Thank you for sharing!

Your article was successfully shared with the contacts you provided.
With Arthur Andersen charged with obstruction of justice for allegedly shredding Enron Corp. documents when it shouldn’t have, document retention and destruction policies are no longer simply an annoyance pushed on corporate executives by worrywart in-house lawyers. Andersen’s troubles presumably have pushed those policies to the top of a general counsel’s priority list. “The stakes are very high,” Fulbright & Jaworski partner William Pakalka told about 130 lawyers and clients at a firm-sponsored breakfast meeting March 27. He said now is a good time for legal departments to review company policy and make sure employees comply with it. There is an immense difference, he said, between shredding under provisions of a document destruction and retention policy and getting rid of documents when a legal proceeding is pending or imminent or after in-house lawyers or employees should have known an investigation has begun. “I’ve had plaintiffs’ lawyers tell me they’d much rather find a defendant destroying documents than find a stack of incriminating documents,” said Pakalka, who has tried suits for 30 years. Establishing and following a policy is not only a wise move for a company, but it also can help the general counsel sleep well at night, Pakalka suggested. John Braddock, an Assistant U.S. Attorney for the Southern District of Texas, told the crowd that it’s best to “obey the law and tell the truth” when approached by law enforcement agents seeking information or documents for an investigation. Braddock said in-house lawyers and their outside counsel need to know that prosecutors can bring obstruction-of-justice charges for even an attempt to obstruct. Braddock’s take isn’t surprising, considering he’s chief of the Fraud Section in the Criminal Division at the U.S. Attorney’s Office in Houston. (He wasn’t speaking in an official capacity at the meeting and wouldn’t comment on Andersen’s indictment, which was unsealed March 14.) But the situation Andersen finds itself in a few short months after the Securities and Exchange Commission began investigating Enron’s financial reporting threatens the Chicago firm’s ability to keep clients as well as its existence. That bet-the-company threat to Andersen is far greater than the penalty for a criminal conviction of obstruction of justice, which is five years’ probation and a $500,000 fine. Andersen, which has entered a not guilty plea, goes to trial May 6 in U.S. District Judge Melinda Harmon’s court in Houston. The Department of Justice alleges Andersen engaged in obstruction of justice because employees were shredding documents from the Enron account after they should have known the SEC was investigating financial disclosure statements filed by Enron, which filed a Chapter 11 in December. TIMELY TIPS Pakalka has a few tips for setting up a document retention and destruction policy. He advises keeping corporate records indefinitely, although companies may decide against keeping board of directors and shareholder meeting minutes permanently because misinterpretation of those minutes could be used to impeach corporate witnesses in litigation instead of exonerating them. Companies also should retain vital records that are indispensable to a company’s business, such as customer lists, and research and development records. Requirements for maintaining most employee-related records are dictated by federal laws, he pointed out. But the electronic storage of documents, often on disks to save space, could lead to trouble down the line because corporations tend to keep more than they have to keep, he said. E-mails also are problematic, Pakalka said, because people tend to speak a lot more frankly in an e-mail than in a formal memo. “A lot of lawyers refer to e-mails as evidence mail,” he quipped. Pakalka noted that spoilation of evidence isn’t a cause of action in Texas, but unlawfully destroying records puts litigants or lawyers at risk of sanctions ranging up to the “death penalty” � which, in litigation, is the striking of pleadings. In the environmental arena, companies face a particularly complicated task of figuring out how long by law to retain various records, Fulbright partner Eva Fromm O’Brien told the crowd. “In the environmental area, it’s not a matter of whether you destroy a document, but whether you retained,” she said. “The regulators use no rhyme or reason in promulgating these regulations.” O’Brien recommended erring on the side of caution, particularly when the records deal with hazardous materials and how those materials are disposed. “Are you better off having no records at all or are you relying on the testimony of truck drivers?” she asked. Fulbright of counsel Frank Blue, a former vice president and general counsel of Las Colinas, Texas-based Caltex Corp. who attended the breakfast, says it’s a daunting task to set up a document destruction and retention policy and use it. The first task is inventorying the documents, but even that is no easy chore, he says. Blue suggests corporations may reap the best results in getting employees to comply with a document retention and destruction policy if in-house lawyers supervise the work. Pakalka agrees, adding that when he’s representing a company in litigation, he always tries to get the in-house lawyers involved in collecting documents for discovery. He believes employees are more willing to turn over documents to the in-house lawyers they know and see around the halls than to outside counsel. He says he’s had clients tell him certain documents don’t exist, but when in-house lawyers ask for the documents, they appear. Notes Pakalka, “There’s a trust.”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.