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Overview of the exposures related to electronic discovery and the need for a document retention/destruction policy. Offers guidelines for writing a document retention/destruction policy. Presented to a group of association finance and administration executives.
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Where’s the Shredder?Where’s the Shredder?A Risk Management Approach to A Risk Management Approach to
Document Retention and Document Retention and Electronic DiscoveryElectronic Discovery
February 27, 2008February 27, 2008
Eileen Morgan Johnson
Whiteford Taylor & Preston, LLP
Leslie T. White, CPCU, CIC, ARM, CRM
Croydon Consulting, LLC
Records ManagementRecords Management
Risk ManagementRisk Management
Risk ManagementRisk ManagementInnovation requires risk taking. Taking risks Innovation requires risk taking. Taking risks
requires informed, fact-based decision requires informed, fact-based decision making.making.
Discipline for dealing with the possibility Discipline for dealing with the possibility that some future event may cause harm.that some future event may cause harm.
Dealing with uncertainty . . .Dealing with uncertainty . . .
Risk Management CycleRisk Management Cycle
Identify risks
Evaluate & prioritize risks
Select risk management techniques
Implement techniques
Monitor & improve the program
What are the risks?What are the risks?
Documents and records can Documents and records can be:be:
The smoking gun proving fraud, employment discrimination, sexual harassment, restraint of trade, conflict of interest, etc.
The evidence that disproves fraud, employment discrimination, sexual harassment, restraint of trade, conflict of interest, etc.
What are the risks?What are the risks?
Criminal charges of obstruction of justiceCriminal charges of obstruction of justice Adverse judgment due to inability to Adverse judgment due to inability to
produce discoverable documents and produce discoverable documents and records records
(Residential Funding Corp v. DeGeorge Corp. 306 F.3d 99 - $96.4 million)(Residential Funding Corp v. DeGeorge Corp. 306 F.3d 99 - $96.4 million) Morgan Stanley $1.45 billion – acted in “bad faith” in failing to turn over Morgan Stanley $1.45 billion – acted in “bad faith” in failing to turn over
relevant emails (Overturned on appeal)relevant emails (Overturned on appeal)
Costs to produce requested documents Costs to produce requested documents (staff time and computer forensics)(staff time and computer forensics)
Storage costs for necessary & unnecessary Storage costs for necessary & unnecessary documentsdocuments
History – Arthur AndersenHistory – Arthur Andersen
June 2002 criminal conviction for destroying Enron documents
October 2001, Arthur Andersen’s in-house legal counsel sent memorandum to partner in charge of the Enron audit team -
“It might be useful to consider reminding the engagement team of our documentation and retention policy. It will be helpful to make sure we have complied with the policy. Let me know if you have any questions.”
Knowing the SEC had begun investigating Enron the partner ordered destruction of Enron related documents on October 21, 2001
Destruction continued until day after Arthur Andersen received a subpoena requesting it to produce those and other documents
May 2005 U. S. Supreme Court overturned the 2002 criminal conviction due to improper jury instructions
Arthur Andersen – Part 2Arthur Andersen – Part 2
Conviction overturned in 2005 since Conviction overturned in 2005 since jury instructions did not require:jury instructions did not require: ““consciousness of wrongdoing” - consciousness of wrongdoing” -
Knowingly corruptly persuading others Knowingly corruptly persuading others to destroy documentsto destroy documents
““any nexus between the ‘persua[sion] to any nexus between the ‘persua[sion] to destroy documents and any particular destroy documents and any particular proceeding”proceeding”
Sarbanes-Oxley Act of 2002Sarbanes-Oxley Act of 2002
Title VIII – Corporate and Criminal Fraud Accountability Sec. 802 Criminal Penalties for Altering Documents – Amends Chapter 73 of title 18 United States Code
§ 1519. Destruction, alteration, or falsification of records in Federal investigations and bankruptcy
Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any department or agency of the United States or any case filed under title 11 [bankruptcy cases], or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.
Sarbanes-Oxley Act of 2002Sarbanes-Oxley Act of 2002 Title XI – Corporate Fraud AccountabilityTitle XI – Corporate Fraud Accountability Sec. 1102. Tampering with a Record or Otherwise Impending an Sec. 1102. Tampering with a Record or Otherwise Impending an
Official ProceedingOfficial Proceeding Amends Section 1512 of title 18, United States Code – inserting:Amends Section 1512 of title 18, United States Code – inserting:
(c) (c) Whoever corruptly –(1) alters, destroys, mutilates, or conceals a record, document, or other object, or attempts to do so, with the intent to impair the object’s integrity or availability for use in an official proceeding; or(2) otherwise obstructs, influences, or impedes any official proceeding, or attempts to do so,
Shall be fined under this title or imprisoned not more than 20 years, or both.
