Think you have a lot of e-mails? Those who work within the e-discovery process — the handling of electronic information and documents for litigation purposes — most likely have more. “Many of the smoking guns in a lot of these cases reside in e-mail,” said Catherine Parente, CPA, ABV, CVA and partner-in-charge of the consulting services department at CPA and business advisory firm Carlin, Charron & Rosen LLP. She added that one of the cases she’s currently working on includes four boxes of records, two of which contain printed out e-mails.

“Years ago, you wrote everything in letters,” she said. “You sent out correspondence and you were very formal in your communication. With the advent of e-mail, a lot has become very informal and quite often [involved parties] will say things that will get them into trouble.”

E-discovery is the inclusion of electronic documents in the pretrial process of discovery, where either side can request documents, ask questions in written form, obtain other evidence or depose individuals.

Once electronic information was included in the discovery phase, large corporations, not surprisingly, were reluctant to cooperate. It was perhaps the 2005 watershed case of UBS Warburg vs. Zubulake — a discrimination and sexual harassment suit where Warburg was ordered to pay an employee $29 million in compensatory damages for destroying relevant and incriminating e-mails during litigation — that brought the process into the spotlight.

As a result, the Supreme Court began to clamp down on corporations. The Federal Rules of Civil Procedure were amended by the high court and went into effect Dec. 1, 2006, with the intent to scrutinize e-discovery procedures.

“They’re really not rocket science,” Parente said about the amendments. “They basically just say that one party seeking discovery of this information has to show good cause and have a reasonable need for those records. You can’t just go in and say, ‘I want to see all your e-mails.’ You have to say, ‘There’s really a reason we think we need to see these e-mails,’ and prove it to the court. The party then has to say, ‘Well, here’s the burden you’re putting on me, if you’re asking for that.’ The courts have a little more guidance of what they look at when they make those decisions.”

FORENSICALLY SPEAKING

Most forensic accounting issues involve the review of some electronic documents, according to Joe Bartling, managing director at Daylight Forensic & Advisory LLC, based in Washington, D.C.

“An example is stock-option backdating, which could include e-mails and other electronic documents that might record minutes of board meetings and then accounting for stock options, grant dates and exercise dates, those kinds of things,” explained Bartling. “The combination of structured and unstructured data — structured being those accounting transactions and unstructured meaning the e-mail and other documents that might be part of the whole stock-option granting process — may need to be reviewed as part of the forensic investigation.”

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