FOIA Lawsuit: The $13 (or $9?) Billion Dollar Complaint

9/25/17 Update

On the eve of Summary Judgment, the DOJ caved and surrendered the vast majority of the draft complaint. Judge Gardephe allowed the DOJ to redact the rest, taking the DOJ's claim that they still intend to go after bankers tied to the scheme -- despite the statute of limitations expiring in the next few months -- at face value. So we will either see another shoe drop very soon or find out that the government pulled one over a federal judge.

An excellent writeup by Vanity Fair's William Cohan can be found here and the document itself and further analysis by Splinter News' JK Trotter can be found here.


In 2014, I was working with Matt Taibbi on a blockbuster article about the key witness at the center of the $13 billion dollar (or $9 billion, depending who you ask) settlement reached in November 2013 between the DOJ and JPMorgan. This was one of the key mortgage-backed securities enforcement actions post-2008 Financial Crisis. Matt's article about inspirational whistleblower Alayne Fleischmann can be found here.

In researching the settlement, I learned that a draft complaint prepared by the DOJ played an influential role in inducing JPMorgan to offer a record-breaking settlement. See William Cohan's article in The Nation for a great rundown.

Naturally, I wanted to see the document, so I filed a FOIA request in July 2014. Flash forward two and a half years later, I'm litigating the case in federal court. 

The DOJ is withholding the entire 92-page draft complaint on the grounds that it relates to another, unspecified, law enforcement investigation. In order to justify FOIA Exemption 7(A), which protects investigatory files until a case is closed, the DOJ is arguing that releasing the document would undermine a different investigation. To which I say: what investigation? After all, it's been ten years since the toxic RMBS were created and sold, not to mention three years since settlement. What is the DOJ working on?

The key factors weighing in favor of disclosure are:

1) JPMorgan already has the document, so there is no element of surprise on the government's side.

2) The investigation is already a decade old, so any enforcement proceeding is likely running up against - or outside - the statute of limitations.

3) In two separate litigations - one a shareholder suit, the other a lawsuit from the Federal Home Loan Bank of Pittsburgh - the DOJ declined to assert any interest in keeping the draft complaint secret. In fact, according to the General Counsel of the FHLB Pittsburgh, a DOJ lawyer negotiating with JPMorgan explicitly stated that once the settlement was complete, he "would not care" about the complaint. Interestingly, the court ended up ordering the draft complaint produced, only for the FHLB Pittsburgh and JPMorgan to settle almost immediately. 

The government's responses to these factors are essentially:

1) We didn't say we are suing JPMorgan. [Huh?]

2) We don't have to tell you what the statute of limitations is. [But you do have to say if it has already run out.]

3) Hearsay! [Admission by party opponent.]

Cross-motions for summary judgment are now fully briefed and I hope Judge Gardephe grants oral argument. I've linked to the legal papers below. 

 - Dan

    Daniel NovackDOJ, FOIA, SDNY1 Comment