencies as well as the public with information regarding
money laundering and relevant investigations is central to FinCEN’s mission. FinCEN, Advisories,
Bulletins, & Fact Sheets, https://www.fincen.gov/resources/advisoriesbulletinsfact-sheets (“As part
of fulfilling its mission to safeguard the financial system and promote national security, FinCEN . .
. issues public and non-public advisories to financial institutions concerning money laundering or
terrorist financing threats and vulnerabilities for the purpose of enabling financial institutions to
guard against such threats.”) (emphasis added).
. | While the BSA requires that certain information remain secret, when Congress passed
the BSA in 1970, it did not enumerate an intention to keep the identities of residential real estate
owners secret. California Bankers Ass’n v. Shultz, 416 U.S. 21, 26 (1974) (“The express purpose of
the [BSA] is to require the maintenance of records, and the making of certain reports, which ‘have a

high degree of usefulness in criminal, tax, or regulatory investigations or proceedings’”) (citations
omitted).. In practice, the BSA would not have shielded this public information at the time of
its passage because limited liability corporations (“LLCs”), the most popular corporate form used to
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anonymously purchase residential real estate, were not authorized by statute in any state until 1977,
seven years after the BSA was passed. Louise Story & Stephanie Saul, Stream of Foreign Wealth
Flows to Elite New York Real Estate, N.Y. TIMES, Feb. 7, 2015,
https://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-wealth-flows-to-time-warner-
condos.html. In addition, “[nJothing in the genesis of [LLCs] suggested they would be used to
purchase personal real estate,” according to a researcher who worked on LLC policies at the IRS in
the 1990s. Id.
. Courts have also found that while the Treasury may withhold information pursuant to
the BSA and Exemption 3, the law does not bar access to al/ relevant information held by FinCEN.
For instance, the BSA does not justify withholding general information and documents related to the
BSA. BizCapital Bus. & Indus. Dev. Corp. v. OCC, 467 F.3d 871 (Sth Cir. 2006). Courts find that
agencies are still required to disclose all segregable portions. See Davis v. U.S. Dep’t of Justice, No.
Civ. A. 00-2457(CKK), 2003 WL 25568468, at *5 (D.D.C. 2003); see also Berger v. I.R.S., 487 F.
Supp. 2d 482, 496 (D.NJ . 2007). Multiple courts have specifically faulted the Treasury for
withholding documents with blanket BSA assertions. See, e.g., Boyd v. Exec. Office for U.S. Ait’ ys, F.Supp.3d 58, 90 (D.D.C. 2015).
The Identity of Residential Real Estate Owners Has Historically Been Public
. The identities of residential real estate owners have historically been publicly
available through several means. Emily Badger, Anonymous Owner, L.L.C.: Why It Has Become So
Easy to Hide in the Housing Market, N.Y. TiMes, Apr. 30, 2018,
https://www.nytimes.com/2018/04/30/upshot/anonymous-owner-llc-why-it-has-become-so-easy-
to-hide-in-the-housing-market.html.
. For instance, the identities of residential real estate owners have been publicly
available under the various states’ “public recording systems,” central to all states’ property laws.
Charles Szypszak, Public Registries and Private Solutions: An Evolving American Real Estate
Conveyance Regime, 24 WHITTIER L. REV. 663, 666 (2003) (noting “the regime relies on a public
recording system.”).
. —Inrecent decades, a trend has developed whereby certain corporate vehicles are used
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to shield this crucial civic information from public visibility. Shell companies, such as LLCs and
other similar corporate bodies, are increasingly used to obfuscate the identities of residential real
estate owners. FinCEN, FIN 2017-A003, Advisory to Financial Institutions and Real Estate Firms
and Professionals, Aug. 22, 2017, https://www.fincen.gov/resources/advisories/fincen-advisory-fin--a003 (describing how the “use of shell companies decreases transparency”). This tactic is
successful because in many states, LLCs and other corporate vehicles “are not required to disclose
their owners to [state] regulators,” and may be registered to offices of lawyers or wealth management
companies. See, e.g., Michael Cohen Case Sheds Light on Sean Hannity’s Property Empire, THE
GUARDIAN, Apr. 23, 2018, https://www.theguardian.com/media/20 1 8/apr/22/michael-cohen-sean-
hannity-property-real-estate-ben-carson-hud.
. By 2015, only 74 percent of rental properties could have their owners easily
identified, down from 92 percent in 1991. Compare U.S. Bureau of the Census, 1991 Statistical
Brief: Who Owns the Nation’s Rental Properties?, Mar. 1996,
www.census.gov/prod/1/statbrief/sb96_01 .pdf with U.S. Bureau of the Census, Rental Housing
Finance Survey: 2015. National Property Configuration, — https://www.census.gov/data-
tools/demo/rhfs/#/?s_byGroup1=6; see also Emily Badger, Anonymous Owner, L.L.C.: Why It Has
Become So Easy to Hide in the Housing Market, N.Y. TIMES, Apr. 30, 2018,
https://www.nytimes.com/2018/04/30/upshot/anonymous-owner-llc-why-it-has-become-so-easy-
to-hide-in-the-housing-market.html.
