Forensic Update

Reflections on information management within the legal and regulatory arena

Archive for the ‘Investigations’ Category

Through the Google Glass Darkly…

Posted by Johnny Lee on December 10, 2013

BowtieLaw

It’s always a challenge to summarize the year for a subject matter as volatile and complicated as Electronic Discovery.  One could spend a few hours looking through the lens of a Google search engine, and days digesting the results, or you could simply peruse the superb summary penned by Joshua Gilliland, the blogger for Bow Tie Law, one of the two attorney bloggers for The Legal Geeks, and a Litigation World columnist.

It’s this last forum where we find the year-in-review that neatly summarizes the four most prominent “lessons learned” from the 2013 eDiscovery trenches.  I commend this to all in this space, as it captures the major themes and provides the most cogent excerpts from the key court opinions that shaped this very interesting year for our industry.

Gilliland readily focuses on the four lessons that “rise above all others: (1) the duty to preserve remains a hot button issue, (2) litigators still fight over the form of production, (3) proportionality is alive and well, and (4) taxation of costs is a sleeping giant we need to confront.”  Please do take the time to review this update…you won’t regret it.

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Panel Discussion on Data Preservation @ 2013 IT-LEX Conference…

Posted by Johnny Lee on October 2, 2013

IT-LEX Logo“Technology is outpacing the law. IT-Lex is a technology law 501(c)(3) not-for-profit organization dedicated to narrowing this gap with entertaining educational experiences.  We are pleased to offer our first annual conference, Innovate.”  The Innovate Conference is an active learning experience with a focus on user participation, and ForensicUpdate editor Johnny Lee will participate in a panel discussion on Friday, October 18th on the topic of data preservation and evidence collection.  Please click here for more details.

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Great GRC audience for joint ISACA & IIA Conference…

Posted by Johnny Lee on August 29, 2013

ISACA-IAA-GRC-2013Thanks to one and all that attended my presentation on eDiscovery and Data Governance.  What a lively and interactive group…very appreciative of the good folks at ISACA and IIA for collaborating on an excellent conference.

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Regulator Fines Financial Services Company $9 Million for Email Spoliation…

Posted by Johnny Lee on May 28, 2013

FINRAThe Financial Industry Regulatory Authority (“FINRA”) announced last week that it had levied fines against LPL Financial LLC (“LPL”) to the tune of $7.5 million for thirty five “separate, significant email system failures, which prevented LPL from accessing hundreds of millions of emails and reviewing tens of millions of other emails.”  FINRA also determined that LPL had made “material misstatements” during FINRA’s inquiry into the email failures, resulting in the establishment of a $1.5 million fund “to compensate brokerage customer claimants potentially affected by its failure to produce email.”

While this is technically not a spoliation sanction, which can only be issued by a court, it is nonetheless what those in the eDiscovery arena recognize as punishment for the failure to preserve relevant evidence.  FINRA’s Chief of Enforcement said that LPL simply failed to “expand its compliance and technology infrastructure” as LPL grew.  This resulted in LPL failing “in its responsibility to provide complete responses to regulatory and other requests for emails.”

To be clear, FINRA felt that these failures were both systemic and severe.  To illustrate just a few of the thirty five enumerated failures, see just a few examples below.

  • LPL failed to supervise 28 million “doing business as” (DBA) emails sent/received by thousands of representatives who were operating as independent contractors over a four-year period.
  • LPL failed to maintain access to hundreds of millions of emails during a transition to a less expensive email archive (with 80 million of those emails becoming corrupted in the process).
  • For seven years, LPL failed to preserve and review 3.5 million Bloomberg messages, as required by regulation.
  • LPL failed to preserve emails sent to customers via third-party email-based advertising platforms.

The Chief of Enforcement sums this up in a rather pithy statement: “This case sends a strong message to firms to make sure your business does not outgrow your compliance systems.”  Indeed…message received.

For more on FINRA’s consent announcement, please click here. To read the actual consent agreement, please click here.

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Excellent panel discussion on the Challenges of Managing Cross-Border Governance…

Posted by Johnny Lee on October 26, 2012

I recently had the pleasure of moderating a panel discussion on the Challenges of Managing Cross-Border Governance.  The event was sponsored by Thomson Reuters, as part of their ongoing series covering topics within the arena of Governance, Risk & Compliance.

Joining me on the panel were a trio of all-star attorneys from the Atlanta area: Scott Burton, Partner at Sutherland; Jason Poulos, Of Counsel at Wheeler Weinberg; and Dewitt Rogers, Partner at Troutman Sanders.  Each of these veteran attorneys shared their perspectives, ranging from the challenges of conducting investigations and litigation across multiple borders to the complexities and impacts of these issues as they relate to Corporate Governance and international Mergers and Acquisitions.

I thoroughly enjoyed myself, and I appreciate the opportunity to take part in such an informed discussion.  I hope that those who attended took as much away from the experience as I did.

 

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Parting is such tweet sorrow…

Posted by Johnny Lee on May 16, 2012

With humble apologies to The Bard for the headline, a recent story picked up by the The Wall Street Journal chronicles the dismissal of a Chief Financial Officer for his candid and extemporaneous disclosures via Twitter and Facebook.  This is yet another in a long series of headline-grabbing stories related to the perils of un-checked social media gaffes.

