Death By Email Blog

Morgan Stanley Says Pre-9/11 Email Destroyed; Pays $12.5-million

Morgan Stanley Dean Witter will pay $12.5-million to resolve new charges that it destroyed email evidence and that it failed to produce email messages that may have helped thousands of customers in arbitration cases were filed against the firm over three years.   Morgan Stanley has had many problems with email and has already agreed to pay to more than $29 million to resolve three email related regulatory probes.

This settlement was announced in a press release yesterday by FINRA, the Financial Industry Regulatory Authority, which was created by combining National Association of Securities Dealers (NASD) and New York Stock Exchange Member Regulation.

Morgan Stanley routinely failed to provide email messages to aggrieved customers who had filed arbitration cases.  The company represented that the destruction of the firm's email servers in the Sept. 11, 2001 terrorist attacks on New York's World Trade Center resulted in the loss of all pre-9/11 email, according to the FINRA release.

In fact, the firm had millions of pre-9/11 emails that had been restored to the firm's active email system using back-up tapes that had been stored in another location.  In addition, many other of the firm’s email messages were maintained on individual users’ computers and therefore were not affected by the attacks, the regulators said.  Yet, Morgan Stanley often failed to search those computers when responding to document requests.

FINRA also said that Morgan Stanley failed to produce email that was the subject of regulatory requests. For instance, in an investigation by NASD into the firm’s fee-based brokerage practices, Morgan Stanley falsely claimed that it did not have pre-October 2001 email and failed to produce over 12,000 email messages and attachments that NASD had requested, the regulator said, according to the New York Times.

If this isn't enough, FINRA also found that Morgan Stanley destroyed many of the pre-9/11 emails it did possess. The firm did so in two ways - by overwriting backup tapes that had been used to restore the emails from 11 of its 12 servers to the firm's system, and by allowing users of the firm's email system to permanently delete the emails over an extended period of time. As a result, between September 2001 and March 2005, the company deleted millions of pre-9/11 emails from the firm's systems.

"Morgan Stanley Dean Witter's attempt to use the terrorist attacks on 9/11 to conceal documents and avoid its discovery obligations to its customers is morally and ethically depraved," said Steven Caruso, president of the Public Investors Arbitration Bar Association, according to Reuters.

"The failure to produce e-mails was a huge problem," Susan Merrill, FINRA's chief of enforcement, said in an interview with Reuters. "We didn't find evidence that Morgan Stanley intended to hold back e-mails, but it was a case of one hand not knowing what the other was doing."

“We think what happened here was unprecedented,” said James S. Shorris, head of enforcement at NASD. “The firm’s actions undermined the integrity of the regulatory and arbitration processes, potentially leaving in question the validity of the outcomes in hundreds of cases.”

The settlement announced today is the first of its kind, according to FINRA.  Rather than ask that Morgan Stanley pay a fine to settle the case, NASD has asked that it be required to provide relief to arbitration claimants whose cases might have been helped by the email that was missing or not produced.  It provides for distribution of $9.5 million to two groups of customers who had arbitration claims against the firm. FINRA estimates that several thousand customers may be eligible to receive payments. FINRA also imposed a $3 million fine on the firm for its failure to provide pre-9/11 emails and updates to a supervisory manual.

Morgan Stanley has a long history of email related problems.  Here is what Reuters reported:   

Email in Divorce Cases

The Press of Atlantic City reports that email is now a leading source of evidence in divorce cases:

"The spouse will always have the e-mails and instant messages," said divorce attorney Carol Goloff , who has offices in Northfield and Upper Township. "I have more than a dozen cases where we have the actual transcripts of the online conversation."

When matrimonial bliss goes bust, attorneys are looking to technology - from laptops to BlackBerrys to E-ZPass - for evidence to build their cases. This new way of collecting information is called electronic discovery, or e-discovery, and it's changing the way law firms do business.

"As a trend, it's been the biggest development in civil litigation in decades," said attorney John Coughlin, of the law firm Duane Morris in Princeton.

Email Discovery Fiasco ... "Put Humpty-Dumpty Back Together Again"

PSEG Power New York, Inc., turned over more than 3,000 e-mails to a legal adversary.  But, the attachments were not intact.  As a result, but Magistrate Judge Randolph F. Treece has found that the company still failed to comply with the discovery request, reported the New York Law Journal and reprinted in Legal Technology. 

