Last month, Jim Duncey, the majority owner and face of Duncey’s Caps, Inc., was involved in a car accident and arrested for DWI.   Facing a PR crisis Duncey’s board of directors called an emergency meeting.  The board implemented its crisis plan, issued a statement condemning driving while intoxicated, suspended Duncey, ordered him to attend rehabilitation, and made a $100,000 donation to MADD. 

While the company survived the initial PR crisis, its bottom line did not.  Retail sales during the following quarter were down 20%.  One of the company’s major commercial customers also terminated its contract that produced $3 million in revenue annually.  To make matters worse, the board’s private investigator discovered that Duncey had previously been arrested for DWI three years earlier while on vacation in another state, but had managed to keep it quiet.  Does the company have any legal remedies against Duncey on top of terminating him?  Should the company seek those remedies? Continue Reading The Calm After the PR Storm: Recovering Damages from the Offender

Jim Duncey is more than just the majority owner of Duncey’s Caps, Inc. – he’s the face of the company, appearing on billboards, in television and radio ads, and on the home page of the company’s website.  He is one of the most influential and recognizable business leaders in the city.  On Saturday night Jim and his wife Diane attend a charity event at the toniest country club in town.  With a little “liquid courage” Jim was the high bidder at the night’s live auction, which earned him respect (and envy) from those in attendance.  On the way home Jim ran a stop sign and t-boned another vehicle.  The driver of the other vehicle suffered serious injuries that would force her to spend several weeks in the hospital.  Police investigating the accident gave Jim a field sobriety test, which he failed.  Jim ended blowing a .12 BAC and was charged with DWI.  The accident, along with Jim’s arrest, was the lead story on the Sunday news.        

With the face of the company in legal and public relations trouble, Duncey’s board of directors called an emergency meeting to discuss the situation and consider options.  What can they do?

Continue Reading Jekyl and Hyde: When the Face of Your Company Becomes a PR Liability

Alice B. (“Babette”) Toklas has a new pastry catering business which she operates from her home. The only delicious delectable pastry, and best seller, that Babette sells is her special, knock you over brownies with their “secret ingredient.” Babette’s husband Douglas is a writer. While Douglas and Babette rely upon the income from Toklas Tasties to cover household expenses between Douglas’s successful writings, Douglas is not much of a cook and lets Babette run the catering business. Douglas’s latest novel made it to the New York Times best seller list. Because of the swings in the Toklas income, Owen Moore, their accountant, assists them in filing their joint income tax return each year. Ignoring Owen’s advice, Babette and Douglas do not report income from the catering business to the Internal Revenue Service. The Toklas just received notice of an audit of their last year’s joint return. If asked by a revenue agent, must Owen disclose the income from Toklas Tasties, or is there an accountant-client privilege? If Babette is ever prosecuted for Toklas Tasties, can she prevent Douglas from disclosing what she told him, including that the “secret ingredient” in her delicious delectable brownies is marijuana?

Accountant-client privilege. Generally, under Texas law a communication made by a client to an accountant or employee of the accountant in connection with services provided to the client is confidential and not discoverable. But, under federal law, no accountant-client privilege is recognized. Therefore, Owen would be forced to disclose his files and knowledge of the source of the income received by Toklas Tasties to agents from the United States Internal Revenue Service.

Husband-wife-communication privilege. The purpose of the husband-wife-communication privilege is to preserve the integrity of the marital relationship. Generally, private communications that are only between spouses and are not intended for disclosure are privileged and are not subject to discovery. If prosecuted for Toklas Tasties, it is likely that Babette can prevent Douglas from disclosing what she told him about her “secret ingredient.”

Tilting the Scales in Your Favor:
Even if the source of the income is arguably a criminal matter, the United States Internal Revenue Service is primarily tasked with, among other things, identifying and collecting taxes upon unreported income. Babette and Douglas would have been better off taking Owen’s advice and reporting the income from Toklas Tasties on their tax return.