. In 2017, FinCEN reported that all-cash purchases by such vehicles accounted for “one
in four residential real estate purchases, totaling hundreds of billions of dollars nationwide.”
FinCEN, FIN 2017-A003, Advisory to Financial Institutions and Real Estate Firms and
Professionals, Aug. 22, 2017, https://www.fincen.gov/resources/advisories/fincen-advisory-fin--a003.
. Today, this information is still sometimes traceable from public documents filed with
a Secretary of State or other similar office. FFIEC BSA/AML Examination Manual, May 5, 2018,
https://www.ffiec.gov/press/pdf/Beneficial%200wnership%20Requirements%20for%20Legal%20
Entity%20CustomersOverview-FINAL.pdf (“For the purposes of the Beneficial Ownership Rule, 2
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a legal entity customer is defined as a corporation, limited liability company, or other entity that is
created by the filing of a public document with a Secretary of State or other similar office, a general
partnership, and any similar entity formed under the laws of a foreign jurisdiction that opens an
account.”’).
. Some jurisdictions have proactively required this information to be disclosed in order
to combat this problem. For instance, in 2019, the State of New York passed legislation requiring
LLCs to disclose beneficial owners in a mandatory tax form. See Elizabeth Kim, New York State
Law Seeks to Unmask Property Owners Behind LLCs, GOTHAMIST, Oct. 9, 2019,
https://gothamist.com/news/new-state-law-seeks-unmask-property-owners-behind-llcs.
. Similarly, outside of the United States, many countries around the globe affirmatively
require this information be identified. See Glob. Research Ctr., Disclosure of Beneficial Ownership
in Selected Countries, July 2017, https://www.loc.gov/law/help/beneficial-ownership/disclosure-
beneficial-ownership.pdf (a report by the Law Library of Congress surveying the laws related to
registration of beneficial owners and disclosure of that information across the European Union and
in twenty-nine countries and listing the many foreign laws requiring this information be public).
. Journalists are also sometimes able to locate this information in the United States
through laborious investigative reporting techniques. See Aaron Glantz, Profiting off pain: Trump
confidant cashed in on housing crisis, June 8, 2017, https://www.revealnews.org/article/profiting-
off-pain-trump-confidant-cashed-in-on-housing-crisis/ (identifying Thomas Barrack as the actual
residential real estate owner of various properties owned by shell companies by cross-referencing
various public filings); Nick Penzenstadler, Steve Reilly, & John Kelly, Here’s who is behind LLCs
buying Trump real estate, USA TODAY, June 13, 2017,
https://www.usatoday.com/story/news/2017/06/13/heres-who-behind-llcs-buying-trump-real-
estate/102382726/ (same).
There is a Strong Public Interest in Disclosure of Residential Real Estate Owners
. The public and the press have a clear and abiding interest in knowing who owns
property in various communities and keeping public officials accountable in their handling of this
matter. See Ben Casselman & Connor Dougherty, Want a House Like This? Prepare for a Bidding
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War with Investors, Nays TIMES, June 20,, https://www.nytimes.com/interactive/20 1 9/06/20/business/economy/starter-homes-
investors.html (stating that the proliferation of residential real estate purchases by anonymous buyers
has a powerful ripple effect on local economies, housing availability, homelessness, and
neighborhood blight).
. The rise of all-cash purchases of residential real estate by shell companies in recent
years has caused public alarm and been a topic of intense public interest. Emily Badger, Anonymous
Owner, L.L.C., N.Y. TIMES. Responding to these concerns and the growing problems from such
transactions, FinCEN has expanded its enforcement efforts. Renae Reints, Wealthy Home Buyers
Can No Longer Conceal Their Identities in These Cities, FORTUNE, Nov. 16, 2018,
https://fortune.com/2018/11/16/fincen-real-estate-llc-all-cash-purchases-disclosure/.
. | Many news outlets, including CIR, have spent years investigating and reporting on
the issue. See, e.g., Lou Fancher, Why Home Ownership Has Kept Declining, EAST BAY EXPRESS,
Nov. 12, 2019, — https://www.eastbayexpress.com/oakland/why-home-ownership-has-kept-
declining/Content?0id=27944363 (tracing all-cash buys of residential property by shell companies
to the decline of home ownership and other economic problems facing millions of Americans in the
aftermath of the housing crisis); Homewreckers, REVEAL, Oct. 19, 2019,
https://www.revealnews.org/episodes/homewreckers/; Aaron Glantz, Profiting off pain: Trump
confidant cashed in on housing crisis, REVEAL, June 8, 2017,
https://www.revealnews.org/article/profiting-off-pain-trump-confidant-cashed-in-on-housing-
crisis/; Casey Michel, The U.S. is a Good Place for Bad People to Stash Their Money, THE ATLANTIC,
July 13, 2017, https://www.theatlantic.com/business/archive/2017/07/us-anonymous-shell-
companies/531996/ (describing “the ease with which one can set up a shell company” to purchase
residential real estate in many U.S. states);. This is a topic of intense public interest which affects
the lives of millions of Americans.
