WHAT CIVIL LAWYERS NEED TO KNOW ABOUT CRIMINAL LAW

WHAT CIVIL LAWYERS NEED TO KNOW ABOUT CRIMINAL LAW

Presented by:

MARTHA S. DICKIE, Austin President-Elect, State Bar of Texas

Akin & Almanza

WILLIAM B. MATEJA, Dallas Fish & Richardson

Written by:

STACY L. BRAININ, Dallas

DAVID B. REECE, Dallas Haynes and Boone, L.L.P.

*Reprinted From: State Bar College “Summer School” 2004 July 2004

State Bar of Texas 4TH ANNUAL ADVANCED

IN-HOUSE COUNSEL COURSE October 17-18, 2005

San Antonio

CHAPTER 13

MARTHA SUE DICKIE EDUCATION University of Texas, B.A. Plan II (1977) University of Texas, J.D. (1980)

EMPLOYMENT Briefing Attorney, U.S. District Judge Jack Roberts, Austin (1980-82) Minton, Burton, Foster and Collins P.C., Austin (1982-2004) Akin and Almanza L.L.P., Austin (2005-present)

PROFESSIONAL ACTIVITIES

State Bar of Texas President-Elect State Bar of Texas 2005-2006 Director (1989-92) Executive Committee (1990-92) Chair, General Counsel Advisory Committee (1991-92) Chair, Ad Hoc Section Study Committee (1997) Co-Chair, Ad Hoc Section Study Committee (1998)

Texas Board of Legal Specialization Board Member (1995-2001) Texas Bar Foundation Trustee (1992-95) Fellows Chair (2003-04)

Travis County Bar Association President (1988-89) Board Member (1986-88) Chair: Criminal Law and Procedure Section (1985-1986) Travis County Women Lawyer’s Association Parliamentarian (1984-85) Austin Inns of Court Master (1991-93) RECOGNITIONS American Board of Trial Advocates (ABOTA) – Selected as Associate (2004-present) State Bar of Texas – Named Outstanding Third Year Board Director (1991-92) State Bar of Texas – Awarded Presidential Citation (1997 and 1998)

OTHER ACTIVITIES Commissioner, Texas Alcoholic Beverage Commission (1993-2000) Board Member, Austin Child Guidance Center (1995-2000) CONTACT INFORMATION 2301 S. Capital of Texas Highway, Building H Austin, Texas 78746 (512) 474-9486 Fax: (512) 478-7151

WILLIAM B. MATEJA [email protected] Bill Mateja is currently a principal in the Dallas and Washington D.C. offices of Fish & Richardson where his practice focuses on white collar defense, securities litigation, and business litigation.

Prior to returning to private practice, Bill spent 13 years with the U.S. Department of Justice culminating in his appointment as Senior Counsel to Deputy Attorneys General Larry Thompson and James Comey (2003-04) in which he oversaw the Justice Department’s white collar crime efforts, including its corporate and health care fraud efforts. Because the Deputy Attorney General was Chair of President Bush’s Corporate Fraud Task Force, Bill served as the point person for the Task Force and was responsible for its day-to-day operations.

Bill previously served as Counsel to the Director for the Executive Office for United States Attorneys (2002-03) and continued to serve as an Assistant U. S. Attorney while on assignment to Main Justice, having served in such capacity with the Northern District of Texas since 1991. As a federal prosecutor, Bill prosecuted and tried many of the Northern District’s most complex and sophisticated white collar crime and fraud cases.

Prior to entering government service, Bill was a trial lawyer with the Dallas office of Liddell, Sapp, Zivley, Hill & LaBoon. His practice focused on banking, real estate, and bankruptcy litigation (1986-91). Bill serves as an adjunct professor of law at the Texas Tech University School of Law (1995-2002, 2006), where he teaches corporate and white collar crime, civil and criminal pretrial litigation, and trial advocacy. He is a former President of the Texas Young Lawyers Association (1997-98) and a former member of the State Bar of Texas’ Executive Committee and Board of Directors (1996-99). Education J.D. Texas Tech University School of Law, 1986; Order of Barristers and Associate Editor, Texas Tech Law Review B.S. (Biology Concentration) University of Notre Dame, 1983 Memberships American Bar Association (White Collar Crime Committee, Criminal Justice, Health Law and Litigation Sections); State Bar of Texas; Dallas Bar Association (Corporate Counsel, Criminal Law, Business Litigation, and Securities Sections); Association of Trial Lawyers of America; National Association of Criminal Defense Lawyers (Vice Chair, White Collar Crime Committee)

Principal Fish & Richardson P.C. White Collar Defense Government Investigations

and Related Civil Litigation

Securities Litigation Complex Business Litigation Dallas Office 1717 Main St., Ste. 5000 Dallas, Texas 75201 Ph: 214-760-6101 Fax: 214-747-2091 Washington DC Office 1425 K Street, NW 11th Floor Washington, DC 20005 Ph: 202-626-7709 Fax: 202-783-5070

Partner and Section Chair Antitrust White Collar Criminal Defense Dallas Office 901 Main Street Suite 3100 Dallas, TX 75202 Ph: 214.651.5584 Fax: 214.200.0373 Areas of Experience: White Collar Criminal Defense Government Investigations and Related Civil Litigation Health Care Complex Business Litigation

Stacy L. Brainin [email protected] Ms. Brainin has extensive experience in white collar criminal defense and government investigations, including representation of companies and individuals in both criminal and civil matters. Her practice also includes complex business litigation with an emphasis in healthcare. Ms. Brainin has defended cases alleging civil and criminal business fraud in state and federal courts throughout the country. In 1998 and 1999, Ms. Brainin successfully defended a national health care provider in three lengthy jury trials involving allegations of fraud, conspiracy, antitrust and RICO violations. All three resulted in complete defense verdicts. The second, named 1999's biggest defense win by The National Law Journal, involved allegations of fraud and conspiracy. Punitive damages of $150 million were sought, and after a four week trial, the jury found no fraud and awarded no damages. Ms. Brainin represents and advises health care providers in civil and criminal disputes with state and federal government agencies. She is experienced in handling internal investigations, compliance programs and legal audits. Recent Publications “Government Investigations and Corporate Criminal Law: Topics of

Interest for General Counsel,” 10th National Forum for Women Corporate Counsel, January 25, 2000

“From Thornburgh to McDade–Ex Parte Contacts with Corporate Employees During Government Investigations,” American Bar Association 14th Annual National Institute on White Collar Crime 2000

“Internal Investigations in Health Care: Unique Enforcement Environment and the Dilemma of Disclosure”, Internal Corporate Investigations (American Bar Association 2d ed. 2003).

“Health Care: A Unique Criminal and Civil Enforcement Environment” (South Texas Law Review Vol. 45 Winter 2003)

Education J.D., with high honors, University of Texas School of Law, 1984; Order of the Coif, Associate Editor of the Texas Law Review B.A., with high honors, University of Texas, 1981; Phi Beta Kappa Memberships American Bar Association, Section of Litigation and Criminal Justice Section, White Collar Crime Committee, Health Care Fraud Subcommittee, Dallas Bar Association Antitrust & Trade Regulation Section Council, W.M. “Mac” Taylor, Jr. American Inn of Court

What Civil Lawyers Need to Know About Criminal Law Chapter 13

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TABLE OF CONTENTS

I. OVERVIEW: DO I REALLY NEED TO LEARN ABOUT THE CRIMINAL PROCESS?.............................1 A. Increased “criminalization” of the law: Business conduct is subject to increasing enforcement scrutiny. .............................................................................1 B. Quick responses – and early mistakes – are often critical. ........................................................................2 C. Assumptions and habits cultivated in civil practice may be inapplicable in the criminal context. ...........................................................................................2 D. In the criminal process, clients’ strengths can hurt them. .........................................................................3

II. AN INTRODUCTION TO FEDERAL GRAND JURY PROCESS.................................................................3

III. INTERNAL INVESTIGATIONS AND RESPONDING TO GRAND JURY INVESTIGATIONS...................3 A. Should an internal investigation be conducted? .......................................................................................4 B. What happens once the internal investigation is completed? ....................................................................5

1. Considering a written report?..........................................................................................................5 2. Is disclosure required? ...................................................................................................................5 3. Potential effects of disclosing results...............................................................................................6

IV. REACTING TO SUBPOENAS AND SEARCH WARRANTS......................................................................6 A. Responding to Subpoenas......................................................................................................................6 B. Reacting to a Search Warrant ................................................................................................................7

V. DOCUMENT RETENTION AND DESTRUCTION .....................................................................................8

VI. FIFTH AMENDMENT AND DEPOSITION ISSUES...................................................................................9

VII. RECENT “RED-FLAG” ISSUES: SARBANES-OXLEY, THE PATRIOT ACT, AND INCREASED ATTENTION ON LAWYERS AND OTHER “GATEKEEPERS” ...................................9

A. Sarbanes-Oxley ....................................................................................................................................9 B. The Patriot Act................................................................................................................................... 10 C. Simultaneously Targeting Attorneys and Enlisting Them as De-Facto Government Agents................................................................................................ 11

VIII. SHOULD I RETAIN A CRIMINAL LAW SPECIALIST?.......................................................................... 12 APPENDIX: Representative Examples of Federal Criminal Statutes Civil Lawyers Should Be Aware Of................................................................................................ 13


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WHAT CIVIL LAWYERS NEED TO KNOW ABOUT CRIMINAL LAW

In the post-Enron environment, each day’s

newspaper reminds us that no lawyer can assume that their practice is immune to the criminal enforcement process. It is hoped that this paper will provide an introduction and general roadmap to several noteworthy criminal law issues and developments relevant to civil practice. Because a civil attorney’s practice is most likely to be impacted by issues that arise in the white collar crime area, this paper focuses on that general subject and does not specifically address a variety of important criminal law issues related to immigration, drug offenses and the like. I. OVERVIEW: DO I REALLY NEED TO

LEARN ABOUT THE CRIMINAL PROCESS? It is tempting to ignore the world of criminal law:

“After all, I don’t represent criminals. And, if one of my clients is charged with a crime, I can always refer them to a criminal lawyer.” Indeed, it is usually advisable to seek the assistance of a criminal law specialist. However, if action is delayed until your client is actually charged with a crime, critical opportunities to either prevent the indictment in the first place or to mount a successful defense may have been forfeited. Today’s reality is such that no lawyer can safely assume that criminal law does not touch on their practice. Increasingly, almost any individual or company can find themselves entangled in a criminal investigation. Even if that involvement is only as a witness, understanding the criminal process can help avoid unnecessary and potentially costly missteps. A. Increased “criminalization” of the law:

Business conduct is subject to increasing enforcement scrutiny. The criminal law’s reach is quite broad. Consider

the range of behavior that can be subjected to criminal investigation:

• procurement contracts with the federal

government, • communications between competitors, • submissions of bids, particularly for

government projects, • a variety of banking activities, • tax and investment activities, • providing rebates, • a variety of activities related to the sale,

purchase and trading of securities,

• submitting claims for reimbursement from the government in the health care industry, and

• the submission of environmental reports.1 And, of course, there are more. In addition, civil cases involving fraud or misstatements, even if they have not yet turned into a related criminal proceeding, often raise difficult questions related to the criminal process, such as the potential that civil testimony may be later used in a criminal proceeding should one arise. And, the chances are that such a case will ultimately involve some form of criminal investigation.

