Volume 38, Issue 2, February 2003
Learning from the Downfall of Others
Document Retention in the Wake of the Andersen Case
by David Barron
In the wake of the Arthur Andersen criminal obstruction of justice verdict and the increasing scrutiny of routine corporate practices, many companies are either revisiting their document retention policies or scrambling to implement one. We all watched the images of truckloads of shredded documents pulling away from the Enron building, but have we learned from criminal mistakes?
Lessons of the Andersen Case
The jury in the Andersen case returned a guilty verdict against the company in June 2002, finding that various employees had obstructed justice purposely in the investigation of the firm’s accounting practices. Essentially, Andersen was convicted because employees ordered the shredding of documents related to the collapse of Enron and Andersen’s assistance in covering up the energy company’s economic losses. A decidedly ill-advised e-mail message conveying Andersen’s order to shred the documents was discovered quickly and became a serious problem for the accounting firm.
The Andersen decision teaches us several lessons:
• Documents, written or electronic, which relate to an ongoing official proceeding must not be destroyed or altered by an agent of the company with the intent of subverting, undermining or impeding the official proceeding.
• An official proceeding could include an Equal Employment Opportunity Commission investigation, an Occupational Safety and Health Administration investigation, a civil lawsuit, an investigation by a state labor commission, etc.
• An agent must not encourage any other person, including other employees, to destroy or alter documents relating to an official proceeding.
• Intent is proven if the act is undertaken with the specific purpose of making the document unavailable for an official proceeding. But, the prosecution need only prove that the obstruction of justice was part of the intent.
• An agent may include lower-level personnel who are acting within the course and scope of their
According to a ruling by U.S. District Court Judge Melinda Harmon in the Andersen case, the jury does not have to agree unanimously on which particular agent of the company violated the law—instead, the jurors must simply agree that any of the company’s agents violated the law. The key portion of this case for management is the fact that lower level employees who are not trained
properly or supervised can create criminal liability for the company as a whole, and a single errant e-mail can wreak havoc on a company during litigation.
E-Mail and Other Electronic Documents
The problem of document retention is magnified by the casual perception of e-mail by many employees. Employees at every level in the company must be trained to think of e-mail as official writing before hitting the send button. Employees are often cavalier about what is in e-mail, erroneously thinking the delete button will wash away any indiscretions.
However, electronic records are extremely difficult to erase permanently there are a number of places where a forensic specialist can find such “deleted” documents.
Any effective document retention policy must address e-mail and other electronic documents specifically, as these types of documents have become increasingly troublesome for companies in litigation. Opposing attorneys will request all e-mail documentation pertaining to a lawsuit, and your company must be prepared to reproduce such data, no matter how damaging to the company’s interests.
Typical Document Retention Policies
According to the courts, a document retention policy must be reasonable. Reasonableness is determined by viewing all of the surrounding circumstances. The following are factors which are usually present in document retention policies.
1. Types of documents stored, where they will be stored, and for how long;
2. Information technology specialists’ involvement in the policy;
3. Manner in which the policy will be enforced;
4. Accountability for the enforcement of the policy;
5. Training of all computer users regarding the policy;
6. Training of employees on how to manage electronic data;
7.Consistent application of the policy;
8. Differentiation between personal and business e-mail;
9. Litigation and government investigation acquiescence;
10. Periodic audits of the document retention policy.
These are the basics of any sound document retention policy. Bear in mind, the courts will look at whether your company’s policy is reasonable under all of the circumstances. The company will have to prove the policy was adopted before threatened litigation, was applied consistently and was designed for the legitimate purpose of streamlining the company’s record keeping practices.
With the basic elements of a sound document-retention policy in mind, your company must ask a number of questions before sitting down to draft and implement the policy.
• Who will formulate a document- retention policy for the company?
• Is a committee needed to oversee the document retention policy?
• Who will be in charge of determining what documents must be preserved?
• Should the company consider the possible advantages and disadvantages of using software that deletes e-mail messages automatically after a set period of time?
• Who will train employees on the proper uses of e-mail in order to prevent possibly damaging messages being drafted in the first place?
• Who is responsible for the company’s computer network?
• How will the company separate personal e-mail from company e-mail?
Obtaining answers to these questions will be the first step for a company to create a balanced, consistent document-retention policy for today’s highly scrutinized business environment.
A well-written and consistently implemented document retention policy can improve a company’s image in the event of litigation and can help limit liability for obstruction of justice charges. Further, in a civil suit, the retention policy can help preserve evidence favorable to the company and can prevent the issuance of sanctions against the company for failing to maintain appropriate corporate records.
David Barron is an attorney at Alaniz and Schraeder in Houston. He represents employers in employment-related matters.
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