03:19 PM
Albert Barsocchini, Guidance Software
Albert Barsocchini, Guidance Software

Financial Institutions Now Taking a Holistic Approach to eDiscovery, Internal Investigations and Compliance

Corporate legal departments are taking a more unified approach to internal investigations, eDiscovery, audit and compliance.

Albert Barsocchini
The 2009 financial meltdown has resulted in new lawsuits and the possibility of increased regulation for many financial firms. Pending legislation that will boost regulation of big banks and hedge funds are two recent examples of this trend. Similarly, legal action against Wall Street firms such as Goldman Sachs, Lehman Brothers and others illustrate the increasing need to be able to respond to an increase in both civil and criminal legal inquiries.

These trends are driving a trend toward the corporate legal departments at financial institutions taking a unified approach on the mission critical functions of internal investigations, eDiscovery, audit and compliance. This has now become a boardroom-level issue.

Internal investigations can include issues involving human resource, fraud, unauthorized network access and intellectual property theft. eDiscovery can include both civil and criminal evidence collections as well as regulatory inquiries. Compliance covers data audit (personal identifiable information, record management enforcement, etc.), data security, HIPAA, Sarbanes-Oxley (SOX) fraud investigations, to name a few.

Traditionally, these types of investigations have been conducted by separate corporate departments and rarely have they been brought under one roof from a technology or departmental resource point of view.

Challenges Driving Convergence But recently, there has been a clear shift to consolidate these areas for efficiency, cost-effectiveness and other internal reasons. Companies are realizing that these departments can no longer operate in isolation and still meet today’s challenges.

There are a variety of challenges driving convergence, including increased litigation and internal investigations, the pressures of evolving case law, increasing volumes of data, reliance on smaller staffs and complex data privacy laws.

There’s also the possible need to defend the technology used in the investigation to prove that the computer program used to discover the computer evidence (ESI) generated authentic evidence. In these cases, the proponent of the evidence must testify to the validity of the program or programs utilized in the process. Daubert v. Merrell Dow Pharmaceuticals, Inc, 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) is a landmark U.S. Supreme Court decision that sets forth a legal test to determine the validity of scientific evidence and its relevance to the case at issue. On the other hand, in state courts we see the Frye v. United States, 293 F. 1013 (D.C. Cir. 1923) test employed which is used to determine whether a scientific technique for obtaining, enhancing or analyzing evidence is generally accepted within the relevant scientific community as a valid process.

Judges are also behind this convergence trend, advocating that companies bring eDiscovery in house. For example in Phillip M. Adams & Assocs., L.L.C. v. Dell, Inc., 2009 U.S. Dist. LEXIS 26964 (D. Utah Mar. 27, 2009) the court scolded the producing party, Phillip Adams, for not having appropriate technology to reasonable access potentially relevant electronically stored information (ESI). The court found it unacceptable for a party to hide behind inadequate information management systems as the reason why it could not produce relevant documents.

In Spieker v. Quest Cherokee, LLC, 2009 WL 2168892 (D. Kan. July 21, 2009) the court admonished the defendant for claiming they did not have the ability to generate the requested ESI materials in-house. "This court is aware of no case where a party has been excused from producing discovery because its employees ‘have not previously been asked to search for and/or produce discovery materials.’"

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