Gillette: Workers may have deleted e-mail
Galvin calls response to P&G deal inquiry 'very hard to believe'
Gillette Co. said it is ''possible" that senior executives deleted e-mail that may have included discussions of the company's proposed $57 billion acquisition by Procter & Gamble Co. that are being sought by Massachusetts regulators.
The company disclosed in a filing in Massachusetts Superior Court Monday that Gillette employees whose e-mail may be subject to a subpoena from Secretary of State William F. Galvin ''simply did not retain e-mail and, instead, had a regular practice of deleting it."
However, Gillette said in the filing that company executives and employees ''were under no obligation to retain e-mails during the period in which the proposed merger was being discussed and evaluated."
Further, the company said its ''review of e-mail during the period shows that it has produced all e-mails it can reasonably identify that are responsive" to Galvin's subpoena.
In its filing Gillette did not name which employees deleted e-mail, nor did it say whether any of the deleted messages specifically contained information or discussions on the P&G offer.
Galvin said Gillette's assertion that it cannot produce the e-mail is the equivalent of the company using a ''dog ate my homework" excuse. ''It's very strange, to say the least, and quite unbusinesslike, that e-mails among the major players and people making these decisions" about the P&G acquisition ''would be deleted," Galvin said. ''It's very hard to believe that this is standard business practice. We are talking about stuff back in January."
Gillette spokesman Eric Kraus said the company instructed employees to retain all deal-related documents in February 2005, in response to initial regulatory inquiries from Galvin and to lawsuits filed by shareholders unhappy with the P&G offer.
While Kraus was unable to provide the company's policy on preserving e-mail, he said, ''We have regular deletion of e-mails, on an ongoing basis." That policy has since been suspended because of the Galvin inquiry and suits. He declined to comment further.
Galvin has sought the e-mail of top Gillette executives and other employees involved in the acquisition process to determine whether shareholders are being shortchanged by the P&G offer. Two weeks ago Massachusetts Superior Court Judge Allan van Gestel effectively ruled that Galvin has authority to investigate the two investment banks that advised Gillette on the deal, Goldman Sachs Group and UBS AG, because they have brokerage operations regulated by his office.
In particular, Galvin is seeking e-mail messages and other documentation related to the so-called ''fairness opinion" issued by the bankers to see whether any information about the company's value was withheld from shareholders. Though many Gillette employees could be subject to his subpoenas, Galvin has concentrated his inquiry on the e-mail of six of the company's top executives, including chief executive James M. Kilts, chief operating officer Edward F. DeGraan, and Peter Klein, who heads strategy and business development for the company.
The most recent filings concern Galvin's request to have the court issue another order for Gillette to produce certain documents, even though the firm has said it has satisfied Galvin's previous requests.
The Federal Trade Commission, which is reviewing the Gillette purchase on antitrust grounds, has a policy on document-retention issues which states, in part, that ''the most senior company officers and executives may be subject to a three-year search" of e-mail.
Michele Lange, a staff attorney for Kroll Ontrack Inc., a Minneapolis firm that performs electronic document discovery and recovery, said e-mail has become an important part of the document trail that a regulator such as the FTC reviews, ''and they want to see those e-mails going as far back as possible, in order to get a picture of whether there are any antitrust concerns."
Lange said given that the e-mail Galvin is seeking is only four or five months old, it is ''very likely" Gillette has a copy of the employees executives' e-mail somewhere in its corporate computer systems, whether on backup tapes, on e-mail server archives, or on the hard drives of the employees' computers.
A spokesman for the Securities and Exchange Commission, John Nester, said there are no specific federal requirements for companies to retain the e-mail of senior executives during periods such as merger and acquisition talks.
However, Nester said that under federal rules, ''all aspects of the deal have to be disclosed. So very often the easiest way to put yourself in a position to disclose them is to maintain those records."
Andrew Caffrey can be reached at email@example.com.