At a pace that seems to quicken with each new corporate scandal, state and federal enforcement officials have re-focused attention on potential misconduct. This focus has resulted in both new legislation either strengthening existing prohibitions or adding new areas of criminal liability and increases in resources allocated to enforcement officials and investigators. For example, on July 9, 2002 in response to a perceived increase in corporate criminal activity, the Corporate Fraud Task Force was created.2 The Task Force includes both a group from the Department of Justice aimed at increasing the enforcement activities of the Department, and an interagency group that focuses on maximizing cooperation and joint regulatory and enforcement efforts of the various federal enforcement agencies.3

In addition, such public attention and pressure increases the zealousness of investigations and prosecutions. Thus, defense counsel must assume taped conversations, the use of wire taps, the prospects of an accused facing additional charges to create (unfairly some might say) the appearance of pervasive misconduct, and other aggressive investigative techniques. This is particularly true now given the

1 These types of activities themselves are not, of course, criminal. However, this a representative sample of the wide-range of activities that are expressly regulated by criminal statutes. The chart attached at the end of this paper provides a general sampling of federal statutes that are potentially applicable to a variety of business conduct. Needless to say, this chart is not exhaustive. 2 Exec. Order No 13,271, 67 Fed. Reg. 46091 (July 11, 2002). 3 See generally the Task Force’s homepage, which may be accessed at http://www.usdoj.gov./dag/cftf/. The interagency group includes the Secretary of the Treasury, the Secretary of Labor, the Chairman of the Commodities Futures Trading Commission, the Chairman of the Federal Energy Regulatory Commission, the Chairman of the Securities and Exchange Commission, the Chief Inspector of the United States Postal Inspection Service, and the Director of the Office of Federal Housing Enterprise Oversight.


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increased ability of the government to use surveillance tools under the Patriot Act and its related rules.

As if federal and state enforcement officials do not already have sufficient incentives to prosecute alleged criminal activity, certain federal statutes such as the False Claims Act give powerful financial incentives to private individuals (including disgruntled former employees) to report suspected white collar criminal activity to the government. The False Claims Act allows these so-called “whistle -blowers” to keep a percentage of any monetary judgments against convicted companies. Once a case is filed, the Justice Department is invited to join the case and it makes its own independent determination.

In sum, there are more forces than ever before pushing criminal investigations and prosecutions, and investigators have a wide arsenal at their disposal to conduct them. To put it differently, there has never been a time when the civil and criminal worlds are more likely to collide. B. Quick responses – and early mistakes – are

often critical. While retaining a criminal defense specialist is

often advisable (an issue discussed in more detail below), civil practitioners can provide their clients a valuable service by being aware of several important aspects of criminal law. First, in the criminal law context, quick and appropriate early action, during an investigation (sometimes even before the existence of the investigation has been confirmed) and before an indictment often makes all the difference.

For example, as Martha Stewart’s recent conviction for making false statements to government investigators and the Arthur Anderson prosecution for destroying documents remind us, companies and individuals can also be subjected to criminal investigation for acts that may occur during (or at times even in advance of) a government investigation. These acts include destroying documents, witness tampering, and perjury, and they can trip-up even well-intentioned witnesses, turning what might have been relatively minor issues into significant criminal liability. C. Assumptions and habits cultivated in civil

practice may be inapplicable in the criminal context. The difference in available remedies and

punishments is of course the most obvious distinction between the civil and criminal arenas. However, equally important are the significant procedural distinctions that arise in a criminal investigation, procedural distinctions that often tilt the scales in the government’s favor:

Comparison of Civil and Criminal Processes Civil Criminal Both sides have compulsory process and techniques to achieve discovery, such as depositions, interrogatories, requests for admission and subpoenas duces tecum.

Generally, only the government has access to pretrial compulsory process, and has access to such powerful and intimidating tools as search warrants, grand jury subpoenas, wiretaps, “consensual monitoring,” secret informants.

Pleadings defining the positions of the parties are filed at the beginning of case development.

The indictment or information is only filed after government discovery is completed, and it is ready for trial.

Case development is generally conducted in open and public proceedings.

Grand jury investigation is conducted in secret proceedings, and it may be a crime for a witness to let a target know he has received a subpoena.

Assuming equal resources, both sides begin on an equal footing.

Both sides are on a totally different footing, since: (a) only the government has the power to grant leniency or immunity to potential witnesses; (b) only the government has the power to indict or charge potential witnesses with crimes if they do not cooperate; (c) only the government controls the timing of filing indictment or information.

Settlement discussions are generally not admissible in the underlying proceeding.

It is possible that civil settlement discussions may later be deemed admissible in a criminal prosecution. 4

4 See, e.g., United States v. Gonzalez, 748 F.2d 74 (2nd Cir. 1984) (acknowledging that Federal Rule of Evidence 408 was designed to encourage settlements, public interest in disclosure for criminal prosecution outweighed interests of furthering civil settlements); cf. United States v. Hays, 872 F.2d 582 (5th Cir. 1989) (overturning a criminal conviction because a consent decree that neither admitted nor denied wrongdoing should not have been admitted into evidence).

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D. In the criminal process, clients’ strengths can hurt them. A risk factor that can be easily overlooked is the

personal characteristics of the individuals involved. Unfortunately, the very characteristics that have contributed to the individuals’ success become problematic in the face of a government investigation. Smart, articulate and persuasive, the person’s gut reaction to receiving a subpoena or search warrant is often “I can explain whatever it is they need to know and get this behind me quickly.” This is particularly true when the person truly believes he or she has not committed any crime. With this false sense of confidence, the person all too frequently will then speak out to investigators, not really understanding who they are talking to, how that information may be used against them, and unaware that, regardless of how articulate they are, the communication will likely do them no good.

Even more dangerously, acting hastily may cause a business person (who of course is used to handling problems on his or her own) to try to make the problem “go away” by trying to hide documents that look harmful but could be explained or by talking to others who might have knowledge about the subject matter. Doing such things only increases the risk that the business person will then be investigated or prosecuted for obstruction of justice or witness tampering.

II. AN INTRODUCTION TO FEDERAL

GRAND JURY PROCESS It may be useful at this point to note a few

characteristics of a federal grand jury. Most importantly, the grand jury is a secret proceeding, so the target of the investigation and his lawyer cannot know what’s going on, what documents the grand jury has, and what witnesses are telling the grand jury. Grand juries deliberate in secret and, when they examine witnesses, lawyers, as a general matter, are not permitted inside.

That is not to say, however, that a business or individual who is the subject of a grand jury investigation can do nothing to influence the process. To the contrary, the primary goal of the criminal defense attorney is to avoid indictment – not only for the whatever substantive crime is being investigated, but also for offenses such as obstruction of justice, perjury or witness tampering that may occur during the investigation itself.

III. INTERNAL INVESTIGATIONS AND

RESPONDING TO GRAND JURY INVESTIGATIONS Quick action is critical in responding to a criminal

investigation. The response must begin as soon as you or your client learn about the potential for a criminal investigation. This may happen in a variety of ways --

for example, your client may receive a subpoena or visit by enforcement officials, someone in your client’s industry may receive such a subpoena or visit, or an issue may be discovered internally through normal business practices. However you learn of the issue – that, not later, is the time to act. To work towards preventing an indictment, it is necessary to thoroughly identify the underlying factual situation.

The process of learning this information, the “internal investigation” can itself be problematic. Indeed, many times it can create its own set of problems. Once undertaken, internal inquiries can result in perilous consequences to the institution or its employees. Thus, a crucial decision in any investigation is the initial decision of whether or not to conduct it in the first instance.

In deciding whether to commence an internal investigation, several important threshold questions arise, including:

• Who is the client (and who is not the client)? • What is the agreed scope of the

investigation? • What are the reporting lines of the

investigation? • What is the end goal of the investigation? • Who and how many people will conduct it;

what are the proper procedures for gathering the information and records (how will records be collected and how will interviews of witnesses proceed)?

• Whether a formal, written report will be created and submitted (and subject to disclosure to a grand jury or civil plaintiff)?

• What steps can be taken to properly observe and preserve applicable privileges, including work product and the attorney-client privilege?

• Will the result(s) of the investigation be disclosed the government and/or will such disclosure be necessary?

It is imperative that counsel carefully consider how the investigation is conducted, particularly those aspects involving interviews with employees. At a minimum, employees should be informed that counsel represents the company, not individual employees. In addition, employees should be informed that the communication is privileged but that the privilege belongs to the company and the company may later disclose the contents of the interview to third parties, including government agencies. Often the interests of the company and the employees are not identical and in fact may be adverse. The issues are particularly important when the company already knows of a pending agency investigation or even suspects one may


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be on the way. It is critical that counsel carefully consider the disclosures and representations that are made to employees in these circumstances, both because of potential legal consequences to the company and because of potentially applicable ethical considerations.

For the most part, the discussion above has assumed that counsel represents the corporation involved in an internal investigation. However, it goes without saying that internal investigations pose risks to employees, who may (either after on their own accord or at the suggestion of company counsel) seek independent legal advice.

Though the issues implicated in such a scenario are too numerous to discuss here, one development in the government’s investigation of Computer Associates for suspected accounting improprieties merits particular attention. Recent media reports indicate that employees of Computer Associates have been accused of obstruction of justice based on alleged misrepresentations those employees made – not to government agents – but to the company’s lawyers as part of the company’s own investigation. It appears this allegation is based on the theory that the employee knew that such misrepresentations would be forwarded to government officials.5 This astonishing development highlights how important it is to approach internal investigations with your eyes wide open. The implications for this type of charge are not limited to employees. For example, if an employee can be charged with obstruction of justice based on misrepresentations to company lawyers, it is not necessarily a stretch to argue that those lawyers are, in effect, government agents. If so, are additional admonishments to employees necessary or are there other limitations (including Fourth Amendment limitations) on the internal investigation process?

At this point, it is important to note that these issues are not limited to far-flung allegations involving accounting improprieties or high-level executives. To the contrary, these issues are equally important, for example, when a company or the company’s lawyer investigates an employee suspected of wrong doing.

In addition, particularly because of newly enacted statutory protection afforded to so-called whistle -blowers (employees who report wrongdoing), it is important that companies carefully consider possible ramifications before taking any action regarding employees implicated in any internal investigation.

A. Should an internal investigation be conducted?

Do I really want to know what really happened? This is a common “gut” reaction many business

5 See Alex Berenson, Case Expands Type of Lies Prosecutors Will Pursue, N.Y. TIMES, May 17, 2004, at C1.

people, and some lawyers, have when some type of misconduct is suspected. The answer is almost always (if not, always) “YES.” It is a mistake to make decisions related to disclosure of criminal responsibility and damage control with regard to a potential civil liability without the benefit of a full knowledge of the pertinent facts.

Usually an internal investigation takes place when a company has received information that misconduct may have occurred within its organization. It is a useful tool in determining what events took place and enabling the corporation to take appropriate actions to rectify the wrong or to defend itself. Particularly in regulated industries or for government contractors, the responsibility to correct misconduct is critical in seeking to avoid the adverse administrative and civil ramifications which, in the case of government contractors, includes suspension and debarment.

