Author: howard.haile

It isn’t just businesses that are hurting in this down economy. As companies cut back it is having repercussions everywhere and local, state and federal government are not exempted from these cutbacks even as their requirements also increase. Case in point, a recent case decision handed down determined that the SEC must comply with the Federal Rules of Civil Procedure (FRCP) just like “any other litigant” that puts the same burdens of eDiscovery and legal holds on governmental agencies that previously only affected private organizations.

On January 13th, 2009, a ruling in the S.E.C. v. Collins & Aikman Corp was handed down in what is sure to become a landmark ruling. What makes this an important ruling? Judge Shira A. Scheindlin ruled that the SEC had to abide by the Federal Rules of Civil Procedure (FRCP) just “like any other litigant.” This could have ramifications across government entities as the FRCP increasingly touches federal, state and local governments. It is already a well documented fact that the FRCP is changing how private industry manages its data but this ruling sets out numerous areas in which the SEC failed in its internal eDiscovery processes and rightly was held accountable.

If the market needed any further reason to feel investor angst, Research In Motion (RIM) (NASDAQ: RIMM) seemed more than happy to step in and fill the gap. Already there are plenty of headlines to feed the pessimism in the economy ranging from Madoff Hedge Fund scandal a month or so ago to the more recent Stanford Group scandal. But when the SEC announced on February 17, 2009, that several current and former executives at RIM had reached a settlement involving an options fraud scheme, it is being to feel like greed and fraud knew no bounds.

If you have followed the news lately it would appear that the media and President Obama feel the economy is firmly entrenched somewhere between disaster and Armageddon, which has framed much of the debate surrounding the stimulus bills that are in both houses of Congress. When the Senate passed their version of the bill on February 9th, it promised $838 Billon dollars for spending projects designed to jump start the economy. But like most things in government there is a lot more in the details than the headlines. Now that the stimulus bill is out in the open, DCIG has a more clear view of where health care regulation is going and how IT will be affected.

Recently, I had a passing conversation with an attorney about FRCP and as we were talking, he kept bringing up areas that concerned him. So I asked him, “What is your biggest eDiscovery concern?” Without hesitation he replied, “Having a judge issue ‘Death Instructions’.”

All of these areas have had a large impact in leading up to the current crisis and will almost certainly result in new regulations but what role will technology play in complying with and/or enforcing these new rules? At this time, that is a still difficult question to answer as the 111th Congress is providing little insight into what new rules it will pass. So often the best thing to do in times like this is to take a step back and look at the recent past in order to gain some insight as to what the near future may hold.

In the first blog entry of this series Congressman Paul Kanjorski (D-PA) Chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises confirmed that 2009 is shaping up as a year of regulation. But as Congress looks for answers into how and why this financial crisis occurred, more hearings will most assuredly convene and squarely in its focus are the SEC, hedge funds and the financial industry. But how did we get in this predicament in the first place and why did the SEC exercise so little control over these hedge funds that have contributed so heavily to today’s economic crisis?

Warren Buffet has a saying about business that goes “In the business world the rear view mirror is always clearer than the windshield.” So in today’s business environment, that quote just begs the question, “Just how dirty was the business world’s windshield leading up to this current economic crisis?” With uncertainty around every corner and bad news being topped by even worse news on an almost daily basis, it would seem 2009 could very well be the year of regulation as President Elect Obama and the Democratic majorities that control both houses of Congress appear to have a clear cut mandate from the US population to take a hard look in the rear view mirror

Recently I had an opportunity to attend an interesting presentation by John Mallery of BKD, LLP that was given to a group of IT industry professionals regarding how to protect trade secrets and the use of forensics to identify wrongdoing. A large part of his speech focused on eDiscovery and FRCP and how companies must understand the importance of having an eDiscovery strategy. But, the part that really struck home with me was when the presenter asked the crowd of around 60 or so participants who knew what eDiscovery and FRCP was. Stunningly, only three people, including myself, raised their hands. Now this is by no means a scientific measurement of companies and their knowledge of eDiscovery, but it was surprising to me none the less and, unfortunately, it is probably closer to reality than most of us would like to admit.

When President Bush signed S.2550 into law on September 19, 2008, the Federal Rule of Evidence (FRE) 502 went into immediate effect. This law brought much needed clarity to section 26(b) (5) (b) of the Federal Rules of Civil Procedure (FRCP). When the FRCP was amended in 2006, the addition of 26(b) (5) (b) was recognition that the sheer volume of documents in an eDiscovery request would lend itself to the accidental disclosures of data that could jeopardize the attorney-client privilege. Attorney-Client privilege is quite simply a court recognized protection of communications between a client and their attorney. This protection is designed to allow open and honest communication between clients and attorney’s so as to aid in the legal process.