Sunday, January 25, 1998

Year 2000 computer crisis draws attorneys' attention

By ALAN SAYRE / AP Business Writer

NEW ORLEANS (AP) -- While fixing computers to avoid a problem with the year 2000 is expensive, ignoring it might be even more so.

"If there is a problem caused to a business, somebody is going to be responsible for that," said Peter Butler Jr., a New Orleans attorney specializing in year 2000 computer liability issues.

Since many computer codes only read the last two digits as the year, experts say many will read the year 2000 as 1900, fouling up interest computations in bank accounts, rendering credit cards useless and deleting files.

Businesses in the United States are spending an estimated $440 billion to solve the problem, according to Standish Group International, a high-tech research group based in Dennis, Mass.

Shortcuts and ignoring the problem could even be more costly in terms of liability lawsuits, attorneys warn.

"What business is at the most risk? Any company that relies on a computer. Really, it's everywhere," said Vito Peraino, an attorney specializing in year 2000 computer problems with the Los Angeles law firm of Hancock, Rothert & Bunshoft.

Peraino's firm and Butler's firm, Breazeale, Sachse & Wilson, are among those using Internet sites to warn businesses of potential liability problems.

For example:

-- Since the potential disaster has been known for some time, the long liability could reach beyond a corporation and into the personal pockets of directors and officers for gross negligence.

-- Companies may decide to sell subsidiaries if the cost of fixing year 2000 problems is too high. Both the acquiring and selling companies may find themselves targeted by stockholder lawsuits if the problem chops into bottom lines.

-- Management may be responsible if potential year 2000 problems and the cost of fixing them are not fully disclosed to stockholders. So far, the Internal Revenue Service has not decided whether companies will be able to write off the costs of fixing year 2000 problems.

-- Software experts able to fix the problem may be in short supply and high demand, leading to disputes over employment contracts and trade secrets when employees move to other companies.

-- Warranty disputes are likely to arise over software and the obligation of a vendor to fix the year 2000 problem. At the same time, if a company modifies a software program to make it 2000-compatible, a copyright infringement could arise.

"The warranty issue is going to be huge," Butler said. "Who is responsible for fixing this problem: the vendor or the buyer?"

However, an information technology consultant suggests that instead of worrying about liability, businesses get down to the task of fixing the problem.

"Obviously, when there is a hint of anything, the lawyers come out," said Heidi Hooper, program manager for the year 2000 project at the Information Technology Association of America, a trade association.

"Why worry about suing now instead of fixing the problem?," she asked. "People need to ask the questions and find out whether they have a problem."