Sarbanes-Oxley Act of 2002Sarbanes-Oxley Act of 2002
One interpretationOne interpretation Prosecutors will not have to establish a Prosecutors will not have to establish a
nexus between the document nexus between the document destruction and an obstruction of justicedestruction and an obstruction of justice
Document destruction itself will be Document destruction itself will be sufficient when there is a known sufficient when there is a known investigationinvestigation
Bricker & Eckler LLP www.bricker.com/publications/articles/681.asp
New Risk – Electronic New Risk – Electronic Discovery Discovery
December 2006 revisions to Federal Rules December 2006 revisions to Federal Rules of Civil Procedure (FRCP)of Civil Procedure (FRCP) Rules govern conduct of all civil actions Rules govern conduct of all civil actions
brought in Federal district courtsbrought in Federal district courts Many states have similar laws
Maryland – Proposed amendments published 9/26/2007 – still pending
Virginia – Seeking public comment or proposed rules; 3/15/2008 deadline
DC – DC Superior Court follows FRCP; Advisory Committee working on local court rules
Federal Rules of Civil Federal Rules of Civil Procedure Procedure
December 1, 2006 RevisionsDecember 1, 2006 Revisions Clarifies definition of electronic discovery (e-Clarifies definition of electronic discovery (e-
discovery)discovery) Modifies discovery procedures to address Modifies discovery procedures to address
electronically stored information (“ESI”)electronically stored information (“ESI”) Imposes express obligations to preserve, Imposes express obligations to preserve,
disclose and produce ESI. disclose and produce ESI. When organization has reason to believe that a When organization has reason to believe that a
claim or lawsuit might occur, must take steps claim or lawsuit might occur, must take steps to preserve all relevant datato preserve all relevant data
E-Discovery RisksE-Discovery Risks
Spoliation – Destruction or alteration of evidence, Spoliation – Destruction or alteration of evidence, or failure to preserve property for another’s use or failure to preserve property for another’s use as evidence in pending or foreseeable litigation.as evidence in pending or foreseeable litigation.
Possible PenaltiesPossible Penalties Monetary sanctions (civil penalties, costs & attorneys’ Monetary sanctions (civil penalties, costs & attorneys’
fees associated with discovery)fees associated with discovery) Preclusion sanctions – precluding the offer or other use Preclusion sanctions – precluding the offer or other use
of certain evidenceof certain evidence Adverse inferences – directing jury to assume missing Adverse inferences – directing jury to assume missing
ESI is adverseESI is adverse ““Rummaging” – Giving discovering party hands-on Rummaging” – Giving discovering party hands-on
access to adversary’s computer systemaccess to adversary’s computer system
Court sanctions for e-discovery failures a growing trend
Electronically Stored Electronically Stored InformationInformation
EmailsEmails Internet browser information (favorites, cookies, Internet browser information (favorites, cookies,
downloads)downloads) Instant messaging/chat recordsInstant messaging/chat records E-FaxesE-Faxes Electronic calendarsElectronic calendars VoicemailVoicemail Text messagesText messages BlogsBlogs Chat room, bulletin, listserve postingsChat room, bulletin, listserve postings PDAsPDAs Cell phonesCell phones MetadataMetadata Deleted documentsDeleted documents
Where Stored?Where Stored?
Hard driveHard drive FloppiesFloppies Digital media (CDs/DVDs)Digital media (CDs/DVDs) Backup tapes (on and off-site)Backup tapes (on and off-site) Flash memory drivesFlash memory drives Network serversNetwork servers Remote storage (hot sites, online backups, etc.)Remote storage (hot sites, online backups, etc.) PDAs/BlackberriesPDAs/Blackberries Home computersHome computers LaptopsLaptops Cell phonesCell phones
Destroying Electronic Files Destroying Electronic Files
Virtually impossible to completely destroy Virtually impossible to completely destroy electronic informationelectronic information
Hard drive shredding & melt downHard drive shredding & melt down Degaussing (removes magnetic alignment)Degaussing (removes magnetic alignment)
With shredding & degaussing need to purchase With shredding & degaussing need to purchase new hard drivesnew hard drives
Scrubbing – Deletes data and overwrites Scrubbing – Deletes data and overwrites with random data (need to overwrite 7 with random data (need to overwrite 7 times)times) Can be detected so make sure no litigation or Can be detected so make sure no litigation or
record holdrecord hold
Record Retention & Record Retention & Destruction PolicyDestruction Policy
Purpose statement for Purpose statement for policypolicy
Identify if policy for entire Identify if policy for entire organization or specific organization or specific departments, unitsdepartments, units
Personnel responsible for Personnel responsible for overseeing policyoverseeing policy
Personnel responsible for Personnel responsible for destructiondestruction
Procedures to implement Procedures to implement policypolicy
Procedures to review and Procedures to review and modify policymodify policy
