As Credit Department Goes Electronic,
Consider E-Mail Policy
By Scott Blakeley

The hazards of e-mail, both retaining them and not doing so, have made headlines. With Enron, on the one hand, a stored e-mail from in-house counsel raising concerns about accounting improprieties served as a roadmap for federal prosecutors. Several Wall Street investment banks, on the other hand, are facing multimillion dollar fines for not keeping e-mail messages. These recent headlines highlight the significance of e-mail communications and raise the question of the credit professional's e-mail retention program.

E-mail has revolutionized how the credit professional communicates with customers, the credit department and credit colleagues. Using e-mail, a customer, whether located across the city or across the globe, can provide the credit professional with hundreds of pages of confidential financial information to assist with credit analysis, immediately and inexpensively. The credit professional and customer can negotiate using e-mail over credit terms. Underscoring the explosion of e-mail use in commerce, businesses around the world are estimated to send over a trillion e-mail annually.

However, the ability to transfer and download confidential information carries with it some risks to the credit professional. Further, the credit professional must consider a policy of sharing and storing emails. A "deleted" e-mail does not necessarily mean it is expunged from the hard drive. Where a credit professional is provided a customer's confidential information through e-mail, what steps should the credit professional take to keep the e-mail confidential and out of a lawsuit?

E-Mail Communication and Litigation

Consider a common situation: a credit professional receives financial information for credit analysis purposes from a customer conditioned on signing a confidentiality agreement. The confidentiality agreement requires the credit professional to take reasonable steps to maintain the secrecy of the documents. The standard confidentiality agreement provides that the credit professional's company may be liable for damages if the confidential information is leaked. The customer's financials are transferred to the credit professional via email. If th company inadvertently discloses the financial information electronically, the vendor may be sued by the customer.

A problem with e-mail from a litigation standpoint is that it creates a lasting record, unlike a phone call that is temporary. A vendor can be compelled to produce e-mailed material in litigation, unless otherwise privileged. If the credit professional's company has a uniform policy of email expirations or shredding its e-mail unless it has some future value, the company embroiled in litigation may not be punished by a court if it does not turn over the information.

If the vendor is embroiled in litigation it may make sense to retain the email to avoid a negative suggestion. However, archiving saved e-mails can be problematic when attempting to retrieve the stored e-mail. Is there a solution for the credit professional to avoid, or limit, this kind of risk when the confidential information is exchanged via e-mail?

New Technological Developments for Keeping E-Mail Communications Confidential and Out of a Lawsuit

Recent technological developments may provide greater protection for the credit professional from an errant confidential e-mail falling in the hands of a competitor, or otherwise keep the e-mail inhouse. The starting point is that the credit professional deleting an e-mail does not mean it is lost from the server. Because of this, new e-mail software may send a message to self-destruct after passage of time, can limit the number of times a message is opened and read, tag messages so that they cannot be forwarded and label messages to prevent cutting, pasting or printing. The software expires both sent and received email. This means that such e-mails are temporary, and from an evidentiary basis, may not fall in the hands of a competitor or used in a lawsuit.

New developments for e-mail may also allow for the credit professional to block the recipient from pasting, printing or forwarding, including the accidental forwarding, the e-mail message. In other words, the credit professional may encrypt a set of rules with its e-mail that blocks forwarding the e-mail -- a virtual e-mail paper

Reprinted by permission from The Trade Vendor Quarterly Blakeley & Blakeley LLP Fall 02