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SEC, Government Agencies Struggling to Get E-Discovery Houses in Order (Just Like Everyone Else)

Created on May 21, 2012

The E-Discovery Beat editorial team frequently reports on the everyday struggles that legal teams face in dealing with e-discovery issues. What often gets overlooked is that government agencies experience similar problems and are just as confounded by the issues. In a recent article for New Legal Review, reporter Nick Huber reported that the Securities and Exchange Commission's (SEC) records preservation policies have come under so much scrutiny that even President Obama felt compelled to intervene.

According to the article, concerns about the SEC first surfaced last summer when an employee submitted a damaging report to agency chair, Mary Shapiro, regarding the SEC's document destruction practices. Following the report, an internal investigation was opened that revealed numerous problems surrounding the agency's management of electronically stored information (ESI) over the last 30 years.

“It was SEC policy to dispose of all documents related to inquiries into potential wrongdoing that had not led to full-fledged SEC probes," writes Huber. “Since 1992, more than 10,000 batches of files had answered that description - some of which could have served as vital early warning systems for financial frauds that, in recent years, have become household names." Files related to infamous Ponzi scheme orchestrator Bernie Madoff were among those improperly destroyed.

In response to the SEC investigation, President Obama issued a memo to the heads of all executive departments and federal agencies last November instructing them to reform their records management policies and practices.

“When records are well managed, agencies can use them to assess the impact of programs, to reduce redundant efforts, to save money, and to share knowledge within and across their organizations," the memo stated. “In these ways, proper records management is the backbone of open Government."

Agencies were given until the end of March to submit a report to the Archivist and the Director of the Office of Management and Budget (OMB) that details plans for improving their records management processes. Meanwhile, a report released this month by the National Archives and Records Administration (NARA) revealed that besides the SEC, several other departments were engaging in risky electronic records management practices, according to Huber.

One sign that the President's concerns over electronic data management is indeed prompting action, back in February the Joint Electronic Technology Working Group, which includes representatives from the Department of Justice, Administrative Office of U.S. Courts' (AOUSC) and the Office of Defender Services among others, released its “Recommendations for ESI Discovery in Federal Criminal Cases."

As reported by the E-Discovery Beat, the protocol is designed to address the emerging problem that ESI presents in criminal cases. It specifically states, “The advent of electronically stored information (ESI) presents an opportunity for greater efficiency and cost savings for the entire criminal justice system, which is especially important for the representation of indigent defendants. To realize those benefits and to avoid undue cost, disruption and delay, criminal practitioners must educate themselves and employ best practices for managing ESI discovery."

To learn more about e-discovery issues related to internal investigations and government regulations, tune into Exterro's upcoming webcast on June 7th, “Litigation, Investigations and Regulations, Oh My!." To learn more and register, click here.