This case should be seen in particular as a warning to companies that archive attachments separately from the email message.  Ultimately, the judge ruled that PSEG Power New York, Inc. was repsonsible for the recovery of the attachments AND that the recovery would be at PSEG's expense.  So, understanding how the messages are attached by your vendor is critically important.

I am not going to discuss the parituclars of the claims between the parties.  It suit relates to the construction of a $25 million, gas-fired PSEG power plant outside of Albany, (PSEG Power New York, Inc. v. Alberici Constructors, Inc.).  The relevant issues here have to do with the storage and retrieval of emails and the attachments. 

PSEG delivered the 3,000-plus e-mails as requested.  But, Martha A. Connolly, attorney for the St. Louis-based Alberici, said many of the attachments that accompanied the messages were not.  In some instances, Ms. Connolly said this week in an interview, there were up to 12 attachments per e-mail that became separated from their original messages. 

"We spent a lot of our time and money trying to put Humpty-Dumpty back together again," said Ms. Connolly. 

How do you recover the attachments?  Fortunately, the raw data still existed.  But, months of effort were devoted to solving the problem and it remains unresolved.  For example, at one point, PSEG supplied a spreadsheet to Alberici that PSEG said would match attachments with e-mails. But it didn't work, according to Magistrate Judge Treece. 

What went wrong?  Magistrate Judge Treece explains,

Barrister Jailed For Fake Email

A U.K. Barrister (attorney) was jailed today for trying to frame a man with fake email.  Bruce Hyman, who was a one-time TV and radio producer, fabricated evidence that could have led to an innocent man being jailed, according to The Times.

Hyman represented a divorced woman fighting for custody of her four-year-old daughter.  He tricked the father of the daughter by sending him an email that appeared to be from a charity campaigning for father's rights.  It appeared to support the father's claim that he should be granted greater access to his daughter.  The father used the document, which he believed to be real, as evidence in court.  At that time Hyman jumped to his feet and denounced the email as a forgery.  Of course, it was a forgery and Hyman knew it.

The father, Dr. Simon Eades, a Wall Street banker, was warned by the court that he faced jail and the loss of his child if the precedent quoted in the email turned out to be fabricated.   Now, let the Times pick up the story:

Dr. Eades turned detective. He found that the email had been sent from an Internet shop in Tottenham Court Road. The owner emailed him the images from the shop’s CCTV camera, which revealed the sender to be Hyman.

Michael Meeke, QC, prosecuting, said that if Dr Eades had not been so computer literate and able to find the origin of the email, he may well have been prosecuted.

Instead, Hyman was caught by his own email.  He faces a 12-month jail term was the minimum he could impose. He also ordered him to pay £3,000 compensation to Mr Eades and £3,457 costs.   

Legal Hold Management is an Important Internal Control

Rick Wolf's, The Datakos Blawg, has an interesting discussion of litigation hold as a management control.  This is actually a critical issue for email archiving because the courts have taken a dim view of deleted messages.  In it, Mr. Wolf states the following:

Effective compliance with the Federal Rules of Civil Procedure and the Federal Obstruction of Justice Law is unattainable without the existence of an enforceable records and information management program. ... However counsel tracks litigation, if at all, they must track holds in perfect lockstep with the opening and closing of litigation files.  As noted, the obstruction of justice laws and common civil law requirements require action when your organization is on actual or constructive notice of legal or regulatory matters.  In short, an organization needs to act on hold instructions well before your outside counsel gets involved.  This is easier said than done, but it is the law.

At InBoxer, we think that litigation hold management is one of the most important tasks for email archiving and electronic discovery.  Therefore, we incorporated litigation hold management into our solution with two unique capabilities:

1. AUTOMATIC LITIGATION HOLD -- InBoxer automatically places any downloaded message or viewed message on hold.  This is because we think that anything downloaded or viewed is a message of interest.  In that way, it cannot be deleted between the time of the first search and the eventual dataset.  (Holds can be removed.)
2. LITIGATION HOLD BY CASE/SET -- Instead of placing messages on litigation hold, they can be organized into sets for hold.  A message can be in multiple sets.  If any one set is on hold, the message is held.  So, if a hold is removed from one set, a message can still be on hold if it fits into another set.

