Local company fined $10,000 
after it dumped records

Pacific Business News recently reported that Fidelity Escrow Services Corp. of Hawaii was fined $10,000 for improperly disposing of 39 boxes of records that contained customer Social Security numbers and other financial information, according to the state Department of Commerce and Consumer Affairs.

The newspaper’s editor, Jim Kelly discovered the records in a Niu Valley recycling dumpster and reported them to the state Office of Consumer Protection. The state sued Fidelity and its former president, Stephen Marn of Hawaii Kai. Marn said he asked a handyman to dump the records, which he had stored in his basement for six years. The files were recovered and destroyed.

A new state law, sometimes referred to as the "dumpster diving" law, requires businesses and government agencies to take reasonable measures to protect against unauthorized access to an individual’s personal information when disposing of the records they keep. Act 136 became effective on Jan. 1 and requires files to be burned or shredded to keep information from getting into the wrong hands, such as those of identity thieves.

Companies, including nonprofits, are required by the Sarbanes-Oxley Act of 2002 to have document retention and destruction policies that, presumably, would avoid creating situations like those faced by Fidelity. According to BoardSource, “Common sense dictates that individuals, nonprofit organizations and companies regularly need to shred or otherwise dispose of unnecessary and outdated documents and files. … A nonprofit organization should have a written, mandatory document retention and periodic destruction policy. Such a policy also helps limit accidental or innocent destruction.

“The document retention policy should include guidelines for handling electronic files and voicemail. Electronic documents and voicemail messages have the same status as paper files in litigation-related cases. The policy should also cover back-up procedures, archiving of documents, and regular check-ups of the reliability of the system. If an official investigation is underway or even suspected, nonprofit management must stop any document purging in order to avoid criminal obstruction charges.”

A sample retention and destruction policy, editable and adaptable to your organization, is available from the National Council of Nonprofit Organizations. Click here to download the sample policy.