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A Deloitte & Touche poll revealed that most companies have not crafted policies to ban pretexting, which exposes them to potential criminal liability if their employees or investigators use deception to gather information in a probe. In an online poll of 230 executives during a Webcast conducted by Deloitte Financial Advisory Services late last year, 42% said their companies had no written pretexting guidelines, and 45% said they didn’t know if their company had such policies. Only 8% have guidelines they are satisfied with, while 5% believe they have unsatisfactory rules on the books. This lack of corporate attention on pretexting is especially alarming in light of a new federal law that creates criminal penalties for illicitly obtaining or disclosing telephone records. President George W. Bush signed the bill in January, following civil and criminal charges against individuals involved in a Hewlett-Packard Co. scheme to fraudulently obtain phone records in an effort to discover which board members were leaking stories to the media. Several detectives and the former chairwoman of the Palo Alto, Calif.-based technology company face criminal charges, and the company paid $14.5 million in civil fines. Drawing the line Beyond prohibiting tactics that are clearly illegal, such as obtaining bank or telephone records under false pretenses, companies need to consider what kinds of information-gathering techniques � pretexting as well as other methods � are acceptable at their firms, said Ernie Brod, director of Forensic & Dispute Services for Deloitte’s financial advisory services arm. The problem is that some individuals may see nothing wrong with surveillance, for example, but “others may be appalled,” he said. “Has someone told the people who conduct investigations what they are permitted to do and not permitted to do according to the culture and ethical guidelines of that company?” Brod said. Although companies are not detailing what kinds of pretexting tactics their employees or hired investigators can use, corporate counsel say existing ethics policies cover potential problems. Others say pretexting is rare in the daily operations of smaller and midsize companies. Gabe Miller, the chief operating officer and general counsel of Chestnut Hill, Mass.-based digital media company STORS Digital Retail Networks, said he would be “very surprised if even 10%” of a 150-member Massachusetts general counsel group he belongs to had inked a policy. “It’s so remote from their normal course of operations, they wouldn’t find the time to deal with it,” Miller said. Watson Wyatt Worldwide Inc. counsel Karl Chen said there hasn’t been much discussion about pretexting the Arlington, Va.-based human resources consulting company. “We haven’t taken steps towards that,” Wyatt said. “It was initially a hot issue with the Hewlett-Packard [scandal] but nothing has evolved or erupted.” Brod argued that even the smallest companies investigate or conduct background checks on potential hires, vendors and business partners, and such activities are often scattered across different departments. No guidelines Sarbanes-Oxley Act policies requiring public companies to establish reporting channels or a “hotline” for employee complaints about accounting and auditing concerns will also trigger investigations, Brod said. Susan Hackett, general counsel of the Association of Corporate Counsel, has attended seminars about the issue, but she said the Washington-based organization hasn’t issued any guidelines for companies or undertaken a formal review of the issue. It’s hard to come up with hard-and-fast rules about what kinds of legal pretexting cross the line into objectionable behavior, Hackett said. That gray zone makes it even more critical for companies to set guidelines for acceptable behavior, Brod said. A useful gauge may be as simple as considering how public exposure of the pretexting method would affect the company, Brod said. “The key question is: How will it affect your company if you read about it in the front page of the newspaper,” Brod said.

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