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Few would dispute that the representation of corporations has become vastly more complicated for both inside and outside counsel in this post-Enron, post-Sarbanes-Oxley world. One of the most telling signs of the change that has taken place is that white-collar litigators like myself now frequently field calls from corporate clients about document preservation issues. A topic previously considered about as mundane as they come has turned into a minefield, and danger lurks for those not sufficiently wary. THE ARTHUR ANDERSEN CASE This preoccupation with document preservation can be traced back to the prosecution of accounting giant Arthur Andersen. The government’s indictment alleged that Arthur Andersen conducted a massive campaign to destroy documents relating to Enron starting in October 2001 and continuing for several weeks. Everyone knows the end of the story — the indictment and subsequent conviction of the mega-accounting firm caused its demise. But there are a couple of other particularly interesting tidbits from that case that are also instructive. First, Andersen was indicted for destroying documents before that firm had received a subpoena from the SEC. Unlike most other obstruction statutes, the statute used by the government in the Arthur Andersen case did not require that the obstructive behavior — in that case the destruction of documents — take place during the pendency of an “official proceeding,” as stated in 18 U.S.C. Section 1512(b). Second, and this is really chilling, it seems that Arthur Andersen and its lawyers did not really understand the law. A few days before the document destruction supposedly began, an Arthur Andersen partner explained that if a document is “destroyed in the course of normal policy and litigation is filed the next day, that’s great … we’ve followed our own policy and whatever there was that might have been of interest to somebody is gone and irretrievable.” And then, two days later, an inside attorney for Arthur Andersen, despite being aware of the likelihood of an investigation and civil litigation involving Enron, sent an e-mail to an Arthur Andersen partner in Houston advising him to remind the Enron engagement team of Arthur Andersen’s documentation and retention policy. Amazingly, this simple misunderstanding of the law appears to have played a major role in the implosion of one of the world’s great accounting firms. CONGRESS REACTS Congress apparently was concerned that, despite Arthur Andersen’s conviction, loopholes existed in the government’s existing arsenal of obstruction statutes. Some cases interpreting Section 1512, for instance, still required evidence that a defendant expected an investigation in the foreseeable future. See, for example, United States v. Frankhause. Moreover, Section 1512(b) requires evidence that a defendant “corruptly persuaded” another to destroy documents, but did not address the person who trashes records on his own initiative. A little-known provision of the Sarbanes-Oxley Act was intended to rectify these concerns. That statute provides, in part, that “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 matter within the jurisdiction of any department or agency of the United States … or in relation to or contemplation of any such matter” has committed a federal felony punishable by imprisonment of up to 20 years. It would appear that this statute criminalizes the destruction of documents even before a government investigation is foreseeable, as long as the defendant acts with the intent to obstruct “a matter within the jurisdiction of a department or agency of the United States, or in relation to or contemplation of any such matter.” The Senate Report, in fact, states that the statute was designed “not to include any technical requirement … to tie the obstructive conduct to a pending or imminent proceeding or matter by intent or otherwise.” Moreover, the statute was apparently intended “to do away with the distinctions … between court proceedings, investigations, regulatory or administrative proceedings (whether formal or not), and less formal government inquiries.” The scope of this statute is potentially breathtaking. Suppose, for instance, you are the regular outside corporate counsel for a corporation. Your client receives evidence that senior salespeople have been paying kickbacks to persons in the purchasing department of customer companies. The government has no knowledge of this information, and there is no investigation on the horizon. Your client has a regular document destruction policy that requires employees to clean out their e-mails and hard paper files every 18 months. After learning of the kickback scheme, your client does not suspend its policy, and does not circulate a document preservation memo. Consequently, several employees with relevant documents delete pertinent emails and destroy other records. Might some aggressive prosecutor allege that the failure to take affirmative steps to preserve documents in light of knowledge of unlawful conduct constituted a violation of Section 1519, or willfully caused a violation of section 1519? See 18 U.S.C. Section 2(b). The bottom line: You need to advise your clients to take appropriate steps to preserve documents (including the suspension of document retention policies) when credible evidence of some unlawful conduct comes to light, even if no governmental inquiry is in sight. OUTSIDE OF CRIMINAL CASES It is not just Congress and federal prosecutors who have shown unprecedented interest in document preservation issues. The Securities and Exchange Commission has made clear its concern about — to use the SEC’s words — “protecting the integrity of the investigative process.” In March 2004, for instance, Bank of America Securities agreed to pay the SEC a $10 million fine for various alleged abuses in producing documents. One of the SEC’s allegations was that the company told the SEC that certain e-mails would be very time-consuming and expensive to restore when, in fact, the company was able to restore some key documents quickly. The SEC also alleged that Bank of America Securities delayed telling the SEC that it knew certain documents had been inadvertently destroyed, and that it simply took too long (almost two years) to produce e-mails. Even in purely civil litigation, courts have demonstrated that they are paying close attention to document preservation issues, and have a far less forgiving attitude toward perceived abuses. One of the most remarkable decisions is Zubulake v. UBS Warburg LLC. In this employment discrimination case, Judge Shira A. Scheindlin imposed various sanctions against UBS even though inside and outside counsel gave written and oral directions to employees to preserve documents, including email backup tapes. Despite these admonitions, it appears that UBS failed to preserve all backup tapes and certain UBS employees deleted a number of e-mails. What is extraordinary about this opinion is that the court set forth in great detail her view of the specific measures lawyers should undertake to preserve and produce documents during civil litigation. Scheindlin held that UBS’ counsel did not do enough to monitor compliance with the litigation hold instruction. Counsel, she opined, has an affirmative duty to become “fully familiar with her client’s document retention policies,” as well as the client’s data retention architecture. Lawyers must interview information technology personnel and the key figures in the litigation to understand their individual document management practices. Scheindlin also made clear that counsel has a continuing duty to ensure preservation. Lawyers must periodically re-issue a litigation hold memo, and must communicate directly with key players in the litigation to remind them of their continuing obligation. The company’s lawyers are also responsible to instruct employees to “produce electronic copies of their relevant active files,” and “make sure that all backup media … is identified and stored in a safe place.” SOME PRACTICAL TIPS It should be obvious that in the current climate, document collection is not a task that can be delegated to the most junior members of a team. So what specific measures should you take when circumstances dictate the need to preserve documents? An e-mail or other memorandum should be sent immediately requiring that all document destruction procedures be suspended, and that individuals retain hard-copy documents (including calendars and appointment books), electronic files, e-mails, voicemails, data compilations and/or tangible objects pertaining to the relevant time frame and relevant events or issues. Individuals should be instructed to maintain electronic data whether on the network, desktop, hard-drive, laptop, Blackberry, PDA, diskette, and/or CD-ROM and whether at home or at work. Employees should also be instructed not to modify relevant documents. The list of individuals to whom this e-mail or memorandum is sent, the categories of documents and the time frame should be overbroad, at least initially. Counsel should have a conversation with the individuals most likely to have relevant information to explain and underscore the document preservation instruction. Counsel should remind such individuals periodically of the need to preserve documents. Consideration should be given to requiring employees to certify compliance with the document hold and production obligation. Counsel should contact the IT department to learn about the company’s relevant systems, prevent automatic e-mail deletion, suspend recycling or overwriting of backup tapes, and possibly image hard drives of key players. Counsel should contact the document storage department, outside storage facility and/or third parties holding records on the company’s behalf to prevent any automatic destruction of records. David M. Howard is a partner and chair of the white-collar litigation group at Dechert. He focuses his practice on the representation of corporations and individuals in government and internal investigations and on civil fraud litigation.

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