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Published by Pike & Fischer, Inc., a subsidiary of The Bureau of National Affairs, Inc.
Digital Discovery
& e-Evidence
BEST PRACTICES & EVOLVING LAW
Vol. 2, No. 9 | October 2002
The Sarbanes-Oxley Act: How Will It Affect the Way Electronic Information Is Disclosed?
The Corporate Fraud Accountability Act of 2002, also known as the Sarbanes-Oxley Act of 2002, increases the penalties for sloppy “e-lawyering”—a term that can be used to describe such tasks as identifying relevant information sources and determining which data are responsive to an information request. Until now, the penalties for sloppy e-lawyering or partial information disclosure have been exceptionally mild. Now regulators and plaintiffs can reference a federal statute under which fines and jail time can be imposed for obstruction of justice, alteration of evidence and incomplete information disclosure. The practice of law has just gotten a whole lot riskier!
New investments will be required to protect companies and their executives from charges of untrustworthy information disclosure. Under Sarbanes-Oxley, failure to properly collect and filter the information to be disclosed to regulators constitutes a federal crime. Individuals can face up to 20 years in prison if they “corruptly” alter, destroy, mutilate, or conceal records or documents with the intent to impair their integrity or availability in an official proceeding; or to otherwise obstruct, influence, or impede a proceeding, or attempt to do so, under § 1102 of the law.
The Time for Best Practices Is Now
It is time to insist that your law firm or legal department either create
or enforce a standard corporate practice for trustworthy create or enforce
a standard corporate practice for trustworthy information disclosure, especially
when it comes to handing over electronic records.
That’s no easy task. Today, responding to a subpoena or a document request has become more challenging because we must deal with a proliferation of electronic records lodged in a multitude of different places. In many cases, the records can be automatically deleted or overwritten on a regular basis. Systems need to be put in place that will enable attorneys to ferret out requested material lest deletions give rise to an obstruction- of-justice charge.
Here are some ways to avoid information losses that can result in legal troubles under the Sarbanes-Oxley Act:
• Develop standardized information disclosure practices (i.e., an electronic discovery and production plan) so that when the request for information comes in, the in-house lawyers know where to look, how to look, and what actions to take to protect the company and prevent mistakes from creeping into your preservation, discovery or production process. Likewise, law firms need to adopt formal electronic discovery and production practices that can withstand scrutiny from outside parties.
• Adopt formal training programs for your professionals on e-lawyering and safe record-keeping practices, so that you can assure your executives and corporate clients that best practices are consistently being applied to all of your client matters and materials. There is a surprising lack of consistency among companies, law firms, and lawyers when it comes to information disclosure. Don’t let these inconsistencies result in a government investigation into the record preservation and deletion practices of your company or client.
• Pay careful attention to source document preservation, data collection, and filtering processes. Document the precise chain of custody. Solid documentation, usable output, and a well-organized disclosure and production effort can often calm even the most skeptical regulator or plaintiff.
Michael Prounis is Chief Executive Officer and co-founder
of Evidence Exchange, a New York-based electronic data discovery solutions
provider. He can be reached at michael.prounis@evidenceexchange.com.
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