Records Management Policy:Records Management Policy:Record Retention & Document Record Retention & Document
DestructionDestruction Evaluate how you Evaluate how you
handle records & handle records & documentsdocuments
Define obligations Define obligations of employees for of employees for records records managementmanagement
Record retention Record retention schedule schedule
Records Management Policy Records Management Policy DevelopmentDevelopment
Identify where and how information is created, stored, archived and destroyed (electronic & paper)
Identify categories of documents Identify fixed period of time to
retain each category Establish record retention schedule Establish process for suspending
document destruction Implement Monitor
Categories of RecordsCategories of Records Define categories of records (examples)Define categories of records (examples)
Employee benefit records Employee seniority & merit systems Notices of job openings, promotions, training
programs or overtime opportunities Job applications & resumes INS forms Personnel records Membership records Accounting & tax records Legal documents Board-related documents E-mails, instant messages, voice mail
Retention PeriodsRetention Periods
Fixed period of time for Fixed period of time for each categoryeach category Legal requirements – Legal requirements –
Federal, state, local lawsFederal, state, local laws Industry requirements/best Industry requirements/best
practicespractices Organizational needs – how Organizational needs – how
long derives continued long derives continued business or historical valuebusiness or historical value
ImplementationImplementation
Employee education & trainingEmployee education & training How to complyHow to comply Categories of information & retention scheduleCategories of information & retention schedule Inform about policy revisionsInform about policy revisions Periodic refresher trainingPeriodic refresher training
Keep accurate indexes of all hard copy Keep accurate indexes of all hard copy records (on-site and off-site)records (on-site and off-site)
Create indexes of electronic informationCreate indexes of electronic information Establish automated record retention & Establish automated record retention &
destruction procedures for electronic destruction procedures for electronic recordsrecords
Destruction Suspension Destruction Suspension ProcessProcess
Process to stop document destruction Process to stop document destruction program (record hold) program (record hold)
Litigation response teamLitigation response team Cease destruction at first notice of suit or Cease destruction at first notice of suit or
reasonable anticipations of suit or reasonable anticipations of suit or investigationinvestigation
Establish mechanism to preserve all Establish mechanism to preserve all possible evidencepossible evidence
Notify users not to delete/destroy recordsNotify users not to delete/destroy records Avoid deleting or alerting metadataAvoid deleting or alerting metadata
Monitor PolicyMonitor Policy
Assign responsibility for policy Assign responsibility for policy enforcementenforcement
Review retention documentation Review retention documentation (indexes and logs) (indexes and logs)
Monitor compliance of destruction Monitor compliance of destruction processprocess
Periodic review and revision of Periodic review and revision of retention scheduleretention schedule
Process to amend policy Process to amend policy
Additional ResourcesAdditional Resources The Sedona ConferenceThe Sedona Conference
http://www.thesedonaconference.org/wgs http://www.thesedonaconference.org/wgs Creating a Strong Foundation for your Company’s Creating a Strong Foundation for your Company’s
Records Management Records Management http://www.klgates.com/files/upload/eDAT_ACC_Dhttp://www.klgates.com/files/upload/eDAT_ACC_Docket_Article.pdf ocket_Article.pdf
Discovery Resources by FiosDiscovery Resources by Fioshttp://www.discoveryresources.org/ http://www.discoveryresources.org/
K&L|Gates (Kirkpatrick & Lockhart Preston Gates K&L|Gates (Kirkpatrick & Lockhart Preston Gates Ellis LLP)Ellis LLP) http://www.ediscoverylaw.com/articles/news-updates/ http://www.ediscoverylaw.com/articles/news-updates/
Association ResourcesAssociation Resources
ARMA International (Association of Records ARMA International (Association of Records Managers and Administrators)Managers and Administrators) http://www.arma.org/http://www.arma.org/
Institute of Certified Records ManagersInstitute of Certified Records Managers http://www.icrm.org/http://www.icrm.org/
Aiim: The ECM Association (Association for Aiim: The ECM Association (Association for Information and Image Management) ECM – Information and Image Management) ECM – Enterprise Content ManagementEnterprise Content Management http://www.aiim.org/ http://www.aiim.org/
National Association for Information DestructionNational Association for Information Destruction http://www.naidonline.org/ http://www.naidonline.org/
PresentersPresenters
Eileen Morgan Johnson
Whiteford Taylor & Preston, LLP
3190 Fairview Park, Suite 300
Falls Church, VA 22042
703-280-9271
www.wtplaw.com
Leslie T. White, CPCU, CIC, ARM, CRM
Croydon Consulting, LLC
P O Box 1414
Severna Park, MD 21146
410.544.0913
www.croydonconsult.com