The sad case of Charles Spadoni has resurfaced, reminding us all of the perils of a panicked response to a government investigation and the need for an organized document retention policy.
Spadoni was the general counsel of Triumph Capital Group, Inc., and a friend to the interim treasurer of the State of Connecticut. When his friend decided to seek election as the actual Treasurer, Spadoni and Triumph donated $100,000 to the campaign. Spadoni’s friend was defeated, but before he left office, he invested $200 million of Connecticut’s money with Triumph and engaged in some shenanigans regarding consulting contracts.
An investigation ensued. Triumph received a subpoena for documents. Spadoni read this initial subpoena as being limited in scope and purchased software to delete (he thought) the documents that he considered to be outside the subpoena. As the investigation broadened, Mr. Spadoni continued to use the file deletion software. That software left “footprints,” however, and the government was able to determine what had been deleted, and when it had been deleted. Spadoni was indicted on bribery, fraud, racketeering and obstruction of justice charges, along with other defendants. Through appeals and otherwise, the bribery, fraud and racketeering charges were dropped. But the obstruction count stood. Spadoni was convicted and sentenced to 24 months in prison – a long time in jail for the average general counsel. Various efforts to undo that conviction have failed, most recently this month.
What lessons can be learned, besides being wary of friends in high places? First, when an investigation is launched, do not panic. Do not destroy documents. Do not attempt to “over-lawyer” the issue by analyzing the perceived contours of the investigation. Preserve the status quo.
Once the investigation has begun, it is too late to do what should have been done all along. If a company has a regular, prescribed document retention policy, it can destroy documents on a regular basis without being accused of obstruction. Of course, once the investigation begins, the regular destruction of documents must cease, and a document hold must be put in place. But in the absence of an investigation, there is no problem destroying documents as they reach a certain age – say, six months old – barring any regulatory requirement for keeping them. This reduces the clutter in the files and minimizes the instinct to panic when a subpoena is received. A good document retention policy should be written down, tailored to fit the needs of the particular company, and followed closely. People fear what they know and (perhaps more often) what they don’t know. Mountains of documents contain lots of unknown facts. They should be culled systematically, regularly and thoroughly.
Mr. Spadoni ultimately stands convicted only of obstruction – not of the fraud, bribery and racketeering charges he originally faced. Perhaps a better document retention policy might have helped him.