1. Offshore Outsourcing: Privacy and Public Perception Issues by Kenneth N. Rashbaum, Esq. by Kenneth N. Rashbaum, Esq. San Francisco Irvine New York Dallas London Los Angeles Chicago Newark Zurich Paris San Francisco Irvine New York Dallas London Los Angeles Chicago Newark Zurich Paris American Bar Association International 2006 Spring Meeting April 5, 2006 American Bar Association International 2006 Spring Meeting April 5, 2006 S EDGWICK DETERT MORAN & ARNOLD S EDGWICK DETERT MORAN & ARNOLD

2. “Cost pressures were enormous and the flat world was available.... Companies found they could go to M.I.T. and find four incredibly smart Chinese engineers who were willing to go back to China and work for them for the same amount it would cost them to hire one engineer in America.” Thomas L. Friedman, The World is Flat: A Brief History of the Twenty-First Century, p.113 (Farrar, Straus & Giroux, 2005) Offshore Outsourcing Will Continue to Proliferate as Technological Advances Shrink the World

3. 2004 FDIC Study of Financial Institutions 39-50% average cost savings through offshore outsourcing

4. Public Perceptions of Outsourcing Can Be an Obstacle to Expanding Global Reach How do they measure up when examined closely?

5. Perception No. 1 “Offshore outsourcing costs American jobs. They are lost to India”

6. Facts 1.In 2005, movement of work overseas accounted for 2% of all job losses due to mass layoff events 2.69% of movement of work overseas went to Mexico and China 1.In 2005, movement of work overseas accounted for 2% of all job losses due to mass layoff events 2.69% of movement of work overseas went to Mexico and China Bureau of Labor Statistics Release February 9, 2006 www.bls.gov/mls

7. “Asian outsourcing can lead to loss of confidential/private data due to corruption and lack of privacy laws” Perception No. 2

8. (Cont’d.) 1.“Mars-Bar” informal study 2.University of California and San Francisco Medical Center, 2003 a.Pakistani woman, transcribing operative reports, threatened to release them onto the Internet if fee was not paid b.Spawned state and federal legislation attempts to restrict offshoring of personal data or subject entities to state (California) privacy laws, in event of unauthorized disclosure 1.“Mars-Bar” informal study 2.University of California and San Francisco Medical Center, 2003 a.Pakistani woman, transcribing operative reports, threatened to release them onto the Internet if fee was not paid b.Spawned state and federal legislation attempts to restrict offshoring of personal data or subject entities to state (California) privacy laws, in event of unauthorized disclosure

9. Question Are security and confidentiality really superior in the U.S.? 1.March 2006: Social Security numbers of 4,000 patients at University of Texas Anderson Cancer Center lost when laptop stolen from home of accountant working on insurance claims 2.Florida man convicted of stealing $1.6 billion files from Axicom Corp. using decryption software Are security and confidentiality really superior in the U.S.? 1.March 2006: Social Security numbers of 4,000 patients at University of Texas Anderson Cancer Center lost when laptop stolen from home of accountant working on insurance claims 2.Florida man convicted of stealing $1.6 billion files from Axicom Corp. using decryption software

10. How Gain Consumer and Government Confidence? 1.Service Level Agreements with information security requirements a.Home country’s information security policies and standards must be clear and current b.Consider sending home office employee at outset for implementation and orientation 1.Service Level Agreements with information security requirements a.Home country’s information security policies and standards must be clear and current b.Consider sending home office employee at outset for implementation and orientation

11. (Cont’d.) 2.Provide for compliance monitoring and audits 3.Hold harmless/indemnification provisions backed by insurance clauses 4.Work with, not against, local standards and culture 2.Provide for compliance monitoring and audits 3.Hold harmless/indemnification provisions backed by insurance clauses 4.Work with, not against, local standards and culture

12. Questions Kenneth N. Rashbaum, Esq. Sedgwick, Detert, Moran & Arnold LLP 125 Broad Street New York, NY 10004 Tel: (212) 422-0202 E-mail: kenneth.rashbaum@sdma.comkenneth.rashbaum@sdma.com www.sdma.com