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Delaware Ruling Would Require Massive

Data Backups
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A little-noticed decision by a
Delaware court has the
potential to impose huge costs
on companies unless it is
reversed, computer-security
experts say, because the judge
misunderstood or disregarded
how a basic element of
computer memory works. The
December 2009 decision by
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 Delaware Judge Leo Strine —
involving involving an Israeli-
American businessman the
judge described as a real-life
“international man of mystery” Does his role model star in a Delaware
lawsuit? Image via Wikipedia
— penalized a company for
erasing the unallocated space of its computer hard drives. Experts say
retaining such data would be prohibitively expensive since the
unallocated space is essentially a trash bin that is altered each time a key
is tapped.

“It’s almost impossible for large companies with massive amounts of

equipment to comply,” said Daniel Garrie, a lawyer and managing director
at Focused Solution Recourse Delivery Group LLC , a computer
consulting firm in Seattle. Garrie filed a brief with a Delaware appeals
court urging it to reverse Strine’s opinion.

The case involves Arie Genger, a businessman with close ties to the
Israeli government who sought financial help from Jules and Eddie
Trump, South African tycoons who aren’t related to The Donald. Their
Trump Group sued Genger after he allegedly hid the transfer of stock in
an Israeli chemical company, Trans-Resources, that the Trumps had
backed with more than $50 million in debt financing. The Trumps
demanded notice of any stock transfers because they didn’t want the
company to be dragged into Genger’s contentious divorce and disputes
with his son, Sagi.

As Genger faced the prospect of losing control of Trans-Resources in

2008, he allowed lawyers for the Trump Group to inspect the company’s
computers and make copies of all the files on them. That included private
files Genger told the court involved secret Israeli government matters, so
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 he was allowed to encrypt them. But during the process of encryption,
unencrypted copies of those files were stored in the unallocated space,
where discarded files are temporarily kept in pieces without the
identifying data to find them or reassemble them easily.

Most of the data in the unallocated space is eventually overwritten with

new information, but computer experts can find files if they look hard
enough. (Garrie describes the scrips and scraps of information as
“confetti.”) Genger was worried about his secret files getting out, so after
the Trump Group’s lawyers finished making images of the hard drives he
told his computer security expert to perform a “deep clean” to eliminate
unencrypted versions of his secret documents.

That offended Strine, who described Genger’s efforts to maintain control

of Trans-Resources as a game of “whack-a-mole.” Genger and his expert
failed to tell the lawyers for the other side about the “deep clean,” Strine
wrote, and it only came to light after the Trumps complained they
couldn’t find a trace of a crucial e-mail referenced in other files.

They did not leave a note saying “oh by the way, we wiped clean the
unallocated space during the dead of night.” Rather, they kept their
furtive conduct secret.

To discourage such behavior in the future, Strine handed down a severe

penalty: Instead of allowing Genger to refute the Trump Group’s
arguments by a preponderance of evidence, he required the higher
standard of “clear and convincing” evidence. And he refused to allow
Genger to testify without providing corroborating evidence to support his
words.

Stripped of these defenses, Genger lost the case and Strine ordered
Trans-Resources turned over to the Trumps in July 2010. He’s appealing
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 that decision, and computer experts are watching closely — not because
they care about Genger, but because large corporations would face an
incalculable expense if they were forced to maintain copies of unallocated
space, which literally changes by the second.

“I don’t even know if it’s possible,” said Garrie. “I mean, anything’s

possible with enough money,” but companies would have to take bit-level
images of their hard drives on a regular basis and store them somewhere,
to be retrieved each time they are sued. That means all the time for most
large companies. The costs would be “exponentially larger,” than current
electronic discovery measures. “Several large global companies,” clients
he declined to name, “have expressed concern.”

Strine didn’t address such technical concerns, focusing on the behavior of

Genger in long-running litigation he acknowledged featured “excessively
sharp conduct” by both sides. Strine, who is known for his colorful
opinions, had this to say about the businessman:

Although Mike Myers may have made millions by bringing to the big
screen his take on what it is like to be an “international man of
mystery,” Arie Genger, as it turns out, is such a man. Aside from his
business interests, Genger apparently has high level contacts within the
Israeli government for whom he performed sensitive tasks relating to
Israel’s national security. It seems that these tasks involved work by
Genger within the United States — apparently on a secret basis —
although there is no indication in the record that Genger has openly
identified his work to anyone of authority in the United States or has
diplomatic or other official credentials. What this work involved is
unknown to me, but what is known is that Genger used TRI’s computer
system to create and receive documents implicating Israel’s national
security.

Genger’s lawyer, Michael Carroll of Davis Polk & Wardwell, didn’t return
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 a phone call for comment. Appeals in the case were filed in November.

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