Students At Risk For Identity Theft

In an attempt to tell 623 Queens University (North Carolina) students about a financial aid opportunity, a university employee accidentally sent an e-mail with all the students’ addresses, telephone and Social Security numbers, reported WCNC of Charlotte, North Carolina.

"The good news is this wasn't a situation where somebody broke into our computer information or anything like that,” said Brian Ralph, vice president for enrollment management, to WCNC. “It was simply human error.”

Human error means that each student has to trust that 622 other students will delete the information before it gets into the wrong hands

UPDATE: "Making the Downtown Whiter"

A few weeks ago, I wrote about Dave Barbee, an Augusta, Georgia Housing Authority member who wrote in an email about a proposed "revitalization" plan by saying, "We will be making the downtown Whiter with moving 200 whites in and moving 500 blacks out!" (Original post)

Barbee resigned his post Sunday in what is seen as a response to his email. 

"On Monday, [Deke Copenhaver,] the mayor said: [Barbee] has expressed to me his sincere regret for the inappropriate wording of his recent e-mail. He apologizes to anyone in the Augusta community that he may have inadvertently offended. I have accepted his apology and with God’s help, may we forgive and move forward as a community of trust and hope,” reported the Atlanta Journal-Constitution.

Workers May Email Multiple Recipients

The National Labor Relations Board has ordered the publisher of the Oakland Tribune and other Bay Area newspapers to rescind an email policy barred workers from using the company email system to send messages to multiple recipients, reported the San Francisco Chronicle on Friday.  The policy was challenged by union officials as an attempt to thwart labor organizing.

Long Live Email!

John McKinley, former President of AOL Digital Services, CTO of AOL, and CTO of Merrill Lynch, asks in his blog whether email as we know it will be dead in five years.  Yet, I don't buy it.  I still have a black telephone on my desk.  It may become VOIP or wireless one day.  But, right now it is plain old telephone service.  And, I depend on it.  I think the same will be true about email.

John, supports his argument by citing the many examples of attacks on email:

• Twitter/short-form blogging
• Asynchronous messaging in social networks (e.g., the Facebook Wall)
• IM experiences now supporting queuing of messages to offline buddies
• Away message/Status message utilization in instant messaging
• SMS adoption (late to come to the US, but now pervasive)
• Wikis and other new collaboration platforms
• Comments (MySpace comments, Blog comments, et al)
• Casual communication forms (the nudge, the wink)
• New sharing experiences (Flickr, et al)
• Email aggregators (e.g., I use Gmail to aggregate all of my AOL, Yahoo, and POP3 accounts. These other companies still bear all the cost of hosting my email accounts, but now get none of the pageviews.)
• Email and IM integration into social networks (the new entrant risk).

I agree that email will change over time.  There will be more efficient content monitoring and prioritization.  Maybe the spam problem will be licked.  It will also learn from the items John mentioned for new features.

But, email was evolutionary and based on a proven model -- namely the post office.  It traces its history back to 1516, when Henry VIII established a "Master of the Posts". The Royal Mail service was first made available to the public by Charles I on July 31, 1635. (Wikipedia)

So, new technology will incorporate new features.  But, email is here to stay.

Formula 1 Race Team Fined $100-million for Email Based Spying

The International Automobile Federation (Formula 1 Racing) fined McLaren Mercedes $100-million for spying, according to the International Herald Tribune.  The Italian police provided the racing federation with evidence that showed Mike Coughlan, McLaren's chief designer, and Nigel Stepney, of rival Ferrari, had exchanged 288 text messages and 35 telephone calls between March 11 and July 3.

"In Formula One, each team spends hundreds of millions of dollars each season to build a car to gain precious seconds on the competition. Sharing intellectual property is, to a degree, part of the game, with teams employing photographers to take pictures of the elaborate technology belonging to the opposition to garner the slightest advantage," reported the Herald-Tribune.

The 14-page detailed account from the IAF included texts of email messages.  For example, According to the evidence, on March 21 2007, de la Rosa wrote to Coughlan:

"Hi Mike, do you know the Red Car's Weight Distribution? It would be important for us to know so that we could try it in the simulator. Thanks in advance, Pedro.

p.s. I will be in the simulator tomorrow."

According to AutoWeek, "On March 25, de la Rosa sent an e-mail to Alonso that described Ferrari's weight distribution to two decimal places on each of Ferrari's two cars as setup for the Australian Grand Prix."

McLaren Mercedes does have seven days to appeal.