Many times, it is critical that management learn what happened, who was involved and most important, why it occurred so that it can make critical decisions, often within a short time frame, on a matter which may be of paramount importance to the corporation. For example, why misconduct may have occurred is important, first because it dovetails with the requirement under the criminal laws that intent be proven, and, second, because understanding why an event took place will have a range of ramifications for the company and be a key element in analyzing what took place and preparing defenses. If the company is to develop arguments against prosecution it must fully understand the facts.

The risks created by not having a full command of the facts are significant. Such ignorance will likely lead to incorrect statements being made to the prosecution and the attendant loss of credibility (or worse). It also may result in a company's counsel being blind sided by the government down the road, a risk only heightened by the far-reaching information-gathering tools at the government’s disposal.

In addition, management needs to be in a position to act rather than react, especially once the government has obtained information on wrongdoing and already mounted an investigation. The company should have a well-established exit interview reporting system for employee complaints, deal seriously with third party complaints, perhaps use an employee company hot line, and use similar methods that are designed to make sure management learns at an early date that its conduct has been called into question. Effective lines of communication with internal and external auditors will also insure that evidence of improprieties is appropriately pursued.

Clearly the structure of an internal investigation must be related to the severity and scope of the matter under investigation. There is certainly a wide difference between suspicion that a bookkeeper has


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embezzled funds and receipt of a report of widespread bribery in connection with the obtaining of government contract or suspicion of widespread accounting improprieties..

B. What happens once the internal investigation is

completed? At the conclusion of the investigation, counsel

will need to consider the means of conveying the results and conclusions to management. There is no way to generalize here, as the appropriate course will be dictated by the circumstances. It may depend on the results of the investigation.

1. Considering a written report?

If misconduct is discovered, it may not be advisable to prepare a written report. Such reports always have the prospect of getting into the wrong hands, resulting in wavier or some other disadvantage. If the result is exculpatory, it may be worthwhile to put such a report in written form for management.

Issues as to whether the report will eventually be turned over to government officials also need to be considered. Allied to this question is the issue of whether or not a written submission should be made to the government at the end of an investigation, and if one is, are all the underlying work papers thereby discoverable. It is also important to consider whether disclosure is required under Sarbanes-Oxley or any other regulation. On the other hand, it is important to consider the perils of turning over the report. For example, in addition to subjecting the report to later discovery in civil lit igation, disclosure may also constitute a waiver of privileges that may have otherwise protected documents (such as witness interview statements or attorney interview notes) that underlie the report.

Are there practical advantages to presenting the findings of the internal investigation to the government? Sometimes, yes. By making a thorough presentation you may be able to (1) persuade the government that the right thing to do would be to decline to indict, while at the same time (2) demonstrate to the government that you are thoroughly prepared in this case and if they go forward they will face the prospect of losing at trial.

As mentioned above, the paramount goal is to prelude an indictment. Thus, it is worth remembering that the Department of Justice focus on essentially three broad areas in considering a potential prosecution: (1) whether a federal offense has been committed, (2) will the person be tried and found guilty (does the government possess evidence sufficient to win?), and (3) whether federal interests would be furthered by prosecution if there are non-criminal alternatives. Other internal Department guidelines consider the advisability of refraining from

criminal prosecution when adequate civil remedies exist. Thus, the presentation may make use of this argument.

Similarly, as discussed in more detail, if the company hopes to avail itself of the benefits of cooperation with the Department of Justice or Securities and Exchange Commission, recent pronouncements from those groups suggest that disclosure of the internal investigation may be necessary.6 Indeed, enforcement officials increasingly rely on internal investigations to provide them with, in effect, a complete factual background to the government’s own investigation and may call company attorneys who conducted the investigation as grand jury witnesses.

2. Is disclosure required?

Regardless of the advantages or disadvantages of disclosure, counsel must also consider whether disclosure to the government is required. Historically, as a general matter, a company has not been required to disclose knowledge of wrongdoing to enforcement officials.7

However, an affirmative act concealing a crime may constitute the criminal act of misprision of a felony. 8

At one extreme, mere silence, without more, does not generally constitute an affirmative act of concealment.9 On the other hand, actually lying to an investigator may be sufficient to trigger criminal liability.10

In certain circumstances, disclosure is compulsory. For examples, under the Anti-Kickback Enforcement Act of 1986, 41 U.S.C. § 57, or 12 C.F.R.

6 See Memorandum from Deputy Attorney General Larry D. Thompson to United States Attorneys, Subject: Principles of Federal Prosecution of Business Organizations (January 20, 2003), available at www.usdoj.gov/dag/cftf/ corporate_guidelines.htm. 7 See generally 18 U.S.C. § 4; United States v. Baez, 732 F.2d 780 (10th Cir. 1984); United States v. Sampol, 636 F.2d 621 (D.C. Cir. 1980); United States v. Hodges, 566 F.2d 674 (9th Cir. 1977); Neal v. United States, 102 F.2d 643, 646 (8th Cir. 1939); United States v. Bustillos, 31 F.3d 931, 932 (10th Cir. 1994); United States v. Gravitt, 590 F.2d 123, 126 (5th Cir. 1979). 8 Id. 9 See generally United States v. Ciambrone, 750 F.2d 1416, 1418 (9th Cir. 1984); Lancey v. United States, 356 F.2d 407, 410 (9th Cir. 1966), cert. denied , 385 U.S. 922, 87 S.Ct. 234 (1966); United States v. Hodges, 566 F.2d 674, 675 (9th Cir. 1977); United States v. Vasquez-Chan, 978 F.2d 546, 554 (9th Cir. 1992). 10 See, e.g., Brogan v. United States, 522 U.S. 398, 118 S.Ct. 805 (1998).













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§ 21.22, promulgated by the Comptroller of the Currency, federal banks are required to file criminal referrals. Likewise Department of Defense regulations urge, if not actually require, government contractors to voluntarily disclose identified misconduct.

Last, but certainly not least, various securities laws and related regulations impose certain reporting requirements on public companies. In particular, it is important to consider whether the requirements imposed by the Sarbanes-Oxley Act of 2002 require or counsel disclosure.

3. Potential effects of disclosing results.

If a report regarding an internal investigation is going to be disclosed, it is important to consider the probability that doing so will result in a waiver of privileges that otherwise might have protected the report (and documents underlying the report) from disclosure in other proceedings may be waived. At least in federal courts, communications between an entity’s employees to the entity’s counsel are (broadly speaking) privileged if the communications were within the employee’s corporate duties; the employee were sufficiently aware that the information sought from them was for the purpose of providing legal advice; and the communications were intended to be and kept confidential. See Upjohn Co. v. United States, 449 U.S. 383 (1981). It is unclear whether production of some or all of the information developed during an internal investigation to a government agency amounts to a waiver of otherwise applicable privileges.

Generally speaking, under federal law, the attorney-client privilege is waived by any voluntary disclosure of confidential information or materials.11 Under this view, which has been adopted by the majority of federal appellate courts to address the issue, any disclosure of privileged materials to the government would amount to a waiver and thus preclude the assertion of the attorney client privilege over those materials in a subsequent proceeding. 12 A minority view is found in the case of Diversified Industries v. Meredith , 572 F.2d 596 (8th Cir. 1977), where the Eighth Circuit concluded, largely on policy reasons supporting internal investigations, that a 11 See, e.g., Permian Corp. v. United States, 665 F.2d 1214, 1219 (D.C. Cir. 1981). 12 See United States v. Massachusetts Inst. of Tech., 129 F.3d 681, 685 (1st Cir. 1997); Genentech, Inc. v. United States ITC, 122 F.3d 1409, 1417 (Fed. Cir. 1997); Solomon Bros. Treasury Litig. v. Stenhardt Partners, L.P., 9 F.3d 230, 235 (2nd Cir. 1993); Westinghouse Elec. Corp. v. Republic of Philippines, 951 F.2d 1414, 1424 (3d Cir. 1991); In re Martin Marietta Corp., 856 F.2d 619, 623-24 (4th Cir. 1988), cert. denied, 490 U.S. 1011 (1989); and Permian Corp. v. United States, 665 F.2d 1214, 1221 (D.C. Cir. 1981).

limited production to the SEC did amounted only to a limited waiver. Likewise, it might be possible to protect some materials under the work product doctrine, even if the attorney-client privilege is deemed to have been waived.13 Finally, if the disclosure of otherwise privileged materials is actually compelled, it might be possible to argue that the disclosure was not voluntary and thus should not result in a waiver.14

A thorough discussion of the subtleties that can arise in this area is beyond the scope of this general overview. The “take-away” lesson is to know that, in conducting an internal investigation, you will often be required (either legally or for strategic reasons) to disclose the results of that investigation to the government and that, by doing so, you may risk subjecting that information and supporting documents to discovery in subsequent proceedings.

IV. REACTING TO SUBPOENAS AND SEARCH

WARRANTS The government’s tools for gathering information

in a criminal investigation include subpoenas and search warrants.15 The government does not need to demonstrate “probable cause” before issuing a subpoena, but such a showing is necessary to support a search warrant.

A. Responding to Subpoenas

Federal grand jury subpoenas may seek testimony and/or tangible things from any witness. Witnesses generally fall within three categories: “targets,” “subjects,” or “other witnesses.” A “target” is a

13 See, e.g., Martin Marietta Corp. v. Pollard , 856 F.2d 619 (4th Cir. 1988), cert. denied, 490 U.S. 1011, 109 S.Ct. 1655 (1989) (holding that using portions of documents in disclosures to government waived attorney client privilege but the documents remained protected by the work product doctrine; Permian, 655 F.2d 1214; but see In re Columbia/ HCA Healthcare Corp. Billing Practices Litig., 293 F.3d 289 (6th Cir. 2002) (applying same standards to work product and attorney-client privilege). 14 See, e.g., Transamerica Computer Co. v. IBM, 573 F.2d 646, 651 (9th Cir. 1978); Shields v. Sturm, Ruger & Co., 864 F.2d 379, 382 (5th Cir. 1989); Smith, et al. v. Texaco, Inc. 186 F.R.D. 354 (E.D. Tex. 1999). 15 Subpoenas can take several shapes, including grand jury subpoenas, civil investigative demands (issued during an investigation under the False Claims Act), health care fraud (HIPPA) subpoenas, and requests for information from the Office of Inspector General (“OIG subpoena”). Often, the government uses an OIG subpoena in lieu of a grand jury subpoena if possible because information obtained in that manner may be shared with other government agencies. Information gathered in response to a grand jury subpoena may only be disseminated by other government agencies if the government can demonstrate a particularized need.


























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putative defendant, someone who is the focus of an investigation and against whom there is substantial evidence linking that person to a crime. A “subject” is a witness whose conduct is within the scope of the grand jury’s investigation; and “other witness” may include custodial witnesses (i.e., a document custodian). This distinction has practical effect: targets and subjects are usually advised about their right to counsel and right against self-incrimination; other witnesses are generally not advised of those rights.

