Financial firms face e-discovery imperative; are they prepared?

Investigators are taking a tough look at Wall Street firms and the activity of top executives as the credit crisis unfolded. Some have suggested that top executives at Lehman Brothers could actually be charged with fraud. Two hedge fund executives at Bear Stearns have already been indicted. On top of all this, private litigation has exploded--all of which means that more firms will be gearing up to produce lots of evidence.

You've got to wonder: How well did the top banks invest in their e-discovery process? How well did they comply with the rules governing retention? It's possible that all of this could expose some shoddy practices. Sarbox wasn't the only issue of course, for many companies, Federal Rules of Civil Procedure kicked the retention anxiety to a whole new level.

The conventional wisdom has been that big companies took the medicine. They developed discovery applications and expanded their data center operations as necessary, but then along came Morgan Stanley's well-documented e-discovery woes. FINRA fined the firm $12.5 million last year for mishandling emails related to arbitration proceedings, among other things. Then it bungled the email discovery process related to its famous case against Ronald Perelman, which led to a big decision against the company (one that was eventually reversed). 

So some think the jury is out on how companies will fare as the litigation unfolds. E-discovery vendors, according to Wall Street & Technology, have already seen an uptick in business. They are out to convince people that it is not too late to get your discovery house in order. - Jim