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Library of Congress Cataloging-in-Publication Data
Springer, Kenneth S., 1953-
Digging for disclosure : tactics for protecting your firm’s assets from swindlers, scammers,and imposters / Kenneth S. Springer, Joelle Scott.
p. cm.
ISBN-13: 978-0-13-138556-6 (hardback : alk. paper)
ISBN-10: 0-13-138556-9
1. Investment advisors—Selection and appointment. 2. Personnel management. 3. Disclo-sure of information. I. Scott, Joelle, 1974- II. Title.
HG4621.S75 2011
658.4’7—dc22
2010026248
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Chapter 1: Just When You Think You Know Someone . . . . . . . . . . . . . . . . . . . . 5Really? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6The Tactic: Turning Over Neighboring Stones . . . . 7Moving Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Chapter 2: A Swindler State of Mind . . . . . . . . . . . . . . . 11The Idea. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11The Payout. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12The Scenery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Chapter 3: We Call That a Clue . . . . . . . . . . . . . . . . . . . 15Dried Up Dreier . . . . . . . . . . . . . . . . . . . . . . . . . . . 15The Situation: Banking With a Binge . . . . . . . . . . . 16The Tactic: Dirt In the Documents . . . . . . . . . . . . 17The Situation: The Subversive CFO. . . . . . . . . . . . 17The Tactic: Collecting Corporate Records . . . . . . . 19
Chapter 4: The Gray Area: Somewhere Between Fraud and Fudging . . . . . . . . . . . . . . . . . . . . 23The Situation: A Lazy Loan . . . . . . . . . . . . . . . . . . 23The Tactic: Don’t Be Complacent . . . . . . . . . . . . . 25The Situation: A Degree of Arrogance . . . . . . . . . . 26The Tactic: Canvassing the Cases . . . . . . . . . . . . . . 27
Chapter 5: Sometimes, You Just Gotta Ask . . . . . . . . . . 29The Situation: Protecting the Innocent . . . . . . . . . 30The Tactic: Ask And Ye Shall Receive . . . . . . . . . . 32
Contents
vi DIGGING FOR DISCLOSURE
The Situation: Baby Proofed Résumé . . . . . . . . . . 33The Tactic: The Friends and Family Plan . . . . . . . 34The Situation: Case of Contagious Coercion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36The Tactic: Secrets of Former Employees . . . . . . . 37The Situation: Unearthing the Ugly . . . . . . . . . . . . 38The Tactic: Corralling the Criminals . . . . . . . . . . . 41
Chapter 6: Crossing Borders: International Investigations . . . . . . . . . . . . . . . . . . . . . . . . 43The Situation: The Facility That Never Was . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43The Situation: The Meandering Hedge Fund Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44The Situation: Son of Scam. . . . . . . . . . . . . . . . . . . 46The Tactic: International Sources. . . . . . . . . . . . . . 47The Foreign Corrupt Practices Act . . . . . . . . . . . . 48The Situation: Blackmail in Brazil . . . . . . . . . . . . . 49The Tactic: Changes in Brazilian Business . . . . . . . 50
Chapter 7: Digging for Disclosure . . . . . . . . . . . . . . . . . 55The Situation: The Empty Suit . . . . . . . . . . . . . . . . 56The Whitest Lie Is Always Gray . . . . . . . . . . . . . . . 56Navigating Through Nicholas Cosmo. . . . . . . . . . . 57The Tactic: Capturing Criminal Records . . . . . . . . 59The Situation: Cocktail Party Perpetrator . . . . . . . 60The Tactic: Debunking The Deceit . . . . . . . . . . . . 62Best Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Chapter 8: The Competitive Edge . . . . . . . . . . . . . . . . . 65The Situation: The Backdating Bluff . . . . . . . . . . . 65The Situation: The Medicaid Fraud Mix . . . . . . . . 67The Tactic: Going Old School. . . . . . . . . . . . . . . . . 69The Situation: The Grapple in the Garment Industry . . . . . . . . . . . . . . . . . . . . . 70The Tactic: Combing Through Corporate Documents. . . . . . . . . . . . . . . . . . . . . . . 72
Chapter 9: Never Too Late: When Problems Arise Post-Investment . . . . . . . . . . . . . . . . . 73The Situation: Buy Now, Pay Later . . . . . . . . . . . . 73The Tactic: Employee Reunion . . . . . . . . . . . . . . . 74How to Get the Most from an Interview . . . . . . . . 75The Situation: The Misled Lender . . . . . . . . . . . . . 77Insuring Investments. . . . . . . . . . . . . . . . . . . . . . . . 77Protecting the Innocent . . . . . . . . . . . . . . . . . . . . . 78The Situation: The Faultless Fraud . . . . . . . . . . . . 78The Tactic: Don’t Stop Digging . . . . . . . . . . . . . . . 80
Chapter 10: Tracking Down a Threat . . . . . . . . . . . . . . . 83The Tactic: Three Principles of Wrongdoing . . . . . 86You Have an Internal Problem: Now What? . . . . . 86
Chapter 11: Now That Is Criminal . . . . . . . . . . . . . . . . . . 89The Situation: The Criminal Connection . . . . . . . . 89The Tactic: The Merits of Media . . . . . . . . . . . . . . 93The Situation: Employee Embezzlement . . . . . . . 94The Tactic: Combing Credit . . . . . . . . . . . . . . . . . . 98The Situation: Fraud in Flight . . . . . . . . . . . . . . . . 98The Tactic: Connecting the Dots . . . . . . . . . . . . . 101