The tweeter in question is Gene Morphis who, until quite recently, was the CFO of Francesca’s Holdings Corp.  Through its subsidiary, Francesca’s operates a chain of retail boutiques offering apparel, jewelry, accessories, and gifts to female customers.  The company was founded in 1999, is headquartered in Houston, and has a $1 billion market capitalization.

According to the The Wall Street Journal, Mr. Morphis “maintained a publicly viewable profile on Facebook, authored a blog called ‘Morph’s View’ and maintained a Twitter account under the handle ‘theoldcfo.’  Online, he discussed everything from Christmas to college basketball, and occasionally company doings.”  It was the last point in this list that brings him to our attention.

The Journal reports that Morphis posted information related to his dealings with Francesca’s board, an investor road show, earnings calls, and other corporate interactions.  Following an internal investigation led by outside counsel, the company has stated that it terminated Morphis “for cause” and that it is “disappointed by this situation but we expect our executives to comply with all company policies.”

While this specific fact pattern is not familiar to this editor, we can perhaps expect similar examples to come.  According to a recent survey from the Society for Human Resource Management, only two in five employers have formal social-media policies.  Perhaps just as telling, of those organizations with formal policies, one in three have taken “disciplinary action” against an employee in the past year.

The take-away?  Social media technologies represent a significant source of both benefit and risk to organizations today.  Examining these benefits and risks is becoming more and more crucial, and placing these benefits and risks within the context of existing compliance frameworks is becoming the only way to proportionally manage the same.

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ForensicUpdate Editor to present on two CyberSecurity Panels…

Posted by Johnny Lee on May 7, 2012

This year’s AccessData User’s Conference will be help in Las Vegas. This conference brings together world-class instruction from real-world industry practitioners, and it provides a wealth of information related to cybersecurity, forensics, and eDiscovery.

This three-day conference will include luminaries from around the world, leading sessions and delving into the complexities related to acquiring, analyzing, and managing data in fast-paced environments and situations. There is a variety of break-out sessions and hands-on laboratories designed to improve the participants’ skills and to apply what they have learned.

ForensicUpdate editor, Johnny Lee, will participate in two panel discussions: “Data Governance and eDiscovery” and “Data Breaches.”  Click here for more details.

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Forensic Update editor presenting at 7th Annual Fraud Summit…

Posted by Johnny Lee on March 20, 2012

The seventh-annual “Fraud Summit” will be held later this month at the University of Texas at Dallas.  This summit is a collaboration among the Dallas Chapter of the Institute of Internal Auditors, the North Texas Chapter of ISACA, and the Dallas Chapter of the Association for Certified Fraud Examiners.

This two-day conference will include “numerous sessions with dynamic presenters on current fraud topics,” including a variety of break-out sessions designed to improve the participants’ fraud-detecting skills and to apply what they have learned.  Several sessions will focus upon “advanced fraud techniques and case studies for those looking for more than just the basics.”

ForensicUpdate editor, Johnny Lee, will present on the topic of “Data Governance and eDiscovery.”  Click here for more details.

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General Counsel Toolworks Forum: Data Governance & eDiscovery

Posted by Johnny Lee on December 1, 2011

Sponsored by Grant Thornton LLP’s Forensic & Litigation professionals, the Forum offers educational events and resources for today’s in-house counsel and corporate senior management. We collaborate with trial and transaction lawyers from some the nation’s leading law firms to bring you periodic complimentary webcasts addressing important financial, operational and legal issues that can impact your organization.

Each event will be supported by a customized Toolbox — documents and other resources offering guidance on the topics covered by the webcast.  The next Toolworks Forum will focus upon the state of the e-discovery marketplace; the importance of intelligent, proactive information and litigation management; and practical steps companies can take to reduce expenses and risks associated with civil litigation and government investigations.

This webinar event will be held on Thursday, January 19, 2012, and it will begin at 1:00pm Eastern time and continue for 90 minutes.  CLE credit has been applied for, and full details can be found here.  Johnny Lee, Director in Grant Thornton’s Forensic & Litigation practice, and Dante Stella, eDiscovery practice leader at Dykema Gossett, will present.

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Divorce Law ruling with potentially far-reaching eDiscovery implications…

Posted by Johnny Lee on November 10, 2011

Facebook-Divorce-Status-Update

A fascinating case from Connecticut may shake up the eDiscovery world.  About a month ago, Judge Kenneth Schluger ordered that soon-to-be-divorced couple Stephen and Courtney Gallion exchange the login information for their Facebook and dating websites.

Like many recent examples from the case law, the reasoning adopted by the court was that the content found within these accounts speaks directly to a matter before the bar.  Namely, Stephen Gallion is alleging that such content raises questions of parental fitness, something that speaks directly to the issue of custody in this divorce case, according to his divorce attorney Gary Traystman.

The reason this was elevated to the judge is that a prior agreement between the parties to share these account credentials broke down after evidence arose (according to Traystman) that Courtney Gallion had texted a friend, requesting that the recipient log into her accounts, delete some messages, and change some passwords.  The judge issued an injunction against such misbehavior, and he then ordered the parties’ attorneys to exchange passwords for such accounts held by both spouses as a furtherance to the discovery process.

Interestingly, this judicial order violates Facebook’s terms of service.  This raises questions of conflicting guidance, among others, though the parties are undoubtedly going to err on the side of listening to a judge.  As traditional notions of privacy continue to morph within the legal landscape, we will undoubtedly see more of these cases…so be careful what you put into your digital archiveno matter how private you believe it to be, it is both permanent and potentially discoverable.

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