The Virtual Smoking Gun: The Role of Email in White Collar Cases
By: DULCE J. FOSTER
January 2005
New York Attorney General Eliot Spitzer made headlines this fall when he unveiled his widespread investigation into the business practices of insurance brokerage giant Marsh & McLennan Companies. According to a New York Times article, Spitzer’s investigation into the company’s alleged participation in kickbacks and bid-rigging focuses on a series of pivotal emails authored by corporate executives.
One executive is alleged to have solicited an insurance company’s participation in a phony bid meeting so Marsh & McLennan could maintain the illusion of competition, while actually steering the business to another insurance company that had agreed to pay kickbacks. His email to the insurance company, no doubt believed by the sender to be hilarious at the time, stated: “This month’s recipient of our Coordinator of the Month Award requests a body at the rescheduled April 23 meeting . . . He just needs a live body. . . . Given recent activities, perhaps you can send someone from your janitorial staff – preferably a recent hire from the U.S. Postal Service.” While there may be an innocuous reason for this message, a jury is likely to view it skeptically.
Email has become a favored medium for business communications and, as a result, has taken center stage in white collar investigations. The government’s best evidence against a company is often buried on the hard-drives of employees who lack a basic awareness of how their messages can be monitored, traced, and ultimately used or misused in cases against them or their employers. Email is particularly useful to prosecutors because it often contains admissions that – unlike some other forms of information – are admissible in court under the rules of evidence. The prevalence of such evidence is also increasing as government investigators become more proficient at conducting electronic discovery and reconstructing “deleted” electronic files. Also, new government regulations and policies mandate that many businesses operating in regulated industries back up and retain electronic files in case of future audits. The SEC and NASD, for example, have established stringent guidelines for ensuring that publicly-traded companies maintain systems for archiving accurate, tamper-proof email and instant message files. These and other rules make the discovery of electronic evidence a virtual certainty when businesses come under government scrutiny.
Email has vastly increased the speed and efficiency of business communications. Nevertheless, these benefits come at a high cost to companies that treat it cavalierly. Email is a particularly risky form of communication because it lacks the formality of other written statements and is much easier to disseminate, yet has the same degree of permanence. When people draft emails, they simply aren’t as careful as when they send letters on corporate stationery. But a message that is intended to be clever or sarcastic may seem far from it to a jury. Employees should be aware when they send such messages how they might be perceived by an outsider.
Not only is there a risk that email may be misconstrued, but the impromptu or sudden deletion of email may be just as deadly – as Arthur Andersen learned. In such situations, prosecutors may be quick to infer that those involved are attempting to sweep damaging evidence under the rug. One way companies can address the risks email creates is by adopting – and strictly enforcing – clear, specific email usage, handling, and retention policies. Because the laws and requirements are different in every business environment, companies drafting such policies should seek the advice of counsel. Like it or not, email is here to stay. Those who don’t want their employees’ messages published in the New York Times should take action to limit the risks now.