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Beware of the Impact of “Discovery” on Your Daily Work

Beware of the Impact of “Discovery” on Your Daily Work
Out of all the features of the US system, the most important to you and the one facet that affects you everyday of every minute on the job, is discovery. And the reason for that is that when you and your business are sued, the opposing side is, first of all, allowed to sweep in to your business and grab any evidence that might be related to the litigation. They can grab not only a hard copy, they can grab electronic evidence such as emails. They can take your personal diary at home, if you’ve written things in there that relate to the litigation, it’s very broad.
And so the obvious message here is that you should strictly follow your company’s, what’s called a document retention system. A better name might be document destruction system. And strictly follow that and destroy documents according to that system. I don’t know if you remember, if you’re a student of history, business history, I don’t know if you remember a company called Arthur Andersen.
Back in 2002, Arthur Andersen was a huge international operation. They employed 85,000 employees. They had $9.3 billion in revenue. And Arthur Andersen was wiped off the face of the Earth because of issues relating to discovery. The claim was made, although it was eventually overturned by the US Supreme Court after the company was destroyed, the claim was made that the company illegally destroyed documents that should have been subject to discovery. Now, not all of their documents were destroyed, so let me give you an example of the kinds of documents that are subject to discovery. This is an email from the head of the engagement team of Arthur Andersen.
And, in this memo, in this email rather, he is discussing one of their clients, Enron, and Enron was the problem for Arthur Andersen that led to the company being disbanded. So, number one, the opposing side can grab your emails. They can grab your memos. This was a memo that the head of the engagement team wrote for his own file, wasn’t distributed to anybody, but is subject to discovery. Here’s his calendar.
Here’s some notes taken at an Arthur Andersen meeting. Here’s a fax of an email. This email was probably the most important email in the whole Enron Arthur Andersen matter, because in this email, a company attorney is saying to somebody on the engagement team that, basically she’s saying we should follow our document and retention policy. And this was interpreted as meaning, we better destroy all documents quickly. And so they were taking documents out in wheelbarrows in the middle of the night and destroying them, and that’s what caused a huge problem for Arthur Andersen. Here’s another case involving Andersen, this one involving Andersen Consulting.
And this is a lawsuit where, I think the basic claim was that Andersen Consulting was going to install a computer system for, I don’t know, around $12 million as I recall. And it didn’t work and so now they face a $100 million lawsuit. And the lawsuit includes this kind of evidence from their emails. This is one Andersen Consulting colleague speaking about another one. He should be taking classes at a community college, not charging for this. Andersen Consulting, by the way, is now called Accenture. Here’s another email, to the recent exodus of one-third of our team, we are in pretty deep s.
Now I am not sure, for those of you from outside the United States if you understand the meaning of that, but we are in pretty deep s with respect to meeting deadlines. We’re now going to have to work like crazed weasels to get these things done. Another email. There’s no way we’ll have all the components done by the 11th. It’s completely unrealistic to make estimates when we don’t know what it is we are estimating. Pure, there’s our s word again. There are problems so glaring I’m surprised we haven’t gotten lots of problems in system tests. Any overruns are our client’s problems. So although we should feel bad when they happen, it’s their decision to spend or not to spend.
Helpful aren’t I? And finally, before you leave for the last time, you should delete your mail messages. And this raises a question, will deleting your email messages help? And the answer is probably no. Your messages are at a backup system. When you try to delete them it’s a lawyer’s heaven because the lawyer can go into the backup system, look at the messages you tried to delete, which are usually the most incriminating ones, and then bring that into court, the fact that you tried to delete the incriminating messages. So that’s a key aspect of discovery.
The other aspect is the deposition, where the opposing attorney, as I mentioned earlier, will ask questions in front of a court reporter, and this is a very powerful discovery tool. The opposing attorney might also use that to intimidate you. And what I have here is an example of a deposition. It’s only about five and a half minutes, but it seems like it takes about a half hour. It’s so aggravating for the executive who is being interviewed or who is subject to the deposition. He happens to be the CEO of a hospital system. As you watch this, think carefully, what would you do if somebody posed these questions to you?
And if you want to see a humorous deposition, I think it’s humorous, then here is the deposition that was taken in Texas. You’ll see a Texas-style deposition. So bottom line, whenever you make business decisions wherever you are in the world, always think, how will this play out in court if I am sued in the end whether it’s a pricing decision, a new product decision, a contract decision, whatever it is. How will it look in litigation? Here’s some advice from a risk management article. What most of us fail to realize is that virtually everything we do in our daily business could end up in front of a jury. Never make the assumption, no one will ever see this.
Do business as if you were in front of a jury. So that concludes our module. And again, the main focus here is trying to obtain an overlap between strategy, law, and ethics to create this center, which we call competitive advantage. And in our other modules, we’ll look at this through the lens of stakeholders while also looking at the key legal risks involved in your business decision making.
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