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Trial Court Decision Rests on Record Integrity

May 25, 2011

A recent collection case in Pennsylvania, Commonwealth Fin. Sys., Inc. v. Larry Smith, 2011 PA Super 30 (Pa. Super. Ct. Feb. 14, 2011), underscores the importance of being able to demonstrate a record’s integrity or trustworthiness as a key component of having the records admitted into the legal proceeding. ARMA International’s Generally Accepted Recordkeeping Principles® also underscore the importance of being able to demonstrate a record’s trustworthiness within its Principle of Integrity.

In this case, there had been a transfer of an individual’s credit card account and debt limit between financial institutions. According to eLawExchange, the trial court ruled that there had been an “inadequate foundation provided for the authentication of bank records and denied their admission.” The Appellate Court subsequently affirmed this trial court decision.

The appellant, Commonwealth Financial Systems Inc. (CFS), had bought the credit card debt from NCOP Capital Inc. (NCOP), which had initially bought the debt from Citibank. CFS argued that the bank records, which happened to be in an electronic spreadsheet format, were appropriate business records. However, the witness they produced to substantiate this claim:

• Was not familiar with how Citibank or NCOP created or maintained their business records
• Was not aware of how these previous entities employed or protected their computers and electronically transmitted the spreadsheets
• Did not have personal knowledge that the entries on the spreadsheets were made at or near the time of the events
• Could not substantiate that the data was transmitted by someone with knowledge

In fact, the trial court found that “the chain of evidence presented did not adequately authenticate the computerized business records necessary to establish their trustworthiness and reliability sufficient to permit their admission into evidence.”

The appellant argued that the records could be relied upon because the "nationwide trend" and "clear federal precedent" is to admit these records. However, the court noted that, "[t]he institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the Court to stop them at the gate."

The GARP® Principle of Integrity states the following:

A recordkeeping program shall be constructed so the records and information generated or managed by or for the organization have a reasonable and suitable guarantee of authenticity and reliability.

Integrity of a record is directly related to the ability to prove that a record is authentic and unaltered. Authenticity requires proof that a document comes from the person, organization, or other legal entity claiming to be its author or authorizing authority.

Integrity of records in a recordkeeping environment should include the following:

• Correctness of and adherence to the policies and procedures of the organization
• Reliability of the information management training and direction given to the employees who interact with all systems
• Reliability of the records created
• An acceptable audit trail
• Reliability of the systems that control the recordkeeping including hardware, network infrastructure, and software

Clearly, at least in the state of Pennsylvania, merely relying on computer records in the conduct of business could fall short when the legal basis of those records is challenged. This decision underscores the importance of having clearly defined policies and procedures in place to ensure that reliable records are being created, follow the organization’s policies and procedures, and have the audit trail documentation in place that shows the procedures were followed correctly when the records were created.

For more information on ARMA’s GARP® Principles, please visit www.arma.org/garp.

Diane Carlisle

NewsWire