Business confidentiality agreements restrict public information

By Marlena Hartz

In the age of information, keeping secrets is standard business practice, according to some academic and business officials.

A growing method of grapevine circumvention is the confidentiality agreement. Once signed, it legally binds individuals from divulging a wide range of information, from a food recipe to the identity of a company.

The ramifications of breaking the agreement vary depending on the type of language used in the document, according to Clovis attorney Drew Tatum. But as legal documents, they carry weight in a court room, and non-abiders can be sued for damages.

Most commonly drafted by employers and signed by employees, confidentiality agreements offer companies much-esteemed protection, Eastern New Mexico University business professor Don Morris said.

“Companies want to protect trade secrets or organizational procedures, to protect the value of their company,” Morris said. “It enforces a kind of ethic by becoming a minimum standard for the behavior of employees.”

However, confidentiality agreements often extend beyond the employment realm.

Local economic developer Chase Gentry said confidentiality agreements are necessary in his line of business.

The Clovis Industrial Development Corp. executive director said he uses the documents primarily to protect the interests of potential Clovis-bound companies.

“There are certain risks involved if something becomes public knowledge — risks in land costs going up, risk from competition … It’s just like buying a house, you don’t tell everyone in town what you are paying for it,” Gentry said.
In fact, CIDC requires anyone who participates in CIDC projects to sign a confidentiality agreement, Gentry said. That most recently included City Manager Joe Thomas and Clovis Mayor David Lansford, among others.

The city officials signed a CIDC-drafted confidentiality agreement with a Wisconsin-based meat packing company, Smithfield, Foods, Inc., when the company expressed interest in the area. Thomas and Lansford admitted to meeting with Smithfield officials, but refused to comment on details of the meeting citing confidentiality restrictions.

According to published reports in Oklahoma and Kansas newspapers, the Clovis area is one of two sites being considered for a Smithfield plant that could employ up to 2,500 people.

Gentry compared negotiations with Smithfield to negotiations with Southwest Cheese, a multimillion dollar industry CIDC recently reeled to Clovis. If details about the cheese company’s intentions were revealed to the public before they were finalized, 225 jobs may have gone elsewhere, Gentry said.

The city offered Southwest Cheese about $40 million in incentives to come to the area, chiefly tax benefits, according to the mayor. Incentives offered to Smithfield by CIDC at this point are merely drafts, officials said.

Southwest Cheese Chief Executive Director Maurice Keane declined comment on the issue.

When should business information become public information?

Smithfield officials responded with an e-mail, which reads: “When Smithfield has arrived at a decision to locate a facility, the company will issue a press release.”

Gentry agrees, the public should know about business deals only once they are finalized.

However, if business incentives call for use of taxpayer money, officials need to formally seek public approval.
“We cannot obligate any city assets without discussing and voting on it in a public meeting,” Lansford said.

And the city doesn’t contemplate use of public funds lightly, Lansford said. “The city is not willing to invest in an industry if we don’t see a potential for job growth. Everything is tied to jobs. It must have a definite benefit to the local economy. It basically must be a local monopoly — it cannot impact other people’s bottom line. For example, we wouldn’t offer an incentive to anyone in the retail industry,” the mayor said.
Doing that would negatively impact other retail producers already in the area, he said.

If public bodies put business negotiations into writing, the rules of the game do change, according to Bob Johnson, executive director of the New Mexico Foundation for Open Government.

“If (public bodies) exchange anything except conversation, they have created a public record,” Johnson said.

There are few exceptions to that rule, Johnson said, which include health-related records, employment records, letters of opinion, and proprietary or trade secrets.