Digging for Disclosure: Tactics for Protecting Your Firm's Assets from Swindlers, Scammers, and Imposters
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Digging for Disclosure: Tactics for Protecting Your Firm's Assets from Swindlers, Scammers, and Imposters

by Kenneth S. Springer, Joelle Scott

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The Start-to-Finish Due Diligence Guide to Investigating Potential Partners, Borrowers, Acquisitions, and Investments

“Our members, being both high net worth individuals and private investors, need to be wary of potential fraudulent landmines when investing. This book provides both a guide and resources of savvy due diligence practices to


The Start-to-Finish Due Diligence Guide to Investigating Potential Partners, Borrowers, Acquisitions, and Investments

“Our members, being both high net worth individuals and private investors, need to be wary of potential fraudulent landmines when investing. This book provides both a guide and resources of savvy due diligence practices to help navigate those pitfalls.”

Jonathan L. Kempner, President, TIGER 21

“This is essential reading for anyone who wants to invest without losing their shirt the old-fashioned way—by getting ripped off!”

Jonathan Wald, Graduate School of Journalism, Adjunct Professor, Columbia University; and former Senior Vice President, CNBC

“Worried about being defrauded? You should be! Former FBI Special Agent Kenneth S. Springer reveals the best tactics for discovering financial fraud–before you make the investment!”

Don Dixon, Managing Director, Trident Capital

“Your tip to good due diligence is Third Party Verification, which, of course, requires background checks of potential managers and business partners. Surround yourself with the talent to avoid making mistakes harmful to your career and financial well-being. Kenneth S. Springer and Joelle Scott will show you the way to succeed!”

Frank Casey, Member of The Fox Hounds, SEC Madoff Whistle Blowing Team Led by Harry Markopolos

Financial crimes constantly victimize sophisticated companies, executives, and business deal-makers. Whether you’re planning a major investment, acquisition, or merger, don’t let it happen to you! In this book, the leaders of a world-class corporate investigations firm show you exactly how to protect yourself.

Drawing on decades of experience as corporate and criminal investigators, Kenneth S. Springer, a former FBI agent, and Joelle Scott teach powerful techniques for recognizing and exposing fraud and corporate crime. Through dozens of real-world stories, they show how to “think like a swindler”…find a criminal past of an executive…locate former employees who have critical information about the company you are dealing with…uncover colorful regulatory problems of your money manager…understand the true state of a borrower’s finances…find crucial information that only exists offline…perform background checks on people and corporations…and investigate the potential involvement of organized crime.

These days, you must know who you’re dealing with. Digging for Disclosure will help you make sure you do—always.

Just when you think you know someone
Why you’d better not skip that background check—and how to do it right

Finding crucial information that’s hidden in plain sight
How to interpret and analyze public record documents and where to find them

Going beyond borders: the international investigation
Uncover foreign criminal behavior, fraud, and bribery

Gaining crucial competitive intelligence
Discover investigative techniques that help you plan investments and outwit competitors

Product Details

FT Press
Publication date:
Product dimensions:
6.10(w) x 9.10(h) x 0.90(d)

Read an Excerpt


“I should have done more.”
“I did not even think to look into it.”
“I didn’t think this would happen to me.”

No, I am not a psychologist, and these are not quotes from my patients. These are some of the painful comments made by investors who have been fleeced. Whether you have been monetarily slammed by Bernie Madoff or simply misled by a borrower, hedge fund manager, or executive with whom you have invested, the economic pain and embarrassment has the same pinch. As a former Special Agent with the Federal Bureau of Investigation (FBI) and the president of a business investigations firm, I have accumulated a number of preventive business methods that help investors of all sizes protect their interests and avoid being the victims of fraud. Even if you have made successful investments over the years and have, thankfully, not been ensnared in a ring of investment fraud, on any scale these methods illuminate the need for gathering intelligence to ensure you keep your track record. From my vault of cases I have investigated over the past 20 years, I have compiled these practices, lessons, and stories to share with you and hope you will arm yourself with these tools before making your next investment.

Financial and legal due diligence are accepted norms in the investment community. What is often overlooked, however, is the importance of conducting proper background checks on a management team, fund manager, or investment adviser. Background checks are your “people due diligence.” The success of your investment relies solely on the abilities of the people (or person) who oversee your money. Although not a line item on the balance sheet of a company, management is your biggest asset. Unfortunately, many investors only realize this when damage has been done and liabilities are being tallied.

At Corporate Resolutions, Inc., the business investigations firm I formed in 1991, I have conducted background checks on thousands of individuals and companies. Three of the biggest mistakes that we have seen investors make repeatedly are

  1. Flock Funding. Investors hire based on reputation instead of research (the perfect example is Bernie Madoff’s affinity fraud). Everyone assumes someone else did the homework. If someone says, “He is well-known,” “I checked them out,” or “I know him; he is a good guy,” what does that mean? The onus is on you. You need to do your own investigating because not everyone adheres to the same definition of risk (or comfort). Very few investors get cheated by people they do not like; Bernie Madoff’s investors liked him. While Madoff did not cause a recession, he did cause us to reassess our processes.
  2. The Bottom-Line Blockade. Investors tend to have blinders on. They are focused solely on the predicted returns of a deal and thus overlook the yellow or red flags that exist. Keep your mind open to all the information you can gather and remember that high rates of return on your investment are worthless if your money is in the wrong hands.
  3. Precipitate, Not Investigate. Investors often move too quickly and do not take the time to look into an individual’s background. We are all accustomed to making swift decisions and having information instantaneously. But when making an investment, you need to take precautions. A person’s past performance is often indicative of future behavior. Although much information is available at our fingertips, it takes time to conduct an appropriately rigorous background check. References must be contacted, degrees must be confirmed, lawsuits must be reviewed, media and Internet attention must be considered, and so on. These steps cannot be done overnight. As President Ronald Reagan used to say, “Trust, but verify.”

