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Tech Bankruptcy
March 03, 2009
  Customer data just goes out the door at bankruptcy auctions.
CIO Magazine recently published an interesting article about the sometimes loose treatment of business and customer data in liquidations. It talks about improper disposition of sensitive customer data and the habit of trustees and liquidators of auctioning off computers without first scrubbing them of data.

This kind of problem certainly exists. I'm personally aware of one case where a weight-loss franchisee's employee threw customer records in the trash without shredding them first, and a reporter found them. This resulted in an investigation by the state attorney general's office. In another case, the data back-up disks for the debtor's on-line website were in a cardboard box, in a corner, and disappeared during the course of the furniture and equipment auction. 

With a failing business, data controls are fairly important. One of the items on the checklist definitely has to be identifying both sensitive data (such as payroll information and consumer information) and key data (such as financial information and asset related data) and developing a plan to ensure such data is properly preserved or disposed of, as needed.

The article includes a quote by Michael Fleming, a friend of mine who practices technology law in Minneapolis. Way to go Mike.

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Warren E. Agin is a partner in Swiggart & Agin, LLC, a boutique law firm in Boston, Massachusetts focusing on the needs of technology companies. Mr. Agin heads its bankruptcy department. The author of the book Bankruptcy and Secured Lending in Cyberspace (3rd Ed. West 2005), Mr. Agin also chaired the ABA's E-commerce and Insolvency Subcommittee from 1999 to 2005, co-chaired the Boston Bar Association's Internet and Computer Law Committee (2003-2005), and served on the American Bar Association's Standing Committee on Technology and Information Services (2008-2011). Mr. Agin currently co-chairs the Editorial Board of Business Law Today. A contributing editor to Norton Bankruptcy Law and Practice, 3d, and co-author of its chapter on intellectual property for the past fifteen years, he is author of numerous legal articles and addresses on topics of technology, internet and bankruptcy law.

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