Upon receipt of a subpoena, it should be examined to determine whether it has been properly issued. For example, a subpoena that is “too sweeping” in its terms may be subject to a motion to quash. At the very least, counsel may be able to successfully negotiate an agreed scope of production. Alternatively, though the general rule is that a witness or recipient of a subpoena must bear the costs of production, it may be possible to argue in appropriate circumstances that the government should be required to share in the cost of production. 16

In responding to the subpoena, it is imperative that responsive documents be identified and isolated immediately. The easiest way for what appears to be an inconvenience to turn into something far more serious is to raise concerns that documents have been altered or destroyed. Needless to say, any documents should be reviewed by counsel prior to production.

A common question is whether the recipient of a subpoena must produce documents in response it if those documents tend to incriminate the recipient. Generally speaking, a corporate and other collective entities (such as unincorporated associations, labor unions, political parties, and partnerships) are not protected by the Fifth Amendment. This rule applies to a corporate custodian of records acting as agent for the entity even if the documents might incriminate that person individually.

In some circumstances, if the recipient of a subpoena is a natural person or sole proprietorship, it may be possible to argue that the mere “act of production” is precluded by the Fifth Amendment because the subpoena “compels the holder of the document to perform an act that may have testimonial aspects and an incriminating effect.17 Generally, a court will look to whether the witness, by producing the documents, would admit that the documents existed, were in the witness’ possession or control, and were authentic.18 In response to such an argument, the

16 See In re Grand Jury No. 76-3 (MIA) Subpoena Duces Tecum, 555 F.2d 1306 (5th Cir. 1977). 17 See United States v. Doe, 465 U.S. 605 (1984). 18 See United Sta tes v. Hubble , 530 U.S. 27 (2000).

government may argue that the act of production should not be considered testimonial because at least one of those factors is a “forgone conclusion.”19

With the proliferation of laptops and other mobile devices, a difficult question arising with more frequency is whether a particular document is a corporate document not protected by the Fifth Amendment or a purely personal document that may be. For example, how does one react when the document at issue is a corporate employee’s calendar or “day timer.” Several courts have held that, as mentioned above, so long as the document was voluntarily prepared, it is not subject to Fifth Amendment protection, regardless of whether the document is business or personal. However, the Fifth Circuit considers several factors in deciding whether the record is strictly personal, and thus perhaps protected from the “act of production.” The non-exhaustive criteria include: who prepared the document; the nature of the document’s contents; who possessed the document; who had access to the document; whether the existence of the document was necessary to or in furtherance of corporate business.20 This issue can be particularly pronounced in the context of subpoenas served on former corporate employees.

B. Reacting to a Search Warrant

With increasing frequency, government enforce-ment officials are applying surprise searches of corporations and employees, often in coordination with other enforcement agencies (both at the state and international levels). Needless to say, reacting properly to such a raid is of the utmost importance. While each situation is different and requires an individualized response, some generalities are possible.

At the outset, it is advisable to contact experienced criminal counsel immediately. At no time should you interfere with the raid or otherwise obstruct the agents. For example, you should not instruct employees that they should not or cannot talk with the agents. Such conduct can easily lead to a criminal obstruction of justice charge and/or immediate arrest. On the other hand, it is generally permissible to inform employees that they can respond to questions by informing the agent that he or she would like to speak with an attorney. The hard truth is that little, if anything, is ever gained by submitting to an interview during a search warrant, and there may be much to lose.

Finally, if possible, it is helpful to attempt to keep an inventory of records and documents that are taken.

19 See Butcher v. Bailey, 753 F.2d 465 (6th Cir. 1985). 20 See In re Grand Jury Proceedings, 55 F.3d 1012, 1013-14 (5th Cir. 1995) (per curiam).







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It is also helpful to ask for the affidavit that was given to the magistrate to support the issuance of the search warrant (though the agents may refuse to provide it). You should also ask for business cards of the agents conducting the search for possible later reference.

V. DOCUMENT RETENTION AND

DESTRUCTION An issue closely related to the proper response to

a government subpoena is the importance of carefully avoiding any risk of being accused of improperly destroying or failing to preserve documents. As noted earlier in this paper, government officials increasingly (and creatively) focus on “collateral charges” such as obstruction of justice to prosecute activities that officials believe have impeded an investigation.

Thus, it is important to understand both the existence of, and the parameters, of the multiple statutes that can impose criminal liability based on the destruction of documents or other evidence. First, of course, it is necessary to recognize the power these statutes add to a government prosecutor’s arsenal. It is not uncommon for a company or person to be facing tolerable (albeit unpleasant) circumstances as far as the substantive allegations are concerned only to find themselves facing more significant problems stemming from false or misleading statements provided to investigators or by attempts (either intentional or merely misguided) attempts to destroy potentially relevant documents or otherwise impede an investigation.

Equally important, counsel representing individuals in a criminal investigation must be aware of the potential for misuse of these broad statutes, through unwarranted threats of prosecution for perjury or obstruction. These attacks may also come in the form of subpoenas served on the attorney, seeking a finding of “crime-fraud” in an attempt pierce the attorney-client privilege.

The basic statute prohibiting obstruction of justice is 18 U.S.C. §1503. Section 1503 provides:

Whoever corruptly, or by threats or force, or by any threatening letter or communication, endeavors to influence, intimidate, or impede any grad or petit juror, or officer in or of any court of the United States...or by any threatening letter or communication, influences, obstructs, or impedes, or endeavors to influence, obstruct, or impede, the due administration of justice shall be punished... the punishment for an offense under this section is ...imprisonment for not more than 10 years, a fine under this title, or both.

18 U.S.C. § 1503 (a), (b) (3). Destruction, alteration, or concealment of documents falls under §1503 because it deprives the courts of the necessary evidence to achieve justice. Importantly, it is clear from the language of the statute that "success is not the criterion of the statute though it may aggravate the offense."21

An traditional limitation on Section 1503 was the statute’s requirement that some sort of pending judicial proceeding. That does not mean, however, that a subpoena must have actually been received. Under certain circumstances, an obstruction charge under Section 1503 can stand even if the allegedly altered or destroyed documents had not yet been called for by the government.22

It is also important to note that recent legislation has purported to expand the ability of the government to prosecute companies and individuals for alleged obstruction of justice. For example, 18 U.S.C. § 1519 is a new provision making it a crime to knowingly alter, destroy, mutilate, conceal, cover up or make a false entry in any record, document or tangible object with the intent to impede, obstruct or influence an investigation within the jurisdiction of any department or agency of the U.S., “or in relation to or contemplation of any such matter or case.” See 18 USC § 1519 (emphasis added).

Finally, a question common to almost all clients, especially at the close of a piece of litigation has concluded, is “can I get rid of these documents now?” This is not an unreasonable question. After all, many of these documents are no longer necessary to the business or individual, have been retained solely because of the pending litigation, and create costs associated with storage and preservation. However, as noted above, any destruction of documents must be done after considering whether doing so might risk an obstruction-related charge. This can often be a difficult question to resolve and of course the answer will depend on the particular circumstances involved. In general, the key to thinking through this issue is to consider whether there is an awareness of, or an anticipation of, any related government investigation. Needless to say, if an investigation is ongoing when the civil case is resolved, the documents should be retained. However, as noted above, an investigation does not have to already be in existence to trigger duties to preserve.

21 United States v. Siegal , 152 F. Supp. 370, 373 (S.D.N.Y. 1957); see also United States v. Gage, 183 F.3d 711, 715 (7th Cir. 1999). 22 See, e.g., United States v. Solow, 138 F. Supp. 812 (S.D.N.Y. 1956).

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=US_distctopinions&volume=152&edition=F.Supp.&page=370&id=58700_01




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VI. FIFTH AMENDMENT AND DEPOSITION ISSUES A common intersection of the criminal and civil

law contexts involves a person’s rights against self-incrimination. In a civil proceeding, the question often arises whether a witness can invoke their Fifth Amendment rights in a civil proceeding, and, if so, should they. It is well-established that, as a general matter, the Fifth Amendment applies to both criminal and civil proceedings.23 However, this right raises several important issues. For example, a criminal defendant must be aware of the civil consequences of invoking the right to not testify in a criminal proceeding. Civil exposure can be quite extensive. In some situations, particularly in the corporate context, the potential civil liability may outweighing any potential criminal exposure. That does not mean that civil implications of invoking the right not to testify trump the protections such an invocation may have in the criminal proceeding, but it is an issue that must be carefully considered.

Assuming a witness decides to invoke his or her Fifth Amendment rights, certain procedural requirements arise. While a thorough discussion of the types of questions a witness may properly refuse to answer and the proper mechanism for properly invoking the Fifth Amendment are beyond the scope of this brief overview, certain points should be noted. Generally speaking, a witness in a civil proceeding can invoke the Fifth Amendment’s protections if the witness reasonably believes that the disclosures could be used in a criminal prosecution. 24 The witness cannot simply make a blanket assertion, but instead must decide whether to assert the right on a question by question basis. An issue that should also be considered in this analysis is the extent to which answering certain questions may constitute a waiver of the right.

Likewise, it is important to remember that a trier of fact may draw an adverse inference with respect to the matter about which a witness in a civil proceeding has asserted her or his Fifth Amendment rights not to testify.25 In some circumstances, this may support a finding of summary judgment aga inst that party.26 However, courts have placed limits on the ability to draw an adverse inference, generally requiring that

23 See, e.g., Lefkowitz v. Turley, 414 U.S. 70, 77 (1973). 24 See, e.g., In re Corrugated Container Antitrust Litig., 620 F.2d 1086, 1091 (5th Cir. 1980);United States v. Bodwell, 66 F.3d 1000, 1001 (9th Cir. 1995) 25 See, e.g., Baxter v. Palmigiano, 425 U.S. 308 (1976). 26 See, e.g., F.S.L.I.C. v. Molinaro , 889 F.2d 899 (9th Cir. 1989); United States v. Private Sanitation Indus. Ass’n, 811 F. Supp. 802 (E.D.N.Y. 1992).

there also be independent evidence of the fact to which the party has refused to answer before permitting the inference.27 This distinction may be particularly relevant when the question is simply whether the party should respond to an allegation in a complaint.28

An interesting twist on this issue arises when a civil litigant seeks to introduce evidence of a Fifth Amendment invocation by one co-defendant as evidence against another co-defendant. Because of the obvious prejudicial effect a Fifth Amendment invocation can have in a civil case, there are strong arguments against admitting them into evidence against a party that has not invoked that right.29

Finally, a question that frequently arises relates to whether a civil litigant may continue to assert a right not to testify when the known related criminal proceeding has been completed. Generally, because of the wide variety of potential jurisdiction and authorities that may seek to bring criminal charges, the mere fact that the identified criminal proceeding has been completed does not preclude a civil litigant from invoking his or her right against self-incrimination. So long as the right has been validly asserted, a court cannot compel testimony unless the witness has the protection of a duly issued immunity order.30

VII. RECENT “RED-FLAG” ISSUES:

SARBANES-OXLEY, THE PATRIOT ACT, AND INCREASED ATTENTION ON LAWYERS AND OTHER “GATEKEEPERS”

A. Sarbanes-Oxley President Bush signed into law the Sarbanes-

Oxley Act of 2002 on July 30, 2002. The ramifications of this far-sweeping statute are still being explored, and full discussion of its provisions and potential use (or misuse) is beyond the scope of this general introduction to the criminal process. Suffice it to say that Sarbanes-Oxley raises a variety of issues related to the obligation to disclose misconduct, an attorney’s duty to disclose suspected misconduct in relation to the attorney’s ethical duties of confidentiality and loyalty, and other important issues (including, for example, potential impact on rights to indemnification of costs incurred defending a securities investigation). In short, 27 See, e.g., LaSalle Bank Lake View v. Seguban, 54 F.3d 387, 391 (7th Cir. 1995); Peiffer v. Lebanon Sch. Dist., 848 F.2d 44, 46 (3rd Cir. 1988). 28 See, e.g., Nat’l Acceptance Co. v. Bathalter, 705 F.2d 924, 930 (7th Cir. 1983) (suggesting that adverse inference cannot be drawn when silence is the answer to an allegation contained in a complaint). 29 See In re High Fructose Corn Syrup Antitrust Litig ., 295 F.3d 651, 664 (7th Cir. 2002); In re Citric Acid Litg., 996 F. Supp. 951, 961 (N.D. Cal. 1998). 30 See, e.g., Pillsbury v. Conboy, 459 U.S. 248 (1983).




















