There are an increasing number of law cases involving electronic evidence. Potentially damaging information for a company is often to be found on old backup tapes, in e-mails, and on disks. When lawyers decide they need electronic evidence as part of the ‘discovery’ process it is usually the IT department (rather than the records manager) of a company that is approached and asked to investigate. Trying to discover the evidence is frequently “an economic and operational nightmare”. It is also very costly and sometimes a public embarrasment. This situation alone provides a compelling reason for having an electronic document and records management system that can store records in such a way that they can be retrieved easily. The fact that an organization does not know what records it is retaining points to a lack of developed records practices and procedures. If they are being inadvertently preserved then the organization is incurring unnecessary costs for storage and possibly litigation risk if there is incriminating evidence contained in them.
E-mail is a major source of corporate memory and evidence of business processes and leaves a “pervasive trail of evidence that demonstrates corporate decisions and behavior – digital testimony to an organization’s functions, activities and transactions”. As such it has been found to be an invaluable weapon in providing evidence of who decided what, when and why.
The following examples of records management or rather mismanagement illustrate why best practice archiving and records management is essential to an organization. What they clearly demonstrate is that there is a need, above all, for written document retention policies for e-mail.
- Microsoft and evidence of anti competitive practices found in e-mail
Microsoft Corporation has been in the legal spotlight more than once related to finding stored e-mails which are used as evidence for a prosecution. In a court case in 2002, a January 1999 e-mail from Bill Gates was used as incriminating evidence of Gates’ plan to promote Microsoft’s audio and video delivery software over that of rival RealNetworks. Had best practice archiving with effective retention policies been in place, this message may have been destroyed before the case was brought. Or, well-defined policies and procedures may have prevented the comments ever being committed to paper or exchanged by e-mail. For some information, e-mail is an inappropriate medium, but an organization needs a policy and procedures that states this.
- Enron, Arthur Andersen and incriminating e-mail
Accounting firm Arthur Andersen was convicted recently of deliberately destroying documents to thwart an investigation being carried out by the Securities and Exchange Commission. Evidence emerged that the instruction to shred documents had been given to and carried out by Duncan, an Andersen employee and lead partner on the Enron account. Andersen claimed that Duncan had acted independently in this regard. However, this was shown to be untrue based upon the evidence of an altered memo that was unearthed and provided to the court. As a result, Andersen, and not Duncan, was found guilty of obstruction of justice. Even if retention policies had existed at Arthur Andersen, they would likely not have been followed as many documents were destroyed knowing that an investigation was pending. The conviction of Arthur Andersen on a charge of obstruction of justice showed that the act of destroying evidence in anticipation of a lawsuit can lead a jury to the conclusion that the information would have been damning”. However, in this situation, having a well defined, understood and implemented records management system in existence may have resulted in a more serious approach to the importance of the organization’s documents and records and may have prevented the employee from undertaking the shredding in the first place (even though ordered). Subsequent to this case more stringent punishments have been imposed upon companies that undertake document shredding in this type of situation. The liabilities are part of the new Sarbanes-Oxley Act in the US which makes destroying or attempting to destroy documents related to a federal investigation a crime punishable by up to 20 years in jail.
- Prudential Insurance and the “lost order”
In 1995, in a case brought against Prudential Insurance pending the review of a claim against the company, a judge issued an order requiring Prudential to preserve all documents potentially relevant to the litigation. However, the order was apparently not passed on to the employees and relevant documents to the claim case were destroyed. This resulted in a fine of $1 million for Prudential. Although there was no evidence that the document destruction was deliberate, the loss of the documents did remove potentially valuable evidence for the claimants. If a retention policy had been in place the documents would not have been destroyed. The judge held senior management responsible for the loss and fined Prudential Insurance. In addition he ordered the company to inform employees of the original court order (to retain documents) and to submit to the court within 30 days a written manual describing its document retention policy.
Records Management can save a company from unnecassary monitary costs and negative impacts to the coporate brand. By establishing Records Management program (process, deploying tools, proper training and dilligent monitoring for compliance) these costs and impacts can be avoided.