Aloha Everyone!
Has anyone heard of a SOX compliance regulation becoming effective in
2006 that requires email to be kept 3 years?
My question is based on the following article...But, I'm looking for the
specific SOX regulation that is being referenced.
-----------------
E-mail retention a must after Morgan Stanley case
By Reuters
http://news.com.com/E-mail+retention+a+must+after+Morgan+Stanley+case/21
00-1036_3-5715554.html
Story last modified Sat May 21 06:00:00 PDT 2005
The $1.45 billion judgment against Morgan Stanley for deceiving
billionaire Ronald Perelman over a business deal has a lesson all
companies should learn--keeping e-mails is now a must, experts say.
Banks and broker-dealers are obliged to retain e-mail and
instant messaging documents for three years under U.S. Securities and
Exchange Commission rules. But similar requirements will apply to all
public companies from July 2006 under the Sarbanes-Oxley corporate
reform
<http://news.com.com/Hidden+gold+in+corporate+cleanup/2100-1029_3-546530
5.html?tag=nl>
<http://news.com.com/Hidden+gold+in+corporate+cleanup/2100-1029_3-546530
5.html?tag=nl> measures.
At the same time, U.S. courts are imposing increasingly harsh
punishments
<http://news.com.com/Microsofts+e-mail+policy+at+issue+in+legal+fight/21
00-1014_3-5458020.html?tag=nl>
<http://news.com.com/Microsofts+e-mail+policy+at+issue+in+legal+fight/21
00-1014_3-5458020.html?tag=nl> on corporations that fail to comply
with orders to produce e-mail documents, the experts said.
Where judges once were more likely to accept that incompetence
or computer problems might be to blame, they are now apt to rule that
noncompliance is an indication a company has something to hide.
"Morgan Stanley is going to be a harbinger," said Bill Lyons,
chief executive officer of AXS-One, a provider of records retention
software systems.
"I think general counsels around the world are going to look at
this as a legal Chernobyl," he said.
Wednesday's $1.45 billion verdict against Morgan Stanley in West
Palm Beach, Fla., was the product of just such a negative ruling on
e-mail retention, which is also expected to form the backbone of the
Wall Street firm's appeal.
Circuit Court Judge Elizabeth Maass, frustrated at Morgan
Stanley's repeated failure to provide Perelman's attorneys with e-mails,
handed down a pretrial ruling that effectively found the bank had
conspired to defraud Perelman when he sold Coleman to appliance maker
Sunbeam in 1998. received in part payment for Coleman.
In a rare step, Maass switched the burden of proof to Morgan
Stanley, and instructed the jury solely to decide whether Perelman had
relied on Morgan Stanley.
Morgan Stanley says that ruling denied it a fair trial. But Eric
Rosenberg, a former litigator with Merrill Lynch and now president of
e-mail policy consultants LitigationProofing, said Maass was within her
rights to rule as she did and could have even taken a more drastic step
of issuing a default judgment and taking the verdict out of the jury's
hands.
Other cases have also resulted in rulings on e-mails.
Last July, U.S. District Judge Shira Scheindlin found that Swiss
bank UBS had willfully destroyed
<http://news.com.com/Judge+sets+rules+for+e-mail+retrieval/2100-1023_3-5
056365.html?tag=nl>
<http://news.com.com/Judge+sets+rules+for+e-mail+retrieval/2100-1023_3-5
056365.html?tag=nl> potential e-mail evidence in a sex discrimination
case brought by equity saleswoman Laura Zubulake. The judge ordered UBS
to pay Zubulake's costs, and a jury later awarded her $29.2 million.
Experts said e-mail retention could be a double-edged sword if
not accompanied by corresponding training for employees on the legal
implications of e-mails they send.
When New York Attorney General Eliot Spitzer investigated the
research divisions of Wall Street firms five years ago, he fined Morgan
Stanley a little under $10 million for not having a proper e-mail
retention policy in place.
Merrill Lynch, however, which did have good backup systems and
was able to produce relevant e-mails, had to pay over $100 million
because some e-mails contained compromising material.
"I guess I would put it as 'no good deed went unpunished,'" said
former Merrill Lynch counsel Rosenberg.
Jay Ritter, a professor of finance at the University of Florida,
said a danger was that among millions of legitimate e-mails,
investigators might find one flippant comment from a low-level manager
and take it as reflecting company policy.
"There's a reason why certain people, why lawyers like to talk
on the phone rather than have any written record of conversations,"
Ritter said.
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--------------------------------------------------
Mahalo!
Brian
Brian A. Moriki
Records Management Officer
First Hawaiian Bank
808-844-3056
808-844-3494 (fax)
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