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it is important to recognize that Sarbanes-Oxley reflects the growing emphasis on alleged corporate misconduct (and the resulting infusion of resources to those who investigate such misconduct) and is a concrete reminder that any attorney who represents companies or their employees that such clients are increasingly at risk of finding themselves embroiled in a criminal investigation.

Among Sarbanes-Oxley’s substantive provisions are new criminal statutes (including an explicit criminal provision proscribing securities fraud and additional obstruction of justice prohibitions), increased the statutory maximum sentences for several existing crimes, and instructed the U.S. Sentencing Commission to review the sentencing guidelines that address white-collar crimes.

There is little doubt that Sarbanes-Oxley has significantly impacted on sentencing. For example, in November 2003, the Sentencing Commission, consistent with the guidance set out in the Sarbanes-Oxley Act, endorsed the Act’s quadrupling of the statutory maximum penalties for wire and mail fraud from five to twenty years and exposed brokers and dealers, and other investment advisors, to increased sentence enhancements. In addition, the Sentencing Commission significantly increased the potential jail sentence for certain financial crimes.31

In addition, Sarbanes-Oxley sets forth a basis to impose standards of professional conduct for attorneys “practicing before the Commission.” These new standards generally extend to both in-house and outside counsel that assist in the preparation of documents that will be submitted to the SEC. Perhaps the most important, and controversial, requirement of these new standards is the provision requiring attorneys to report “evidence of a material violation” of a securities law, breach of fiduciary duty, or similar violations to the company’s chief legal officer, and some circumstances, the company’s board of directors.32 This reporting obligation arises when it is “reasonably likely” that a material violation has occurred. These standards are of course difficult to precisely define, but suffice to say they can reach a wide-range of conduct.

If the attorney does not receive an “appropriate response” from the chief legal officer within a

31 It remains to be seen what impact, if any, the United States Supreme Court’s important decision on June 24, 2004 in Blakely v. Washington will have on continued efforts to use the sentencing guidelines to enhance white-collar criminal penalties. In Blakely, the Court struck down as a violation of the Sixth Amendment right to trial by jury an enhanced sentence based on a factual finding made by the judge rather than the jury. This reasoning may well apply to the Federal Sentencing Guidelines. 32 See 17 C.F.R. § 205.2(i).

reasonable time, the attorney must report the suspected wrongdoing “up the ladder” to the audit committee, a committee comprised solely of independent directors, or to the board if no such committee exists. Alternatively, a company may establish a qualified legal compliance committee (“QLCC”) independently to investigate reports of a material violation. If a QLCC exists, the attorney may make his or report to it and are relieved of any further reporting requirements and of any obligation to evaluate the company’s response.

The most talked about provisions of Sarbanes-Oxley are the provisions that purport to permit (though not require) attorneys to reveal confidential client information to the extent the attorney “reasonably believes” disclosure is necessary to prevent the client from committing a material violation that is likely to cause substantial injury to the financial or property interests of the company or investors. Even more controversial was the proposed rule to require attorneys to “noisily withdraw” from a representation in certain cases. This requirement has not yet been finally approved and remains under consideration. Nevertheless, it clearly represents a trend towards attempting to enlist attorneys as additional tools to combat perceived corporate misconduct (a trend discussed more in Section 3 below).

B. The Patriot Act

At this point, most people are at least generally aware of the Patriot Act and its origins as an attempt to combat terrorism. Of course a thorough discussion of the Patriot Act and its potential ramifications are well beyond the scope of this paper.33 However, several provisions are noteworthy to civil practitioners. For example, the Patriot Act created new electronic surveillance authority, new substantive crimes, increased penalties for existing crimes, new immigration restrictions, changes to the money laundering laws, and changes to biotechnical research protocols. Any of these provisions might bring a company or other civil client within the scope – either directly or indirectly – of a criminal investigation.

For example, companies could increasingly become venues for federal criminal investigations of certain employees suspected of utilizing the work environment for illegal and/or terroristic activities. These investigations will necessarily involve some combination of government-installed wiretaps at the 33 President Bush signed the The Patriot Act counter-terrorism legislation into law on October 26, 2001 as Public Law 107-56. The legislation, H.R. 3162, is officially cited as the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism," or more simply, the USA Patriot Act of 2001."


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workplace, execution of search warrants, and issuance of grand jury subpoenas.

Another potential result may be an increased incentive for companies to monitor activities of their employees (especially the use of the internet) more carefully at the workplace to avoid vicarious investigation of corporate activities.

The following is a brief (and non-exhaustive) overview of Patriot Act provisions potentially relevant to the normal corporate environment:

• New Title III/ Wiretap Predicates - Sections

201 and 202 of the Patriot Act extends federal electronic surveillance statutes to include interception of wire communications, oral communications, and electronic communications, digital-display pagers, and facsimile machines, for terrorism crimes, offenses relating to chemical weapons, and computer fraud abuse.

• Voice Mail - Section 209 treats the interception of voice-mails similar to the interception of written documents pursuant to a federal or state search warrant. Formerly, the government could only intercept voice mails pursuant to onerous Title III procedures (those requirements included a federal prosecutor's application; an agent's affidavit; and order from a federal district judge).

• Internet Communications - Section 216 expanded authority for court ordered pen register installation (i.e., record of dialed outgoing calls) and the installation of trap and trace devices (used to record incoming calls). Notably, the pen register amendment allows federal law enforcement agencies to obtain a single pen register order that may be implemented anywhere in the country. This change allows the government to trace internet communications as long as the information likely to be obtained is relevant to an ongoing criminal investigation.” This standard is well below that required for a search warrant or Title III order.

C. Simultaneously Targeting Attorneys and

Enlisting Them as De-Facto Government Agents Recent public announcements and headlines have

confirmed that attorneys are not immune from criminal prosecution. For example, last year, Michael Chertoff, then-Assistant Attorney General for the Department of Justice’s Criminal Division, noted that while accountants had recently been at the center of

prosecutions, lawyers may not be “far behind” if they continued to facilitate the creation of complex transactions that provide a misleading picture of a company’s health. 34 This commitment is not limited to the federal government. Manhattan District Attorney Robert Morgenthau has indicated that if lawyers do not properly disclose financial improprieties, they may become a target of an investigation. 35 These words have been followed with action. For example, Rite-Aid’s general counsel was convicted in September 2003 on multiple counts of conspiracy and obstruction of justice arising from a securities fraud investigation, and other general counsel for public companies have recently been indicted and/or charged by the Securities and Exchange Commission.

At the same time, beginning in earnest in 1999, enforcement officials around the world are increasingly seeking to enlist the aid of professionals, including attorneys, in the global effort to combat money laundering. These efforts are commonly referred to as the “Gatekeeper Initiative.” Simply put, the Gatekeeper Initiative is intended to impose the same reporting and records requirements on professionals such as lawyers, accountants, investment advisors, real estate professionals, casinos, and trust providers that are currently imposed on financial institutions. This initiative, while perhaps legitimately motivated by the desire to curb money laundering (and in particular terrorist financing) raises several troubling issues when applied to attorneys, including whether such an initiative is consistent with attorneys’ duties of confidentiality and loyalty to their clients. For these reasons, the Gatekeeper Initiative has roused active opposition from various organized bar associations, both in the United States and abroad.

Such regulations have been adopted in varying degrees in several countries around the world, but not yet in the United States. However, the United States is actively examining these issues and has formed an inter-agency group to examine the issue. Especially when those aspects of the Sarbanes-Oxley Act that permit disclosure of client confidences and that, at a minimum, have proposed requiring “noisy withdrawals” in certain circumstances in order to combat corporate misconduct, it is not unreasonable to expect that the Gatekeeper Initiative will be

34 Mark Wigfiled, “Top DOJ Cop Says Corporate Lawyers are Now in the Agency’s Sights,” Special Report on WorldCom, January 22, 2003, at 12, cited in Lanny A. Breuer and Christopher J. Burke, “Lawyers, Accountants and Other Capital Market ‘Gatekeepers’ Come Under Prosecutors’ Srutiny,” 18 Legal Backgrounder No. 34, Washington Legal Foundation (Aug. 22, 2003). 35 See Brook A. Masters, Tyco Ex-Counsel Fifths Charge, WASH. POST ., Feb. 8, 2003, at E1.


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implemented at least to some degree in the foreseeable future in the U.S. It is an issue that all attorneys would do well to follow. At a minimum, this development will impact civil attorneys representing those professionals that are likely to come under the Initiative’s scope.

VIII. SHOULD I RETAIN A CRIMINAL LAW

SPECIALIST? In closing, a question that inevitably arises is “at

what point do I need to talk with or retain a criminal law specialist?” The answer is straightforward. Whenever potential criminal implications are identified, it is generally worthwhile to consult or engage criminal defense counsel as quickly as possible. Increasingly, government officials act preemptively, with little or no warning. Examples of such actions include:

• executing a search warrant or warrants and

taking critical information, computers and other materials;

• contacting both current and former employees away from the office, at home or other times when legal counsel is not present and cannot be accessed by those employees (note that in such circumstances government agents frequently ask the questioned individual not to inform the target of the investigation about the questioning);

• issuing grand jury subpoenas to third parties; and

• obtaining the services of an “inside source” and using that source to record conversations (conversations that are themselves often scripted).

Using these, and other, methods, government

investigators often have access (and understand) much more about the subject of the investigation than might otherwise be assumed (and in fact may have a better understanding of that subject than the target himself).

Particularly given this possible “information advantage” the Government may already have, potential targets of a government investigation (and their counsel) must be aware of the potential that damaging evidence may be needlessly provided through discovery in civil proceedings, government filings, tax return examinations, among other avenues. Criminal defense counsel may prove valuable in analyzing these and other relevant considerations. Also, even if the individual or company is not the actual target of the investigation, consultation with a criminal law specialist will help prevent costly missteps along the way.

In selecting criminal defense counsel, there is no formula to be applied. However, certain considerations should be taken into account, including: (1) an awareness of and familiarity with both civil and criminal defense strategies; (2) experience; (3) adequate resources to handle the frequently complex and consuming issues that arise in this context; and (4) the ability to relate with and, if necessary, influence multiple counsel, since such situations often involve multiple parties with varying degrees of similar and divergent interests.


