Stryker Investigations

Permissible Purpose: How it Applies to Bank Searches?

Empowering Attorneys with Credible Information for 25 Years

 A thorough due diligence assessment uncovers risks, brand value, assets, debts, negative media, and ensures the business aligns with your goals.

This summary does not discuss every scenario, anticipated use, or subsequent authorization. It is intended to illuminate a convoluted and misinterpreted legal framework while providing general guidance on core principles and common applications. The information contained herein should not be construed as legal advice, and readers should consult with qualified legal counsel regarding their specific circumstances. While efforts have been made to ensure accuracy, laws and regulations are subject to change, and variations may exist across different jurisdictions. Nothing in this document creates an attorney-client relationship or serves as a substitute for professional legal consultation.

The legal framework governing access to nonpublic financial information operates through multiple federal statutes, establishing specific requirements for different scenarios. The Fair Credit Reporting Act (FCRA) serves as a primary foundation, mandating consumer authorization for credit report access while explicitly prohibiting its use for determining insurance, credit, or employment eligibility. FCRA Section 6802(e)(8) provides essential exceptions, permitting disclosures when necessary to comply with federal, state, or local laws, to respond to authorized civil or criminal investigations, to address regulatory requirements, or to fulfill judicial process obligations.

When accessing bank or brokerage account holder information, account balances, or deposit records, requestors must demonstrate a valid permissible purpose—specifically, to fulfill judicial obligations or comply with court orders or civil judgments, while remaining subject to the Right to Financial Privacy Act restrictions specifically governing government access. Financial institutions are responsible for verifying the requester’s authority before disclosure. This comprehensive framework, incorporating 28 U.S.C. Chapter 176 Fair Debt Collection Procedures and 15 U.S.C. Title 15 Privacy Provisions, explicitly establishes that exceptions (6)(A), (7), and (8) and (D) grant access to persons holding a legal or beneficial interest relating to the consumer; or (E) to persons acting in a fiduciary or representative capacity on behalf of the consumer; but require demonstration of a valid permissible purpose for both pre-civil and post-civil proceedings. Pre-civil proceedings are specifically defined as subpoenas, search warrants, or other Judicial Orders. Post-civil proceedings are defined as Judicial Orders or Judgments, which constitute the judge’s rulings at the conclusion of an adversary proceeding requiring the debtor to pay the amount awarded in the Judgment or Judicial Order resulting from the proceedings. All financial information access must align with these federal statutes while simultaneously complying with applicable state privacy laws and institution-specific requirements, ensuring a balanced approach between necessary information access and privacy protection.

After seven successful years at North American Corporation’s printing division, Kathy Lawlor had established herself as a top performer, earning over $200,000 in 2004 alone. Her career trajectory changed dramatically when she was on the verge of securing a lucrative five-year contract with MapQuest worth millions to the company. The company owner suddenly informed her that her standard 30% commission wouldn’t apply to this major account and demanded she sign a document accepting these new terms or risk not being paid at all. Faced with this ultimatum, Lawlor chose to resign rather than accept the reduced compensation.

The conflict escalated when North American sent Lawlor a letter claiming she owed them $20,000 in commission overpayments—a claim she disputed, believing instead that the company owed her money for accounts she had finalized before departing. As legal tensions mounted, North American grew suspicious that Lawlor might be attempting to take the MapQuest account with her or had shared confidential information during a job interview with a competitor. The company’s response was to hire private investigators, who then subcontracted a third party that illegally obtained Lawlor’s telephone records without her consent.

Upon discovering this invasion of privacy, Lawlor expanded her initial compensation lawsuit. The legal battle resulted in split decisions: a judge ruled against Lawlor in the company’s countersuit for anticompetitive behavior, ordering her to pay $630,000 in commissions and punitive damages, while a separate jury found in her favor regarding the privacy violation, awarding her $1.8 million. With both sides planning appeals, the case became a landmark example of how corporate investigations using pretexting can create substantial legal liability, even when outsourced through multiple layers of contractors.

Fraudulent conveyances occur when defendants or potential defendants deliberately move property or assets to another entity to avoid potential judgments. These transactions typically manifest in several recognizable patterns – debtors may transfer valuable assets to family members, create shell companies, or establish trusts with suspicious timing relative to legal proceedings. Key indicators often include transfers made without receiving reasonably equivalent value, transactions occurring when the transferor faces insolvency or substantial debt, and unusual haste or secrecy surrounding the conveyance.

The Kathy Lawlor case vividly illustrates how pretexting—the practice of obtaining information under false pretenses—can expose companies to significant legal liability. When North American Corporation suspected Lawlor of attempting to steal clients and disclosing confidential information, the company’s decision to investigate led to a chain of outsourced services that ultimately resulted in illegal pretexting. The company consulted its legal counsel, which hired a private investigator, who then hired an outside database company. This third party obtained Lawlor’s telephone records without her consent through deceptive means—a clear case of pretexting—and provided them to North American.

The legal consequences were severe. Despite winning their countersuit against Lawlor for anticompetitive conduct, North American faced a devastating $1.8 million jury award for invasion of privacy related to the pretexting activities. This outcome demonstrates a critical legal principle: companies cannot escape liability by outsourcing potentially problematic investigative work.

As Eric N. Macey of Novack Macey, who represented North American, explained: “With that much distance, the company may not know the pretexting was going on. This company got hit even through all those layers.” The Lawlor case serves as a powerful precedent showing that courts will hold companies accountable for pretexting conducted on their behalf, regardless of how many layers of contractors separate the company from the actual perpetrator.

The case highlights why companies must conduct thorough due diligence on investigation firms, clearly define investigative parameters, and explicitly prohibit illegal practices like pretexting. It also underscores why many legal experts now recommend avoiding pretexting entirely, as the Federal Trade Commission and other regulatory bodies have increasingly targeted such practices for enforcement action, making the legal risks far outweigh potential investigative benefits.

Based on the detailed account of the Kathy Lawlor case, the investigation process contained several critical errors that ultimately resulted in significant legal liability. The investigation began with North American consulting its legal counsel, who then hired a private investigation firm. This investigator subsequently outsourced the work to a third-party database company without proper vetting or oversight. This created a dangerous accountability gap where no entity was adequately monitoring the methods being used.

The third-party database company specifically obtained Lawlor’s telephone records without her consent. This was done through pretexting—using false pretenses, deception, or misrepresentation to trick the telephone company into releasing private records. At no point did any party in the investigation chain seek or receive Lawlor’s permission to access her personal telephone records, a fundamental invasion of privacy that formed the basis of her successful lawsuit.

Further compounding these issues, the investigation firm failed to clearly disclose to North American how they would obtain information, allowing potentially illegal practices to occur without the client’s explicit knowledge or consent. Despite involving legal counsel in the process, the investigation lacked proper safeguards to ensure compliance with privacy laws and regulations regarding personal information. The investigation also inappropriately crossed from legitimate workplace concerns into Lawlor’s private communications, violating the principle that corporate investigations should generally remain focused on company time and property.

These investigation failures demonstrate why companies need to thoroughly vet their investigation partners, explicitly prohibit pretexting in contracts, require detailed explanations of investigation methodologies, and maintain oversight throughout the process. The $1.8 million judgment against North American highlights how companies cannot shield themselves from liability by simply outsourcing potentially problematic investigative work through multiple layers of contractors. Even with “that much distance,” as Macey noted, the company was still held accountable for the privacy violations committed on its behalf.

When Investigation Agencies Cross the Line – Three Plead Guilty to Misuse of Social Security Numbers and Other Charges as Part of Scheme to Obtain Tax Information

Contact Info

(800) 733-1950