Be a good steward of your e-records.

• Author: Kahn, Randolph

The Enron/Andersen story is a stark reminder that managing company records requires directives for normal operations and altogether different rules when litigation, audits, or investigations strike.

Intentional destruction of evidence has devastated reputations, slashed stock prices, and raised the ire of regulators. The monetary -- and perhaps even criminal -- exposure a company may face as a result of the destruction of records can be mitigated by implementing policies that dictate employee conduct in the context of a lawsuit. While implementation of policies might not preempt a rogue employee's destruction of evidence, it can help to insulate the company and its management from the ramifications of such misconduct. Indeed, when a court recently imposed a seven-figure penalty on a financial services company in a high-profile lawsuit, it noted that it was not the destruction of records itself which prompted the penalty but, rather, the company's failure to have a policy in place to ensure that records were not destroyed.

There is another type of "destruction" far more insidious and potentially damaging that exists across corporate America. With ubiquitous use of computers for virtually every component of every business, there is a growing volume of e-records that companies routinely fail to manage like their paper counterparts both from a policy, as well as a technological, perspective. While there is no intentional destruction of these records, there is nonetheless mismanagement that may create corporate liability because records that happen to be in electronic form are not available.

In fact, some courts have recognized negligent destruction of evidence as a cause of action, thereby allowing for penalization of poor management of records. In one such example, a court concluded that utilizing a system of record keeping which "conceals rather than discloses or makes it unduly difficult to locate" records was the functional equivalent of destroying records...