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Representative Examples of Federal Criminal Statutes Civil Lawyers Should Be Aware Of

Type of Activity Potentially Relevant Statutes

Procurement Fraud Defense Industry

False Statements (18 USC §1001) Mail Fraud (18 USC §1341)

Conspiracy to Defraud U.S. (18 USC §371) RICO (18 USC §1961)

Price Fixing, Market Allocation, Bid Rigging

Sherman Act (15 USC §1) Mail Fraud (18 USC §1341)

False Statements (18 USC §1001) RICO (18 USC §1961)

Business Fraud: Kick-Backs, Illegal Rebates, Bribery

of Public Officials

Mail Fraud (18 USC §1341) Conspiracy to Defraud U.S. (18 USC §371)

Bribery (18 USC §201) RICO (18 USC §1961)

Bank Fraud

Multiple Title 18 Offenses

Tax Fraud

Tax Code

Securities Fraud

Securities Fraud (18 USC § 1348) Mail Fraud (18 USC §1341) Wire Fraud (18 USC §1343)

RICO (18 USC §1961)

CEO and CFO Certification Requirements (periodic reports filed with the SEC comply with the law

and that the information contained in the report fairly presents, in all material respects the financial condition

and results of operations of the issuer

Punishes knowing and willful violations

(18 USC §1350)

Knowing and willful failure by accountant to maintain all audit or review papers for 5 years

18 USC §1520

Conspiracies to commit mail fraud, wire fraud, bank fraud, health care fraud, and the new securities fraud

18 USC §1349

Increased fines and imprisonment related to reporting and disclosures regarding employee benefit plans

29 USC §1131

Collateral Charges

Perjury (18 USC §1623) Witness Intimidation (18 USC §1512 and 1513)

Obstruction of Justice (18 USC §1501 and 18 USC §1519)

Taking harmful action against any person for providing truthful information regarding commission of federal

crime to enforcement officer

18 USC §1513(c)

PartyTALKIllustrations by Gilberto Sauceda

948 | Texas Bar Journal | December 2004 www.texasbar.com

QMy brother is in a wheelchair. Does his landlord have to make modifications to his apartment so that he can use his wheelchair in his apartment?

ADennette Vaughn Sweeney of Lubbock: In housingcovered by the Fair Housing Act, the landlord mustallow your brother to make modifications to the proper-ty which are necessary to afford him full use of thepremises. This might include such things as making the

doorways wider to allow for thewidth of his wheelchair or evenremoving the bathtub to replaceit with a roll-in shower. Yourbrother would have to pay forthese modifications. When yourbrother moves out, if the modi-fications he made might inter-fere with the next tenant’s useof the property, he might haveto make reasonable restorationsto the original condition, suchas replacing the bathtub. Heprobably wouldn’t have to makethe doorways more narrow againsince wider doorways would not

interfere with the next tenant’s use of the apartment.

QMy wedding photographer says I cannot post my wedding photos on the Internet, claiming he has the copyright. There was nothing in our contract on this. Who is right?

ADavid R. McAtee II of Dallas: Unfortunately, the wed-ding photographer. Unless your contract says otherwise,the photographer (orhis employer) ownsthe copyrights in thephotographs. Underfederal Copyright Law,assignments of copy-rights must be in writ-ing to be valid, and, inthis case, it appearsthat your contractdoes not have such aclause. As a result, allthat you purchasedfrom the wedding pho-tographer was his professional time at your weddingand the physical copies of the photographs that youselected. Scanning the photographs and displayingthem on the Internet would be acts of copyrightinfringement (regardless of how much food and drinkhe enjoyed at your expense during the reception).

www.texasbarjournal.com Volume 67 | Number 11 | 949

‘Tis the season when the calendar is packed with neighborhood gath-erings, kids’ end-of-the-season team events, festive holiday parties, large family get-togethers, and New Year’s Eve galas. ’Tis also the season when you’re likely tohear, “You’re a lawyer? You’ll know the answer to this. …” Sound familiar?

Recognizing that most lawyers’ expertise does not extend to every possible areaof the law where your friends, neighbors, or acquaintances might have concerns,this section offers a little guidance on some of the questions you may encounter.

Couch your answers very carefully. Always ensure that the people you are talkingto understand you are not their lawyer and thus you cannot give them advice with-out a deeper understanding of their particular problem. But you can help educatethem and you can help the profession’s reputation by being cordial.

The Bar Journal thanks the attorneys who provided the following answers.

QIs there a “lemon law” for used cars?

ACade Browning of Abilene: No. Used vehicles are notcovered under the Texas Lemon Law. However, dealersare required to display on the car’s window if it is beingsold with or without a warranty. Generally, the “as is”language on the window signifies exactly what it soundslike — the buyer assumes any risk that the vehicle is

defective. This meansthat if you buy a car “asis” and it breaks downthe next day, usually thedealer has no obligationto repair it. However, aconsumer may be ableto use the Texas Decep-tive Trade Practices Act.

Under the DTPA, it is unlawful for a seller to fail to dis-close known defects or fraudulently induce you intosigning the contract. Therefore, if you buy a car “as is,”you may be able to recover against the seller if you canshow that he knew about the defects but failed to dis-close it or he deceived you into signing the contract.

QA stream runs through our ranch property. Can anyone simply float down this streamthrough our property without our permission?

ABen McDonald of Corpus Christi: It depends. If yourstream is classified as a “navigable stream,” the wateris owned by the state and the public has a perpetualeasement of use forboating, fishing, swim-ming, or hunting,whether it has year-round water or not.In Texas, a navigablestream is statutorial-ly defined as retain-ing an average widthof at least 30 feetfrom cutbank to cut-bank from the mouthup. If the stream is of less average width or begins andends on your property or is artificially created and is allon your property, the public has no entry rights.

QMy sister and her ex-husband went through a nasty divorce and she got custody of theirtwo children. She wants to move from thissmall town but her ex says she cannot take the children away from here. Who is right?

ATom Vick of Weatherford: Relocation is one of thehottest issue in family law today. The public policy inTexas is that both parents should have frequent andcontinuing contact with their children. The FamilyCode allows the court to impose a geographic restric-tion on the party who is designating the children’sdomicile. If a restriction was imposed at the divorce,the children will likely be staying unless she can showsome very good reasons why the move is in the children’s best interest. If there was no restriction inthe decree, he will have the burden of proof in themodification to show a change in circumstances andthat it would be in the kid’s best interest to impose a domicile restriction.

QI’m writing a novel set in the small town inwhich I grew up and changing the names ofthe people involved. Can I be sued for libel?

ATom Alleman of Dallas: Before you run your novel upthe flagpole to see who salutes, remember that a specif-ic name is not necessary for a claim of libel to stick. Ifyou create charactersthat can be easily rec-ognized as specificindividuals eventhough you’vechanged their names,then the individualsyou are depicting cansue for libel if whatyou’ve written, takenin context, isn’t true,injures their reputation, or exposes them to publichatred, contempt or ridicule. How do you get aroundthe problem? Do one of two things: make your charac-ters broad enough that they can’t be recognized as asingle person or base them on someone who has passedaway. Dead men don’t wear plaid or have causes ofaction for defamation.


TBJ | PARTYTALK The Lawyer’s Guide to Friendly Requests for a Little Free Advice

QI was involved in a car accident. The policecame, but did not issue a ticket. The other driver still maintains it was my fault and issuing me. Can he do this?

AJeff Lucky of El Paso: Yes, he can “do this.” If youhave received suit papers, a demand letter, or otherwiseexpect a claim, you must immediately put your insureron notice of this accident and the threatened litigation.Call your insurance agent to explain the situation anddeliver any pleading or demand letter to the agent. Be

sure to documentthe fact that youhave provided suchnotice. If you havebeen sued, yourinsurer is obligatedto defend you andwill provide anattorney. If youthink that the caseis serious enoughto lead to a judg-ment in excess ofyour policy limits,

you should consult your own lawyer for advice.Although excess verdict exposure rarely occurs, it canbe devastating to an otherwise properly insured driver.If you have no insurance and/or no lawyer, call yourlocal bar association or the State Bar Lawyer ReferralService to find an experienced lawyer.

QDo I have three days to change my mind after I sign a contract to buy a car?

ARichard Alderman of Houston: This may be the number one myth about the law. As far as the law isconcerned, you do not have any time to change yourmind after you sign a contract to buy a car. Once yousign, you are bound. Unless you have been misled ordeceived into signing, you have no right to get out ofthe agreement. About the only time the law lets you“change your mind” and rescind a contract is withdoor-to-door sales, timeshare contracts, health clubcontracts, or certain contracts that put a lien on yourhouse. Don’t sign any contract until you are sure youwant to be bound.


The Lawyer’s Guide to Friendly Requests for a Little Free Advice PARTYTALK | TBJ

Are You Liable if You Give Advice?

QYou are an attorney. You are at a Christmas party. Another guesttells you that he has a legal ques-tion and asks for your opinion as to what he should do. How doyou give any legal advice underthese circumstances and avoidcreating a liability for yourself?

ABroadus Spivey of Austin: The bestanswer to that question is given byChuck Herring in the fourth edition of hisclassic text, “Texas Legal Malpractice &Lawyer Discipline.” On page 195, hestates: “Whether a lawyer-client relation-ship exists is a question of fact, and alay person may infer that such a relation-ship is present even when you have nosuch intent. Consequently, you should becareful about giving ‘free advice’ insocial settings.” The case of Prigmore v.Hardware Mut. Ins. Co., 225 S.W. 2d897,899, confirmed that the non-pay-ment of a fee does not preclude the cre-ation of an attorney-client relationship. Agood technique to avoid creating a “feel-ing of reliance” by the social guest is forthe lawyer to clearly state: “This is notlegal advice, and it is not my legal opin-ion, but … ” The essence of the idea isthat a lawyer should make it clear thatthe response is not legal advice. I use thetechnique of saying something like, “Ialways charge a big fee for advice youcan rely on, so this is just shooting fromthe hip. … ” Make it clear that you donot want the person to consider yourresponse as a legal opinion.

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=TX_caselaw&volume=225&edition=S.W.2d&page=897&id=58700_01

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=TX_caselaw&volume=225&edition=S.W.2d&page=897&id=58700_01

QThe boy next door hit a baseball through a window in our house. His parents say it’s his responsibility to pay for it. He can only pay $1 per week. This will take years to collect. What can we do?

ARocky Robinson of Houston: Must have been anexpensive window. In some cases, the parents may beresponsible for the child’s conduct and if you wanted topursue the matter in smallclaims court, you could suethem. A better approach, how-ever, would be to teach the kida valuable lesson and maintaingood relations with your neigh-bors. Try this: (1) come to anagreement on the amount ofyour damages, presumably thecost of repairing the window,which from personal experi-ence is not expensive; (2) have the boy work off hisdebt by performing household chores such as rakingleaves, weeding your flower beds, picking up yourpapers and mail, and feeding and walking your dogwhen you are out of town. This is a chance for awin/win solution at minimal cost.

QOur town has a leash law, yet every morning a neighbor lets out her dog, who then poopson our lawn. We have asked the neighbor tocome and clean up the mess, but she ignoresus. What can we do to stop this?

