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Panama Papers: What Attorneys Can Learn from History’s Largest Data Breach

Background

It is estimated that since its inception in 1977, MF has incorporated 250,000 businesses, largely in offshore jurisdictions. MF serves a wide range of clients, including politicians, celebrities and corporations. Incorporating “anonymous” businesses is entirely legal. There is, however, a stigma attached to “shell companies,” and several of the public figures associated with these businesses have already been embarrassed by exposé-style articles. The ICIJ has promised that additional, highly compromising articles will be published.

Following the disclosure of the breach, MF stated that it experienced an “e-mail server breach” at one if its data centers. It also has been reported that the documents were removed over the course of a year, beginning in early 2015. This followed a 2014 “whistleblower” data breach involving MF’s activities in Germany.

The details of how MF’s client data was removed, who removed it and why are not known and may never be made public. Regardless, the breach raises important questions that are relevant to any lawyer who uses a computer to create, store and access attorney-client materials:

  • After a whistleblower distributed client materials to the German government in 2014, what additional safeguards were implemented to protect client files? Does your firm regularly review security procedures? What process does your firm implement when computers, phones or remote storage devices are lost, stolen or decommissioned? What process does your firm follow if a data breach or virus is discovered in your system?
  • How long should client files remain on accessible servers? More than 11.5 million MF documents dating from 1977 forward were exposed by an “e-mail server breach.” Many of these documents surely predated MF’s current computer system. For whatever reason, “historical” documents were stored on the same servers that handled routine e-mail functions. What is your firm’s protocol for retaining “historical” documents on “active” servers?
  • Were notifications issued when non-active files were accessed? MF apparently had a policy of assuring that all documents for the 250,000 companies that it formed were readily available. But did the “primary” attorney on those files receive any type of notification when materials from their assigned clients were accessed? Did the system administrator receive notification when older files that had not been accessed for a significant period were suddenly downloaded? Does your firm have electronic notifications in place when files are accessed? Are sensitive files restricted to certain users? Are your files password protected?
  • News articles indicate that the breach was publicly disclosed only because a journalist contacted a representative of the Russian government who raised the possibility of a data breach with MF on March 28, 2016. MF notified their clients on April 1, 2016. ICIJ then issued a press release about the breach on April 3, 2016. The data breach(es) likely occurred over the course of several months, starting in 2015. When should the breach(es) have been discovered and disclosed to MF’s clients? Does your firm regularly monitor its access logs? Does your firm have a data breach response plan? Has your firm prepared a letter to advise a client of a discovered breach? Has your firm prepared a press release if a wider disclosure is necessary?

Lessons Learned

The MF data breach represents a sea change in the management of client data by law firms. The bar for safeguarding client data has risen. All attorneys must now consider the potential pitfalls of maintaining “historical” data on their servers, the implementation of notifications when files are accessed and protocols for issuing client disclosures when files are accessed. It is likely that MF will face considerable litigation over the undocumented data breach. Attorneys seeking to avoid litigation need to learn from MF’s failure and ensure that their data is protected.

© 2021 Wilson ElserNational Law Review, Volume VI, Number 173
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About this Author

William F. McDevitt, Wilson Elser Law Firm, Commercial Litigation Attorney
Partner

William McDevitt defends attorneys in professional liability claims in Pennsylvania’s state and federal courts. Cases involve statutory issues, professional negligence, breach of contract, wrongful use of civil proceedings, abuse of process and regulatory suits, including claims brought under the Fair Debt Collections Practices Act, Fair Credit Extension Uniformity Act and Real Estate Settlement Procedures Act. Bill also has experience with asbestos liability defense; medical malpractice defense; construction litigation; malpractice claims brought against architects,...

215-606-3979
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