US Federal agencies’ methods for keeping and accessing public documents haven’t received much attention for the past few decades. Last year, though, the archiving and retrieval of electronic records hit the headlines after a US Government probe found that, for more than 30 years, the Securities and Exchange Commission (SEC) – the agency responsible for policing America’s stock market – had improperly destroyed records of inquiries into wrongdoing that should have been preserved.
The result was a legal crisis that would highlight the challenges of document management in large-scale government institutions. In fact, it was so severe that it captured the personal involvement of US President Barack Obama. His aim: to spur efforts by the government to improve the SEC’s handling of electronic records and tighten the agency’s approach to electronic discovery (commonly known as e-discovery), and enhance Department of Justice (DoJ) procedures for using electronic information to counter white-collar crime.
All these developments are likely to have significant implications for the compliance duties of companies that show up on the SEC’s radar in the future.
Allegations about the SEC’s document management system first surfaced on 15 June 2011 in a whistleblowing action by SEC Enforcement counsel Darcy Flynn. Writing to the agency’s chair, Mary Schapiro, via his attorney – and former SEC employee – Gary Aguirre, Flynn queried document destruction practices at the organisation over a period covering the previous two decades. Schapiro opened an investigation that very day. In November, a report from the agency’s inspector general revealed that the SEC had destroyed a large volume of internal documents that should have been preserved as official Federal records.
It also emerged that the SEC had withheld important information about the practice from US National Archives and Records Administration (NARA) – the body in charge of preserving Federal records generated across all government departments.
According to the report, improper activity had occurred on an even longer timescale than Flynn had first alleged, and focused upon a particular category of data. Investigators found that, from about 1981 to mid-2010, it was SEC policy to dispose of all documents related to inquiries into potential wrongdoing that had not led to full-fledged SEC probes. 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.
For example, one of the batches stemmed from a 1992 anonymous tip about Lehman Brothers Holdings, written on the letterhead of the company’s auditor, Ernst and Young. Lehman’s collapse in 2008 was a major factor in the genesis of the credit crunch that began that very year. Other files destroyed since 1992 related to Bernard Madoff – now serving a 150-year prison term for running a massive Ponzi scheme. After Flynn’s allegations surfaced, the SEC said that an electronic database still contained information about purged files. But the inspector general’s office found only sketchy or unclear information about certain files in which Madoff was listed as a ‘Related Name’. The trail of previous allegations about his conduct in the financial markets had been effectively discarded.
President Obama was less than pleased.
Plans and protocols
Off the back of the report, he published a 28 November Presidential Memorandum ordering Federal agencies to develop and adopt new procedures, both to sharpen their internal management of records and to keep NARA in the loop. The President gave every government agency until 27 March 2012 to submit proposals to the archivist and director of the Office of Management and Budget (OMB), describing their plans for improving or maintaining their record-keeping programmes – particularly with respect to electronic files, including emails, social media messages and data held in ‘cloud-based’ online services or storage solutions. President Obama had six objectives in mind:
i) Creating a government-wide records management framework that is more efficient and cost effective;
ii) promoting records management policies and practices that enhance the capability of agencies to fulfil their statutory roles;
iii) maintaining accountability through documentation of agency actions;
iv) increasing open government and appropriate public access to government records;
v) transitioning from paper-based records management to electronic records management where feasible; and – most importantly –
vi) supporting agency compliance with applicable legal requirements related to the preservation of information relevant to litigation.
The President stressed that his Memorandum was a ‘priority’ for senior agency management. ‘Records transferred to NARA provide the prism through which future generations will understand and learn from our actions and decisions,’ he wrote. ‘Modernised records management will help executive departments and agencies to minimise costs and operate more efficiently.’
In February, his initiative was bolstered with the signing of an e-discovery protocol between the DoJ and the Criminal Defence Bar: an agreement designed to improve the progress of Federal criminal cases – especially in the field of white-collar crime. The protocol aims to encourage common procedures for the use of electronically stored information (ESI) and make it easier to cover the costs of gathering this information.
If further research is taken into account, the measures have arrived in the nick of time. In early May 2012, a NARA report of government agencies’ record-keeping practices during 2011 showed that other departments came close to repeating the SEC crisis. According to NARA archivist and records manager Arian Ravanbakhsh, a ‘large majority’ of Federal agencies remain at high-to-moderate risk of compromising the integrity, authenticity, and reliability of their records. ‘They risk improper management and disposition,’ he announced, ‘or in some cases, are saving their records, but not taking the necessary steps to ensure that they can be retrieved, read, or interpreted.’
However, he noted that there was a slight increase in the number of agencies that scored in the Low Risk category and added that ‘a number of agencies have in place – or are working on – guidance for managing records in social media and Web 2.0 platforms, as well as cloud computing environments’.
In a very real sense, the challenges that have affected the management of legal data in corporations and law firms have been echoed in the various bodies and departments constituting one of the world’s most powerful nations. The steps to improve document archiving and retrieval show that the US government is taking e-discovery issues as seriously as other parts of the legal landscape.