ATrey Martinez of Brownsville: Have you ever seen themovie “Me, Myself & Irene”? Whatever you do, don’t dowhat Jim Carey did in that movie. Leash laws are put inplace in order to restrain animals from running aroundfor sanitation purposes or for the general safety of peo-ple. I would look up your local leash law and figure out

which entity has the abili-ty to enforce this law andif it can be enforced forthe reason you stated. Ifso, write your neighbor afriendly reminder askingher to cease and desistthe defaming of youryard. If your neighborignores your request, lether know that you will filea complaint with the

appropriate entity. If there is no protection against thispoochie poo poo problem, you may want to be creativeand find out if doggie doo doo is considered litter andreport a litterbug in your neighborhood.



QCan I pay for my niece’s college tuition, room,and board ($26,000 + $4,000 + $4,000 =$34,000) and not be taxed for making a gift?

ADavid Wheat of Dallas: Sounds like a nice school.Gifts of college tuition are not subject to the gift tax.However, payments for anything other than tuition aretaxable gifts. Therefore, payments for your niece’s roomand board will not be excluded from the gift tax. Sincethese payments total $8,000, they are less than the$11,000 annual gift tax exclusion. Thus, you won’t haveto pay gift tax on those payments (or file a gift taxreturn) unless you have already used your annualexclusion on other gifts to your niece.

QAn employee is leaving my firm. How can I make sure he won’t take any trade secrets with him?

AC. Clark Martin of Houston: The law imposes on adeparting employee a continuing duty not to disclose toothers or use for his own benefit or the benefit of othershis former employer’s trade secrets. Unfortunately, anemployer cannot make absolutely sure that a departingemployee won’t takeany trade secrets withhim — they may existin his mind even if hetakes no documentswith him. An employercan strengthen its posi-tion by entering into aconfidentiality agree-ment with its employeeand by conducting anexit interview duringwhich the departingemployee is requestedto acknowledge that he will abide by his continuingduties imposed by the law (and his confidentialityagreement if there is one), and is asked to representthat he has delivered back to the company everythinghe possesses, whether on his personal computer or infiles at this home, that belongs to the company.

QOur University of Texas blood runs orange, but we were told we could not put UT stickerson our license plate, nor add a great Longhornslicense plate holder. What is legal?

AJudge Royal Furgeson of San Antonio: While I wentto UT Law School, my undergraduate degree is fromTexas Tech. As a general rule, no one can put anythingon a Texas license plate that interferes with or obscuresthe plate’s numbers or letters. Likewise, the use of a

license plate holder canviolate the law if it coversthe design features of theplate. While this prohibi-tion applies to all Texans,including Longhorns andAggies, some have arguedthat Red Raiders shouldreceive a dispensation fromthe rule, given theirhumanitarian embrace ofall the universal virtues. As

enlightened as the argument is, the Texas Legislaturehas thus far failed to provide an exemption.

QHow can I find out if my landlord has casualtyinsurance on the property, and does this covera person who tripped andfell on the stairway to myapartment?

ABroadus Spivey of Austin:The most reliable way to getthis information is to ask thelandlord directly. If there is acommunication problem, writea letter to the landlord. Statethe date and time that theincident occurred which is thebasis of the claim along with abrief description of the injuriesand damages. Request that thelandlord: (1) forward the letterto the liability insurance carri-er; and (2) inform you of thename of the liability insurancecarrier and the contact infor-mation for the carrier. Also, be sure to determine if thereis a “Tenant’s Policy” that might provide coverage.

QI have always used my middle name. I’m getting married and will be changing my last name. Can I also, at that time, legally drop my first name?

AKarin Crump of Austin: No. When changing yourname based on a marriage license or certificate, youmay only do one of the following: (a) drop your middlename; (b) change your middle name to an initial; (c)add your married name to your maiden name with ahyphen; or (d) use your maiden name in place of yourmiddle name. You may not drop, alter or change yourfirst name without a court order. To legally change yourfirst (or last) name, you should file a Petition for NameChange in the county of your residence. After a hear-ing, the judge will grant the name change if you candemonstrate that you are not running from the law andyou have a legitimate reason to change your name.

QCan my employer require me to take a drug test? What can happen if I refuse?

AJohn Jansonius of Dallas: In the private sector, youremployer may require you to submit to a drug test.This is especially common among employees who workin a safety sensitive position.It is recommended thatemployers who requireemployees to take drug testshave a written drug testingpolicy, which states that non-cooperation by an employeemay result in termination ofemployment. Employeesshould be required toacknowledge in writing thatthey have read and under-stand the policy. Courts haveheld that private sector employers do not commit anunlawful invasion of privacy by conditioning hiring orcontinued employment on taking a drug test. Foremployees who work for a governmental entity or whoare represented by a labor union, there may be restric-tions on mandatory drug testing that do not apply toprivate non-union companies.



QCan I break my lease if my employer transfers me out of state?

ARichard Alderman of Houston: Probably not. A leaseis a contract, and you are bound by its terms. The onlytime you can terminate a lease early without any liabili-ty is when the lease says you may. In other words,unless the lease says that you may terminate it if youare transferred out of state, you may not. If you sign alease knowing that you may need to terminate it earlybecause of employment, marriage, or any other changein circumstances, be sure to add an appropriate provi-sion to your agreement.



QWe own a small ranch. Are there legal restrictions on how we can dispose of pesticides on our land?

ABane Phillippi of Austin: Yes. Under the Texas Depart-ment of Agriculture’s Pesticide Regulations, you maynot dispose of pesticides or pesticide containers in amanner that may cause harm to humans, vegetation,crops, livestock, wildlife, pollinating insects, or pollu-tion of any water supply or waterway. Although theTexas Solid Waste Disposal Act also regulates waste dis-posal, you are exempt from its disposal requirements ifyou are a farmer disposing of waste pesticides fromyour own use and you triple rinse each emptied pesti-cide container and dispose of the residues in a mannerconsistent with the label instructions.

YESJohn Bradley of Georgetown: You accepted aTexas driver’s license on the condition that youwould provide a sample of your breath or bloodshould you be arrested for driving while intoxicat-

ed. That sample provides law enforcement with a scientificway to determine whether you drove while intoxicated. Ofcourse, some people choose to disobey the law by physicallyrefusing to provide a sample when requested by an officer.There are several penalties for disobeying that law, includingsuspension of your driver’s license and potential loss of evi-dence that could show you were not intoxicated. In addition,a jury lawfully may conclude that you refused to provide asample only because you were guilty. I’ll tell you the samething I tell my children: Don’t drink and drive. But if you dodrink and drive and get arrested, follow the law you accept-ed when you received your driver’s license: Blow.

NOGary Trichter of Houston: “No”, don’t take the gov-ernment’s breath test of convenience! But, even beforethat, “thou shalt not drink and drive!” Even if soberand legal, it is easy to be mistakenly arrested, con-

victed, and surcharged. Nervousness, uncoordination,fatigue, fright, and police over-zealousness mean nothing onthe roadside. It’s far wiser and cheaper to use designatednon-drinking drivers or taxis than to hire me, an “intoxiliar”expert, a bondsman, and to miss work while in court. Thatadvice aside, the specimen to give is blood. It’s more accu-rate, reliable, and is re-checkable while breath specimens arechecked by machines not warranted fit for breath testing.Moreover, like the famous novel and movie, breath evidenceof unreliability is destroyed by the government and it franklydoesn’t give a damn, i.e., Gone with the Wind. Clearly,refusing an unfair breath test and recognizing that it is farcheaper to prove your innocence without having to overcomebreath pseudo-science is proof of sobriety.

Two Sides of the Same QuestionAs with many of these questions, there may be more than one correctanswer depending on the circumstance. The following question gener-ated a lot of interest and response when the Bar Journal printed a simi-lar feature in 2002. This time, readers are offered both the prosecutorand defense perspectives. As both responses indicate, driving and drink-ing should never be mixed — always have a designated driver!

If I get stopped by a policeman and am asked to take a breathalyzer test, should I take it or not?

QCan a rancher sell me five landlocked acres without permitting me access to and from a road through his fields?

AGlenn Hall of San Antonio: Since you knew Scottywould not be standing by to beam you up and down,you certainly did not agree that you would not have theuse of that road, and no such condition appeared in theclosing documents. Since the rancher owned both yourproperty and all the surrounding property when youbought, since the road was in existence and in apparentand continuous use at the time of the sale, and since itis reasonably necessary to the use and enjoyment ofyour property, you can claim an implied easementappurtenant. If he promised you the use of the road,you believed him, and you relied on that promise, youcan also claim an easement by estoppel, or estoppel inpais (ranchers hate that kind of talk). If there was noroad, you could claim an implied easement by necessityacross his land to a public road.

QI want to order a case of wine from myfavorite winery in California. Can I do that?

AWarren Harris of Houston: If you are at the winery,you can purchase and carry home up to three gallons ofwine if you personally accompany the wine as it entersthe state. Until recently, it was illegal to ship wine fromout of state (although it has been legal to ship winefrom an in-state winery). In July 2002, a federal districtcourt in Houston declared several provisions of theTexas Alcoholic Bev-erage Code unconsti-tutional and enjoinedenforcement of theban on out-of-stateshipping. The U.S.Court of Appeals forthe Fifth Circuit inJune 2003 upheld theinjunction ( Dicker-son v. Bailey). Winestill may not, howev-er, be shipped into a dry area. The issue may be finallyresolved because the U.S. Supreme Court will hear oralargument on Dec. 7, 2004 in three cases on the issue ofthe constitutionality of Michigan and New York lawsprohibiting direct shipment of wine.

QI was fired and am looking for a job. I found out that my previous employer is giving me nasty references. Does he have the right? What can I do?

ADennis Herlong of Houston: The previous employer isprobably ignoring advice from company counsel to zipit. The Texas Labor Code Sec. 103, in effect since 1999,authorizes references only where requested by a prospec-tive employer or authorizedby the former employeehimself. This statute hasnot changed personnelpractices. The rule for thecompany is to tread mostcarefully. Most do. Still, theemployee must show byclear and convincing evi-dence that the statementswere known to be false ormade with malice or reckless disregard to the truth.Most situations leave the employee with no recourse. Aletter from counsel demanding that it stop may help.The best I’ve had was a chairman of the board termi-nated in violation of his contract where the employertold everyone in the industry that “it had to fire him forcause.” It was easy to show that the statements weremade and that the company knew that they were false.

QMy friends own a restaurant and received a bad (and unfair) review from the localrestaurant critic. They feel they have lost business because of it. Is there any recourse?

ARob Wiley of Houston: If the review had some factualmisstatements (they said that you serve “really lousysteak” when you’re a vegetarian place or they statedthat the chef at your French restaurant is from Pakistan

when he’s from Paris), then you may have a claim. If, how-ever, all the reviewer saidis that your food tasteslike leftovers from theTitanic and your serviceresembles what you mightfind at a diner in Ele-phant Breath, Ariz., thenforget it. You have to havefalse statements (and youmay have to, under cer-tain circumstances, show

that the reviewer knew his or her statements were false orhad serious doubts about them), not opinions, and you willneed proof that the review actually caused you to lose busi-ness. Libel suits/business disparagement claims are reallyhard to win, unless you’ve got really false statements andreal losses that you can show flowed from the review.



