A Burning Question: How Safe Are Your Records?

Recent blazes at data warehouses have companies worried

The arsonist couldn't have been more brazen. On Mar. 19, a sprawling central New Jersey warehouse owned by Iron Mountain Inc. and jammed with 850,000 boxes of corporate records was set ablaze, according to Middlesex County (N.J.) prosecutor Robin J. Stacy. The fire spread even as investigators probed the ruins of two smaller deliberate blazes--one started just two days before--at another Iron Mountain warehouse nearby. "We were still at the location...still pulling materials out," says South Brunswick fire marshal Robert J. Davidson.

Questions remain about the motive for the three arsons, says Stacy. The fires have drawn the attention of local and state investigators, along with the federal Bureau of Alcohol, Tobacco & Firearms. Separately, investigators are probing a blaze that destroyed another company's record-storage facility in West Pittston, Pa., on May 5. Law-enforcement authorities are also exploring the possibility that someone may have been trying to destroy documents from the likes of Citibank or Bear, Stearns & Co. at the sites. "We are looking into every single avenue possible," Stacy says.

NO EXCUSE. But companies that rely on the 2,500 businesses nationwide that guarantee safe storage of records are more interested in the answer to this question: Just how safe are the aging documents, disks, and tapes that banks, brokerages, law firms, and companies pay millions of dollars a year to store in such warehouses? In addition to the four New Jersey and Pennsylvania fires, an accidental blaze broke out in a Chicago storage facility last fall.

The fires have companies checking on the security of the storage companies they deal with. "We're going to take another look," says a spokesman for AlliedSignal Inc., which was not affected by the fires but deposits documents with one of the storage companies that was. One reason companies are so worried: Regulators such as the Securities & Exchange Commission might not regard fire as a good excuse for a brokerage or investment adviser failing to produce a record.

"OH MY GOD." With records proliferating and with corporations looking outside for storage services, revenues in the once-sleepy business now top $1 billion and are climbing at a 5%-to-7% annual rate. Until the recent incidents, "it had been virtually unheard of" for records centers to go up in flames, says Marti Fisher, chair of the standards advisory committee for the Association of Records Managers & Administrators. "Obviously, the first question that comes up is: `Oh my god, are the standards high enough?"' she says.

Alarmed by the fires, Professional Records & Information Services Management, a Raleigh (N.C.) trade group, is considering hiring a consultant to review current fire-prevention standards at records centers, says President Hal Real. But according to C. Richard Reese, Iron Mountain's CEO, higher standards might not have saved his company's facilities. "There's no way you can design against an arsonist," Reese says.

Industry executives say customers can always pay for more safety. Some companies keep vital records in underground vaults, but that can cost $1.50 or more per box of documents--compared with 20 cents above ground. For now, few customers are willing to pay the higher costs. But that could change, given the recent blazes. They should "give pause to those who store their records...and make them inquire what kind of safeguarding arrangements are made," says SEC lawyer Douglas Scheidt. If such questions haven't been on recordkeepers' minds up until now, they certainly will be now.