In the Security and Exchange Commission's now-famous "Statement on the Relationship of Cooperation to Agency Enforcement Decisions," the Commission outlined criteria it would consider when determining how much to credit firms for "self-policing, self-reporting, remediation and cooperation."

According to the statement, cooperative behavior actions by companies could result in reduced charges, lighter sanctions, mitigating language in documents used to announce and resolve enforcement actions, or even "the extraordinary step of taking no enforcement action" (see box at right).

Increasingly, that notion of "cooperation" has much to do with the rapid recovery of electronic data—often internal emails—demanded by regulators and government agencies. And ever since the infamous Andersen shredding incident, the ability to recover documents quickly has forced many companies to think more proactively about their policies and procedures.

Lange

"There have been so many document destruction scandals, judges aren't sympathetic to firms that don't have their act in gear," says Michele Lange, staff attorney with data discovery firm Kroll Ontrack, Eden Prairie, Minn. Courts are imposing fines and sanctions against companies that can't produce needed documents.

In order to rapidly respond to courts requests, many companies are finding they must bring in electronic discovery teams to help with the process. These e-discovery "SWAT" teams specialize in locating, extracting and organizing information so that it can be easily searched by attorneys and others involved in a legal proceeding.

Boland

J. William Boland, a partner with McGuire Woods, often brings in e-discovery teams in cases in which federal or state government agencies are investigating corporate clients. "Cooperation is key," he says. "You want to provide the government what they want when they want it." E-discovery teams also are needed on large cases, as well as employee whistleblower lawsuits, says Boland.

Making The Call

According to experts, most executives bring in e-discovery teams once they've received notice that they are being investigated. Two weeks ago, for example, Compliance Week made available a letter from the SEC to a gas company, requesting—among other things—that the company "preserve and retain, until further notice, all documents and electronic data" related to the case (also available in box above, right).

Gomes

RenewData, an Austin, Texas-based e-discovery firm, was recently hired by a telecommunications firm related to such an investigation. According to RenewData CEO Bob Gomes, a team of five people was brought in to take forensic images of the executives' hard drives. The team worked in the middle of the night, for several nights, in order to avoid spoliation of evidence by employees. "The company wanted to go to court and say, 'We did everything to ensure that all data was preserved,'" says Gomes.

Baker

And due to the technical and legal complexity of the data recovery process, e-discovery teams often include individuals with a mix of expertise, including process management. "It's a massive coordination effort," says Jennifer Baker, managing director with Navigant Consulting, Inc., Chicago.

For instance, it's not uncommon on large cases for several hundred attorneys to be reviewing records simultaneously. In those situations, the e-discovery team needs to track which documents are on their first, second or third review. In addition, the e-discovery team often needs to be able to verify that it provided a specific document to the court or another third party at a specific time, says Baker.

What's more, the company has to ensure the court that the document review process in place is "of testimony standard," and thorough and reliable, says Baker.

10 Billion Pages In Six Days

If an e-discovery team is hired as the result of a lawsuit, says Lange, its first step will be to urge the company to halt all document destruction, particularly in the areas relevant to the suit. In a trademark or patent suit, for instance, they'll want to retain records from research and development.

Next, the team will "sweep for documents," says Lange. That entails taking snapshots of employee's hard drives and servers, processing the data into a standard file format, and uploading it into an online document database.

Throughout, the e-discovery team often acts as a liaison between executives, legal counsel and the company's information technology team, says Boland. "There can be a gulf between the legal and technical side," he says. For instance, unless they've been specifically told otherwise, the IT staff may continue erasing information from the company's servers in order to re-deploy them, not realizing that the data should be preserved.

Typically, the "sweep" is completed quickly, as e-discovery teams usually have to provide attorneys with required documents within a discovery time frame of just a few weeks. According to RenewData CEO Gomes, his firm once had to electronically search about 10 billion pages of data in order to find emails from a handful of employees that were the target of an investigation. The time frame? Six days.

The timing was aggressive because the client company would have faced fines of $20,000 per day. Gomes says RenewData worked around the clock, and met the deadline with a day to spare.

The Price Tag

E-discovery teams aren't cheap. Costs typically start at five figures and can quickly get much larger.

Most firms were unable to provide rates to Compliance Week, but Gomes provided a "theoretical" scenario. To preserve and cull information from 120 backup tapes, he noted, preservation might cost $20,000, processing might run about $120,000, and putting the data into a Web-based tool so it could be reviewed by lawyers might cost about $400,000.

Of course, the real expense would be with the lawyers—it could cost as much as $1 million for attorneys to manually cull through all the data.

Due to the high price tag, executives often feel that their internal IT folks can handle the demands of producing documents for a legal case. And while that may be the case, the process can be extremely time-consuming for those who don't have an expertise in recovery, and the risks are very high if data is missed. More importantly, experts note that an outside firm can bring credibility to the table, ensuring regulators and the courts that "selective recovery" by the company was not an issue.

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