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Daniel FisherFULL DISCLOSURE

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Delaware Ruling Would Require MassiveData BackupsMa r . 10 2 01 1 - 2 :09 pm | 237 view s | 0 recom m endations | 0 com m ents

A little-noticed decision by aDelaware court has thepotential to impose huge costson companies unless it isreversed, computer-securityexperts say, because the judgemisunderstood or disregardedhow a basic element ofcomputer memory works. TheDecember 2009 decision by

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Does his role model star in a Delawarelawsuit? Image via Wikipedia

Delaware Judge Leo Strine —involving involving an Israeli-American businessman thejudge described as a real-life“international man of mystery”— penalized a company forerasing the unallocated space of its computer hard drives. Experts sayretaining such data would be prohibitively expensive since theunallocated space is essentially a trash bin that is altered each time a keyis tapped.

“It’s almost impossible for large companies with massive amounts ofequipment to comply,” said Daniel Garrie, a lawyer and managing directorat Focused Solution Recourse Delivery Group LLC , a computerconsulting firm in Seattle. Garrie filed a brief with a Delaware appealscourt urging it to reverse Strine’s opinion.

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

As Genger faced the prospect of losing control of Trans-Resources in2008, he allowed lawyers for the Trump Group to inspect the company’scomputers and make copies of all the files on them. That included privatefiles 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 theidentifying data to find them or reassemble them easily.

Most of the data in the unallocated space is eventually overwritten withnew information, but computer experts can find files if they look hardenough. (Garrie describes the scrips and scraps of information as“confetti.”) Genger was worried about his secret files getting out, so afterthe Trump Group’s lawyers finished making images of the hard drives hetold his computer security expert to perform a “deep clean” to eliminateunencrypted versions of his secret documents.

That offended Strine, who described Genger’s efforts to maintain controlof Trans-Resources as a game of “whack-a-mole.” Genger and his expertfailed to tell the lawyers for the other side about the “deep clean,” Strinewrote, and it only came to light after the Trumps complained theycouldn’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 theunallocated space during the dead of night.” Rather, they kept theirfurtive conduct secret.

To discourage such behavior in the future, Strine handed down a severepenalty: Instead of allowing Genger to refute the Trump Group’sarguments by a preponderance of evidence, he required the higherstandard of “clear and convincing” evidence. And he refused to allowGenger to testify without providing corroborating evidence to support hiswords.

Stripped of these defenses, Genger lost the case and Strine orderedTrans-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 becausethey care about Genger, but because large corporations would face anincalculable expense if they were forced to maintain copies of unallocatedspace, which literally changes by the second.

“I don’t even know if it’s possible,” said Garrie. “I mean, anything’spossible with enough money,” but companies would have to take bit-levelimages 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 mostlarge companies. The costs would be “exponentially larger,” than currentelectronic discovery measures. “Several large global companies,” clientshe declined to name, “have expressed concern.”

Strine didn’t address such technical concerns, focusing on the behavior ofGenger in long-running litigation he acknowledged featured “excessivelysharp conduct” by both sides. Strine, who is known for his colorfulopinions, had this to say about the businessman:

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

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.