On the heels of the Dot Com bust were a number of very prominent corporate scandals and even criminal activities and convictions in some of the largest and most well known US corporations. Congress responded with the Sarbanes-Oxley legislation and specifically, section 1519 which penalizes the destruction of records or information during any investigation or bankruptcy proceedings.

At times illegal, is the idea of shredding records to protect possible litigation practical or even enforceable, or is it obsolete?

One of the major reasons most organizations have written information retention policies is to avoid historic lawsuits like Manville’s asbestos and Phillip Morris & R.J. Reynolds tobacco cases.  In each of the above cases, the internal documents came to light and supported the prosecutors’ cases.  Nonetheless, there is certainly a legitimate need to get rid of obsolete paper records to free up space for others.  It is impossible to store hard copy records forever.

Given the fact that all records can now be digitized, the space needed for storage has drastically decreased.  With the advancement of digital storage technologies, potentially speaking, we can store all records indefinitely in digital format.

But this then begs the question: is there a reason to store records digitally (or in any format) indefinitely?  What can that be the possible benefit for the organization?

In Ronald Perelman vs. Morgan Stanley, after a five-week trial, the jury awarded $1.45 billion to Ronald Perelman because Morgan Stanley was unable to produce the electronic documents.  And again in Laura Zubulake vs. UBS, the panel awarded $29.3 million in wages lost and punitive damages against Zurich-based UBS.  According to the ruling, UBS could not produce the necessary emails and other electronic documents, and this led to the appearance of UBS having something to hide.

In both of these cases, Morgan Stanley & UBS might have been better of producing all required emails and documents and let their highly paid lawyers argue it out in court, because the alternative was not really acceptable in either case.  Why then could not both firms produce the information requested by the courts?  We may never know.  Was the information not longer available because it had passed its retention date?  Or if the information was in electronic format such as email or other forms of electronic documentation were they not being saved or backed up? Again, we might never know.  Given the size and resourcefulness of both firms, one would think producing required records would not be that difficult.

We know by now that most organizations do not have all records / information in hard copy paper format, and when one wants to eliminate the record, shredding hard copies alone does not guarantee their destruction. Even for electronic records and information, erasing them does not necessarily eliminate them. Oliver North found out the hard way after he erased his email from his computer during the Iran-Contra scandal back in the Reagan administration.

Bill Gates in one of his books – “The Road Ahead” – predicts that we will soon live a fully “documented life.”  Well, I think we are just about there already. What the implications are for our society at large we may not know for sure for some time to come. But one thing we do know is that for corporations and other businesses, the retention of information and the policies that govern it will be ever-changing going forward.

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