QMy landlord promised to install a smoke alarm and a double safety lock on the doorwhen I signed the lease, but now, three months later, still has not done it. Is thisgrounds for terminating my lease?

ATom Curtis of Harlingen: Since you do not appear tobe over 55 years old or have a physical or mental dis-ability (either of which may modify my answer) yourlandlord, prior to your leasing the dwelling, wasrequired to install a double safety lock, if you mean adoor knob or keyed dead bolt lock and a keyless boltingdevice. Unless your lease states certain matters regard-ing locking devices in bold-face type (which mayrequire seven-days’ notice), you must give your land-lord a written demand to install the locks. After threedays of non-compliance, you may unilaterally terminatethe lease. Likewise, depending on the configuration ofthe dwelling, one or more smoke detectors are requiredto be installed prior to occupancy. If the landlord doesnot install them after seven-days’ written notice, youmay unilaterally terminate the lease.

QTwenty years ago, we built a fence that sepa-rates our backyard from our neighbors’. Thefence has deteriorated badly. Our neighbors’dog broke a slat, got out, and was killed by a passing car. The neighbors blame us for our negligence. Are we legally responsible?

ALeo Charles Salzman of Harlingen: You may beresponsible. You have an obligation to take reasonablesteps to maintain your property and the failure to do socould be considered negligence; however, the neighborscould also be responsible, if they were aware of the dogcausing the fence to deteriorate and didn’t take reason-able steps to prevent their dog from getting out. Thepassing car also possibly was at fault, for example if itwas speeding. Even if you are responsible, all you wouldowe is the economic “value” of the dog, which generallytranslates into how much it will cost to buy a similardog. Texas law does not allow for the personal loss onesuffers for losing a domesticated animal, such as a dogor cat. So, all things considered, this is a situation thatthe ill feelings could be worse than anything else. Youmight consider an apology and buying them a new dog.



QMy friend gave me a few Vicodins after I hurt my back. Is it illegal for me to carry them in my purse?

ARalph Brock of Lubbock: Yes, it is illegal to possessVicodin without a prescription, whether you carry it inyour purse or keep it in your medicine cabinet. Vicodinis a trade name for hydrocodone, which is a controlled

substance. Possessionof even “a fewVicodins” without aprescription is a ClassA misdemeanor. AHouston man recentlyreceived a suspended365-day sentence anda $4,000 fine for pos-sessing 15 Vicodintablets. By the way,the friend who gave

you the tablets could be prosecuted for delivery of acontrolled substance, which would be a state jail felonyin this case. Flush ’em.

QDo I have to post “No Trespassing” signs all around my property to keep out unwanted people?

APhilip Mack Furlow of Lamesa: No, not really. Signsare good but a good barbed wire fence is better. It ishard to get over a barbed wire fence without gettingbarbed in places that don’t need to get barbed. A sign orsigns posted thatare “reasonablylikely to come tothe attention ofintruders that entryis forbidden” willwork. Purple paintlines eight incheslong and one inchwide on posts ortrees three to fivefeet above theground that arereadily visible andno more than 100feet apart on forest land and 1,000 feet apart on othertypes of land by statute serve as notice also. Most cow-boys do not like purple paint, but it is an option. Trespassis punishable as a Misdemeanor C, unless the trespasseris carrying a deadly weapon, in which case it is a ClassA Misdemeanor. The law is a little tougher on poachers.

QIf I catch my husband and his lover in our bed and shoot them both, will I be charged with first-degree murder?

AGeorge Dix of Austin: This depends on how good ashot you are. If you kill either or both of them, and theevidence indicates you intended to kill or seriouslyinjure them, you will be charged with murder. Prior to1974, a husband committed no crime by killing one“taken in the act of adultery with (his) wife.” Evenunder this rule, the courts refused to exonerate a wifewho killed one found in an act of adultery with her hus-band. But the 1974 Penal Code thankfully abolished theentire rule. There is no “adultery defense.” If you areconvicted of murder, you will have a chance to per-suade the jury that the tryst was adequate provocationmoving you to kill in the “heat of passion.” Should yoube successful, the murder will be reduced from a first-degree felony to a second-degree felony.

QOur home borders a golf course. If a player hits a ball through our living room window, who pays?

APatricia Moore of Austin: Generally, this is consid-ered an accident, with no negligence involved. Mosthomeowners’ insurance policies contain non-deductiblecoverage for physical damage caused by the homeownerto the property of others, traditionally up to an amountof $1,000. If the golfer is ahomeowner with insuranceand “fesses up,” that wouldcover it. (This same insur-ance is good if you borrowyour neighbor’s lawn mowerand break it mowing over arock.) Insurance companiesprovide this type of coverageto avoid the costs of litigationto assess blame for suchminor incidents. In the eventthe golfer is a scoundrel andgoes on his merry way, checkwith your homeowner’s policyto see if the damage would becovered outside yourdeductible. Some private golf courses may have a gen-eral liability policy that may cover its members foraccidents to third-party property outside the bounds ofthe golf course.

QIf I am arrested for DWI, can an insurance company cancel my policy?

AMelody Wilkinson of Fort Worth: While an insurancecompany probably won’t cancel your policy by themere arrest of a DWI offense, it may, nevertheless, can-cel your policy if your driver’s license is suspended.Often, in connection with an arrest for a DWI offense, it

is not uncommon for yourdriver’s license to be sus-pended. Some insurancecompanies routinely runmotor vehicle reports atrandom on their policy-holders. These motor vehi-cle reports may revealtickets, accidents, andwhether your license isactive or has been sus-pended. In those caseswhere it is discovered that

a driver’s license has been suspended by the nameinsured or spouse, the policy is usually canceled. Themoral to the story is that when attending holiday par-ties, it is a good idea not to drink and drive not just forsafety’s sake, but because you might lose your driver’slicense and auto insurance.

QCan my husband and I use the same divorce attorney to save money?

AClaude Ducloux of Austin: Although not illegal, repre-senting both parties presents a terrible ethical dilemmafor the lawyer, because divorcing spouses have inherentconflicts and a lawyer may not “serve two masters.”Moreover, divorce mediators generally refuse to signpleadings or go to court to enter decrees, so if partiesreally need separate opinions, they’ll eventually consultseparate lawyers anyway. The best way to pursue a lowcost, amicable divorce is for one spouse to find adependable, reputable family lawyer in their communi-ty and explain generally what the parties desire. Thenboth spouses meet with the lawyer to discuss details.The other spouse then is instructed to have the pro-posed decree/paperwork reviewed by another attorney.I always supply the other spouse with several names ofreasonably-priced family lawyers who cooperate in ami-cable divorce review. Both sides then have an inde-pendent opinion.



QOur family loves vacationing on Gulf Coastbeaches, which I know are public property.How can we tell the line where beach frontsbecome private property?

ABen McDonald of Corpus Christi: Texas has openbeach statutes relating to Gulf beaches (NaturalResources Code, Section 61) which provide the publicwith free and unrestricted right of ingress and egress(an easement) from mean low tide to line of vegetationon the seaward shore of the Gulf of Mexico. Case lawhas construed this as a “rolling easement” which fol-lows and moves with the Gulf as in a hurricane or ero-sion which changes its location. Easement does notapply to Gulf seashores not accessible by public road orpublic ferry so long as non-access exists. Local govern-ment containing Gulf shores may charge for beach use(parking, safety, patrols, etc.) and adopt use plans com-patible with policy of act and approved by the state. So,you and your family plan on enjoying our beautifulTexas Gulf beaches.

QI am suing my neighbor in small claims court.He offered to settle for an amount much toosmall. He said, “Take it or you can hire a lawyer,which will cost you much more than you canpossibly get, even if you win.” Is he right?

ASuzanne Mann Duvall of Dallas: Such might be thecase if you hire a lawyer on an hourly basis. Usuallyyou do not need a lawyer in small claims court. Youhave alternatives: (1) you may be able to representyourself in pursuing your claim; (2) you may be able tohire a lawyer on a contingency fee basis; or (3) you canask the court to order your case to mediation throughyour local dispute resolution center. There, for a smallfee, you and your neighbor can work together with thehelp of a third-party neutral to resolve the problem toyour mutual satisfaction. A bonus of the mediationprocess is that it has the ability to bring parties togeth-er in a way than can preserve relationships as well assettle the legal disputes (especially important in neigh-borhood disputes), an outcome not likely to occur atthe courthouse.

QWhat is a reasonable accommodation in thework place for a person with disabilities?

ABrian East of Austin: An accommodation is a changein the workplace, or in the way things are usually done,that reduces barriers so that a person with a disabilitycan have equal job opportunities. An accommodation isreasonable if it generally workable and is not a serioushardship on the employer. Some examples of reason-able accommodations are removing architectural barri-ers (e.g., putting in a wheelchair ramp), jobrestructuring, modifying work schedules, reassigning toa vacant position, getting special equipment, providingqualified readers or interpreters, or modifying exams,training materials, or policies. Most employers have toprovide reasonable accommodations to a person with adisability if needed to apply for a job, do essential jobfunctions, or enjoy equal job benefits and privileges. Ifa person with a disability asks for an accommodation,the employer should talk to the person to try to agreeon one that is both reasonable and effective.

QMy four-year-old refuses to sit in her car seat. She says she’s not a baby. Can I get a ticket if I don’t use one?

AZach Aoki of San Antonio: Aren’t four-year-olds great!If your child is taller than 36 inches, you can’t get aticket. Texas law says that any child who is under theage of five and is less than 36 inches in height must besecured in an infant or child safety seat. If you let yourchild get away with not using a car seat, you have com-

mitted a mis-demeanorand you willbe fined any-wherebetween$100 and$200. A kindjudge mayelect to defera fine andorder you toattend an

approved driver’s education course that has at least fourhours related to the use of car seats. As tempting as itmight be to spend four hours away from your child, usethe car seat.



QBy court order, my ex-husband pays the mortgage on the home in which I live with our children. He is threatening to file for bankruptcy if I don’t agree to reduce the child support he also pays. Can he do this?

AAnne Cofer in Bryan: Your ex-husband may modifyhis child support obligation if the circumstances of achild or a person affected by the order have materiallyand substantially changed since the date of the lastorder. He could also modify his child support obligationif it has been three years since the date of the last order and the amount of the child support ordered differs by either 20 percent or $100 from the amountthat would be ordered. He cannot get out of paying hischild support obligation or the mortgage payment, if it is in the form of a support obligation, by filing forbankruptcy.

QIs is illegal to drive barefoot?

AJohn Bradley of Georgetown: No, it’s not. As a teen-ager, I too believed it was illegal to drive barefoot. Myunimpeachable source was an older brother. I checkedwith the Department of Public Safety and got thisresponse from the public information officer: “While itis not illegal to drive barefoot, it’s certainly not a goodidea. If you’re involved in a wreck and have to get outof the car suddenly, you’re probably not going to beable to find your shoes and there will be lots of brokenglass and metal lying around.” Of course, if your feetaren’t the only thing bare when you have that accident,you could run into other, more serious, problems. Also,if you are planning a drive to the local library, youmight want to check out http://neinast.home.att.net/barefoot/libshoe.htm#tx, to find out whether shoes areoptional while reading in Texas.


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