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Old computers: An IT department liability that's costing more

Resellers now want money to sanitize hard drives

August 25, 2004 12:00 PM ET

Computerworld - Resellers of old computer equipment say they will no longer accept used equipment without charging for erasing hard drives to ensure they aren't held liable for exposing sensitive data.
Marc Sherman, chairman and CEO of WindsorTech Inc. in Highstown, N.J., a used IT equipment reseller, charges companies a flat $8.75 fee for performing a basic audit of used computer equipment and $10 to $30 for erasing disk arrays, depending on the disk's size.
"As the business developed over the years, we've gone into a world where data security is critical," he said. "The whole thing now is we're in a situation where we're reluctant to buy equipment unless we're fully indemnified. Otherwise, it puts us in a very dangerous situation.
"It's been an educational process for IT users. The information on a computer doesn't belong to the company. It belongs to the customer," he said.
Sherman said he believes his company is more trustworthy when it comes to ensuring data has been erased from drives before resale because his is the only publicly traded firm that resells used equipment and must answer to the U.S. Securities and Exchange Commission and the National Association of Securities Dealers.
Jill Vaske, vice president and co-founder of Redemtech Inc., a Columbus, Ohio-based recycler of PCs and other IT products, said that with the economy picking up, companies are just beginning to change out PCs and servers after holding on to them for longer than the normal three-year refresh cycle.
Redemtech manages end-of-life technology turnover for almost 100 Fortune 500 and Global 1,000 companies, making sure data isn't exposed when computers are reconditioned for continued use or given to charities.
"Our experience is [that] most resellers aren't minding the liability side of end-of-life equipment. They don't assume liability for reselling it," Vaske said.
Liability for any data exposed through the resale of technology equipment rests squarely on the company that created the data, according to Alan Burger, an attorney at the law firm of Burger, Trailor & Farmer in West Palm Beach, Fla. "You can't shift the risk by contract to a reseller," he said.
Burger sees a growing problem around data security and information privacy because of a number of laws that took effect over the past three years, including the Health Insurance Portability and Accountability Act, the Sarbanes-Oxley Act and the Gramm-Leach-Bliley Act, also known as the Financial Institution Privacy Protection Act of 2001.
"You're just getting into that computer changeover due to technology obsolescence now," he said. "You will have billboards on both sides of the highway saying, 'Was your health informationexposed? Call ABC attorneys.' "
Examples of the necessity of data protection abound. For instance, in January 2003 a disk drive with 176,000 insurance policies was stolen from Guelph, Ontario-based Co-operators Life Insurance Co.
In response to such events, California adopted a new law, SB 1386, which went into effect July 1, 2003. It requires any company that stores information about California residents to publicly divulge any breach of security affecting that data within 48 hours.
Said Sherman: "These regulations ... are really validating our business model."

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