Advice on Document Retention.

The accounting firm of Arthur Andersen learned the hard way what can happen when business records are destroyed. Now, one attorney active in the Real Estate Owned Managers Association of California is warning firms in the REO business to take heed.

Eric Merser, a Palmdale-based attorney, said in a recent issue of the association's newsletter that a program for disposal of business records that are no longer needed is a business necessity. Old records are expensive to keep and manage, he notes.

Moreover, as tobacco companies have learned, they "can contain the ammunition fatal to the defense of adverse claims."

In blunt terms, Mr. Merser says that keeping obsolete records could preserve evidence, contrary to the interests of the firm that might otherwise go unnoticed in litigation.

Generally, unless a particular document is the subject of some obligations existing either in law or in contract, the owners may dispose of those documents, he said.

But compliance with state and federal law, in the highly regulated financial services and real estate businesses, is an ongoing concern.

In many cases, participants in a real estate or financial transaction are required to retain records for three or four years from the date of closing, he said.