Considerations During a Government Investigation: Perspective from the Data Management Provider

To quickly recap the case introduced in the first blog:

1. XYZ Corporation is investigated by a state attorney general’s office for fraudulent activity

2. The corporation is sued by other states and individuals impacted by the fraud

3. The case reaches Federal court

4. A class action suit is filed

5. Executive officers and directors of the company are charged for violating federal laws

6. Ensuing litigation results in XYZ Corporation filing for bankruptcy

7. The bankruptcy is finalized after years of litigation and negotiations

Data management providers are essential in managing government investigations.  If involved in an organization’s response team, the data management team can provide insights into the technology, data types and search strategies that are needed to provide early information assessment and maintain control of the investigation. In addition to the legal and forensic accounting plans that are required, a data plan must be developed to determine what and how it will be handled.

In this particular case study, the data planning needed to be divided into multiple components:

Preserving the Data

With an investigation looming and an impending bankruptcy, the data management provider’s first course of action is to preserve the data.  In this particular matter, the data associated with the investigation is preserved as soon as impending litigation is assumed.  The data that is preserved must include both accessible and inaccessible information, even if it will never be produced.  Preservation is usually a multi-disciplinary action, involving legal, compliance, risk and information technology departments, and in this case, a data management provider’s assistance as well.

In this preservation example, the initial round only included data related to the investigation; however, later in the matter, and due to the bankruptcy, preservation of entire servers and enterprise accounting systems is essential.  By preserving the entire system, the data management provider can ensure that all data is available, regardless of its importance to a particular matter.

Preservation and collection are the least expensive components of the discovery process; however, it is an area that is often overlooked or underdone to the detriment of future matters. This case study proves that a corporation never knows when this data will be needed – perhaps during an existing investigation, a future bankruptcy, or during a far-future multi-defendant matter. Corporations should ensure that preservation is done properly and judicially to ensure best practices.

Processing, Hosting and Review Data

In any investigation, it is important to understand what data is available and relevant to the investigation as quickly as possible.  By using advanced indexing tools, corporations today can work with data management providers to quickly understand their data, determine what data may be relevant and begin to build a case.  Also, even though a large amount of data was preserved in the previous step, careful use of search terms, concept searching and other technology-assisted filtering can ensure that only a small set of targeted data is moved through the process.

In this particular case, both good preservation and processing allowed for a cost-effective use of the data in the first investigation and the first bankruptcy matter – over 12 terabytes of data was preserved, but only one terabyte was processed and hosted for these two matters. The creative cost savings during this phase allowed the corporation to save millions of dollars on processing and hosting, while still allowing full access to the data.

In addition, over a year after the initial investigations and bankruptcy, the corporation required the use of the data again in a multi-defendant matter. The data solution provider was able to use previously existing data to easily provide the information for use in this additional matter.

Producing the Data

In a government investigation, it is just as important to ensure that the production of the data is done right. Government agencies are not consistent in their acceptance of load file formats, especially around de-duplication and custodian requirements.  Corporations must understand, before the processing of data, which government agencies are involved and their production specifications. In this particular matter, the production was required to be in four different load formats, with specific field information.

Conclusion of the Three Part Series

 Government investigations require a multi-disciplinary approach.  In this particular case study and matter, a corporation, a law firm, a forensic accounting firm and a data management provider were required to work together for the government investigation, bankruptcy and multi-defendant matter.  Through proper planning, all stakeholders were able to anticipate future needs for information and data to ensure that the corporation could provide the information required.

Editors’ note: This blog is the third in a three-part series, presented by CohnReznick and eTERA Consulting on the idiosyncrasies of investigations from the viewpoints of different participants.  This blog was authored by Todd Haley from eTERA Consulting and focuses on the perspective of the data management provider.  In the previous installment, Vinni Toppi from CohnReznick discussed key considerations from the forensic accountant’s perspective.