PROCEDURAL BACKGROUND. On July 17, 2019, Mr. Glantz submitted a request, on behalf of CIR, to FinCEN for

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any agency documents containing information about the “real human owners” of residential real
estate purchased wholly with cash from 2016 to July 2019 (“the Request”), including those records
created outside of its jurisdiction under the BSA. A true and correct copy of the Request is attached
as Exhibit A.
. Specifically, Mr. Glantz requested:
e Addresses of all residential real estate purchased with cash of which FinCEN is
aware;
e the amount of money transferred;
e the names of the true, human owners of each residential real estate property
purchased with cash, including but not limited to those purchased by LLC, LLP, and
LP shell companies;
e the names of the individuals responsible for representing the purchasers of such
property;
e the addresses of the human owners and individuals responsible for representing the
purchaser;
e any and all additional information FinCEN possesses about these purchases.
. Mr. Glantz sought a waiver of applicable fees on the grounds that he was a
“representative of the news media” and that the records were not sought for commercial use. 5
U.S.C. § 552(a)(4)(A)Gi).
. On July 24, 2019, Treasury sent a letter acknowledging the Request and assigning it
case numbers FinCEN 19-178-F and goFOIA 2019-07-130. A true and correct copy of this
acknowledgment letter is attached as Exhibit B.
. On July 29, 2019, Treasury sent a second letter denying the request in full (“the
Denial”) in which it asserted a Glomar response, stating, “FinCEN can neither confirm nor deny the
existence of the materials that you seek.” A true and correct copy of the Denial is attached as Exhibit
C. Specifically, the Denial states that “records filed under the Bank Secrecy Act and records of such
reports are exempt from disclosure under FOIA.” Jd. (citing 31 U.S.C. § 5319; 5 U.S.C. § 552(b)(3)).
It further states that “except to the extent necessary for the performance of official duties, FinCEN
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is prohibited from disclosing Bank Secrecy Act records and information that would reveal whether
the Bank Secrecy Act records do or do not exist.” Jd. (citing § 31 U.S.C. 5318(g); 31 C.F.R. §.320(e)(2)).
. On August 1, 2019, Plaintiffs sent an administrative appeal letter (“the Appeal”) to
Treasury. A true and correct copy of that letter without attachments is attached as Exhibit D.
. In the Appeal, Plaintiffs argued that Treasury incorrectly asserted a Glomar response
and misapplied Exemption 3 of FOIA, and that Treasury failed to meet the foreseeable harm standard
under the FOIA Improvement Act of 2016. Id.
. On August 7, 2019, Treasury sent a letter acknowledging the Appeal. A true and
correct copy of this acknowledgment letter is attached as Exhibit E. In it, the Treasury stated that
“every effort will be made to provide . . . a timely response within 20 business days.” Jd.
. Two months later, on October 17, 2019, Treasury issued a letter remanded the matter
to FinCEN for further processing. A true and correct copy of the response is attached as Exhibit F.
In relevant part, the letter read: “I [Treasury Deputy Director Jamal El-Hindi] have decided to remand
your request to FinCEN’s FOIA Office for further processing. FinCEN’s FOIA Office will contact
you directly.” Id.
. Approximately five months have elapsed since CIR first requested the records in
controversy, and Plaintiffs have not received any further communication from FinCEN or Treasury.
, —_ Having exhausted all administrative remedies, Plaintiffs now seek injunctive relief.
CAUSE OF ACTION
Violation of Freedom of Information Act
. Plaintiffs repeat and reallege paragraphs 144.
. FinCEN is subject to FOIA and must therefore release in response to a FOIA request
any disclosable records in its possession and provide a lawful reason for withholding any materials
as to which it is claiming an exemption.
. FinCEN has no lawful basis for declining to release the records requested by Plaintiffs
under FOIA.
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. FinCEN has failed to respond to Plaintiffs’ appeal within the 20 business days
required by FOIA, and has therefore administratively denied Plaintiffs’ appeal. See 5 U.S.C. §(a)(6)(A)(ii). Accordingly, Plaintiffs are deemed to have exhausted their administrative remedies
under FOIA.
. Plaintiffs are entitled to declaratory and injunctive relief compelling the release and
disclosure of the requested records.
REQUESTED RELIEF
WHEREFORE, Plaintiffs pray that this Court:
. Declare that Defendant FinCEN violated FOIA by failing to provide requested
records in response to Plaintiffs’ FOIA request;
ps Declare that the documents sought by their FOIA request, as described in the
foregoing paragraphs, are public under 5 U.S.C. § 552 and must be disclosed;
. Order Defendant FinCEN to provide the requested documents to Plaintiffs within 20
business days of the Court’s order;
. Award Plaintiffs the costs of this proceeding, including reasonable attorneys’ fees, as
expressly permitted by FOIA; and
Si Grant Plaintiffs such other and further relief as this Court may deem just and proper.
DATED: December 16, 2019 Respectfully submitted,
By: /s/|_ <—

D. Viclésia Berens (2 311892)
THE CENTER FOR INVESTIGATIVE REPORTING 65th St., Suite 200
Emeryville, CA 94608
Telephone: (510) 809-3160
Email: vbaranetsky @revealnews.org
Attorney for Plaintiffs
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