Background checks are often viewed as deal-killers. In actuality, background checks rescue investors from inevitably explosive deals or even resuscitate investments that otherwise looked murky. As more state and federal regulations clamp down on the investment industry, businesses will be (and some already are) required to implement meticulous due diligence techniques. These techniques should involve a lot more than a quick Google search or simple check-the-box criminal record review. If you look at Bernie Madoff, Robert Allen Stanford, and Danny Pang, the perpetrators of three of the biggest investment scandals in 2009, you will find all three had something in common: no criminal record history (until now). This alone is proof that you cannot rely on meager background checks. Securing your investment is crucial; comprehensive background checks are your most reliable tools.

We have found that although a tremendous amount of information is available online, it is imperative to know what is not available. The gap between the two is wide, and the awareness of this will better serve you in your role as a prudent investor. As we detail throughout this book, the ability to identify discrepancies, vagaries, and half-truths is as indispensable as finding overt criminal record histories or regulatory problems.

That is not to say that glaring criminal records are not hazardous. We have uncovered considerable and sizable frauds: complex money laundering schemes, a narcotics ring, overt sexual harassment, theft of intellectual property, theft and fraud of investor money and trust, spousal abuse, and blatant lies regarding accomplishments.

Our firm conducts global background checks, business intelligence, and corporate investigations. Our clients include lenders, private equity funds, investors, hedge funds, investment advisers, law firms, insurance companies, pension funds, corporations, and government agencies.

Conducting background checks is no longer a cloak-and-dagger operation devised in a dimly lit and smoky room. The need to know more is not only something we preach from our desks but also has become the suggested method of regulators. Background checks are a mandated component of the Sarbanes-Oxley Act, U.S. Patriot Act, Know Your Customer, and corporate governance.

With the help of investigators and intelligence analysts, we conduct exhaustive public record and database research, verifications, and independent interviews on individuals and companies before deals are inked, companies are merged/acquired, or executives are hired. I have spent more than 12 years with the FBI investigating white-collar crime, and my experiences there were not nearly as enlightening as those I have witnessed since I started Corporate Resolutions, Inc. What we have encountered in this business is more than fodder at a cocktail party. The stories are diverse, yet there is one theme common throughout them all: deception.

Recently media such as The Wall Street Journal, The New York Times, Hedgeworld, Kiplinger’s, CNBC, Bloomberg, and Fox Business Network have sought out our professional expert investigative perspective on the Madoff scandal, Robert Allen Stanford, and Ponzi schemes in general. Our message has always been the same: There is no such thing as too much due diligence. Desktop research is not sufficient. The Madoff scandal was a game-changer for investors. The risk investors assume no longer impacts just your financials; it is also affects your reputation. As shown throughout this book, blind faith and reputation no longer suffice as solid reasons to invest. We hope our experiences illuminate some of the warning signs that should not be overlooked and provide investors with ways they can protect themselves from future problems.

© Copyright Pearson Education. All rights reserved.

Meet the Author

Kenneth S. Springer, a Certified Fraud Examiner, is president and founder of Corporate Resolutions, Inc. A former special agent of the Federal Bureau of Investigation, Mr. Springer has conducted business- related investigations and intelligence gathering for more than thirty years. While in the FBI, Mr. Springer worked on numerous internal and external bank frauds, wire frauds, Wall Street-related crimes, and other complex white-collar investigations. Prior to founding Corporate Resolutions in 1991, he was president of Bishops Services, Inc., an investigative firm in New York City.

A 1975 graduate of Siena College with a B.S. in finance, Mr. Springer is an active member of the Society of Former Special Agents of the Federal Bureau of Investigation, the Association of Certified Fraud Examiners (ACFE), the Securities Industry and Financial Markets Association-Legal and Compliance Division (SIFMACL), the Association for Corporate Growth (ACG), the Association for Independent Private Sector Inspectors General (IPSIG), the American Society for Industrial Security (ASIS), the Managed Funds Association (MFA), Commercial Finance Association (CFA), and the European Venture Capital Association (EVCA). Corporate Resolutions is also a sponsor of the New York Private Equity Network (NYPEN), the HedgeFund CFO Association, and a recommended service provider of the National Venture Capital Association (NVCA). Mr. Springer is also a frequent speaker and lecturer on private equity, hedge funds, global due diligence issues, risk management, and corporate investigations.

Joelle Scott is the Director of Business Intelligence at Corporate Resolutions, Inc. Ms. Scott has spent the last twelve years in business investigations and currently oversees the intelligence analysts at Corporate Resolutions to ensure quality control and accuracy of all investigative reports. A graduate of Colgate University, Ms. Scott received her master’s degree in journalism from the Columbia University Graduate School of Journalism. Ms. Scott is also a teaching assistant for Richard Wald at Columbia’s Journalism School on the topics of Critical Issues in Journalism and National Affairs Reporting.

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