Chapter 12: Dial ‘F’ for Fraud: The Benefits of an Ethics Hotline . . . . . . . . . . . . . . . . . . 103The Situation: The Spread of Swindlers. . . . . . . . 104The Tactic: Hotline Help . . . . . . . . . . . . . . . . . . . 104Prime Time Whistleblowers . . . . . . . . . . . . . . . . . 105
Chapter 13: This One Goes Out to the Attorneys . . . . . 107The Situation: The Bragging Banker . . . . . . . . . . 108The Situation: A Leg Up for Lawyers. . . . . . . . . . 109
Chapter 14: The Godfather in the Boardroom . . . . . . . 113The Situation: Crime in Construction . . . . . . . . . 115The Tactic: The RICO Reason . . . . . . . . . . . . . . . 116Crime Beyond Construction . . . . . . . . . . . . . . . . . 117
CONTENTS vii
The Situation: The Russian Racket. . . . . . . . . . . . 118The Situation: Connected . . . . . . . . . . . . . . . . . . . 119
Chapter 15: Show Me the Money: Asset Investigations . . . . . . . . . . . . . . . . . . . . . . . 121The Situation: Going for Broke . . . . . . . . . . . . . . 121The Tactic: The Property Paper Trail . . . . . . . . . . 123Finding Hidden Assets in the Real Estate Business . . . . . . . . . . . . . . . . . . . . . . . 124The Situation: The Driver Has the Keys . . . . . . . 126The Tactic: Human Sources . . . . . . . . . . . . . . . . . 126Methods for Finding Assets . . . . . . . . . . . . . . . . . 127
Chapter 16: Investigating the Inc. . . . . . . . . . . . . . . . . . 131The Situation: Submitting to a Scam . . . . . . . . . . 132The Tactic: Regulators Rule . . . . . . . . . . . . . . . . . 133
Chapter 17: You, the Referee . . . . . . . . . . . . . . . . . . . . . 137The Situation: Fraud vs. Brothel: You Choose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137The Situation: Sex, Documents, and a Deal. . . . . 140The Situation: Thieves Then; Executives Now . . . . . . . . . . . . . . . . . . . . . . . . . . . 140The Tactic: Assessing Your Appetite. . . . . . . . . . . 141
Chapter 18: The Secret Sauce . . . . . . . . . . . . . . . . . . . . 145
Chapter 19: Testing, Testing . . . . . . . . . . . . . . . . . . . . . . 159The Brazen Bernie . . . . . . . . . . . . . . . . . . . . . . . . 160Stanford’s Instabilities . . . . . . . . . . . . . . . . . . . . . . 162The Sting of Pang . . . . . . . . . . . . . . . . . . . . . . . . . 166Remember Bayou? . . . . . . . . . . . . . . . . . . . . . . . . 169And the Moral of the Story Is... . . . . . . . . . . . . . . 170
Resource Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
viii DIGGING FOR DISCLOSURE
Introduction
“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 mypatients. These are some of the painful comments made by investorswho have been fleeced. Whether you have been monetarily slammedby Bernie Madoff or simply misled by a borrower, hedge fund man-ager, or executive with whom you have invested, the economic painand embarrassment has the same pinch. As a former Special Agentwith the Federal Bureau of Investigation (FBI) and the president of abusiness investigations firm, I have accumulated a number of preven-tive business methods that help investors of all sizes protect theirinterests and avoid being the victims of fraud. Even if you have madesuccessful investments over the years and have, thankfully, not beenensnared in a ring of investment fraud, on any scale these methodsilluminate the need for gathering intelligence to ensure you keepyour track record. From my vault of cases I have investigated over thepast 20 years, I have compiled these practices, lessons, and stories toshare with you and hope you will arm yourself with these tools beforemaking your next investment.
Financial and legal due diligence are accepted norms in theinvestment community. What is often overlooked, however, is theimportance of conducting proper background checks on a manage-ment team, fund manager, or investment adviser. Background checksare your “people due diligence.” The success of your investment
1
2 DIGGING FOR DISCLOSURE
relies solely on the abilities of the people (or person) who overseeyour money. Although not a line item on the balance sheet of a com-pany, management is your biggest asset. Unfortunately, manyinvestors only realize this when damage has been done and liabilitiesare being tallied.
At Corporate Resolutions, Inc., the business investigations firm Iformed in 1991, I have conducted background checks on thousands ofindividuals and companies. Three of the biggest mistakes that we haveseen investors make repeatedly are
1. Flock Funding. Investors hire based on reputation instead ofresearch (the perfect example is Bernie Madoff’s affinityfraud). Everyone assumes someone else did the homework. Ifsomeone says, “He is well-known,” “I checked them out,” or “Iknow him; he is a good guy,” what does that mean? The onus ison you. You need to do your own investigating because noteveryone 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 notcause a recession, he did cause us to reassess our processes.
2. The Bottom-Line Blockade. Investors tend to have blinderson. They are focused solely on the predicted returns of a dealand thus overlook the yellow or red flags that exist. Keep yourmind open to all the information you can gather and rememberthat high rates of return on your investment are worthless ifyour money is in the wrong hands.
3. Precipitate, Not Investigate. Investors often move tooquickly and do not take the time to look into an individual’sbackground. We are all accustomed to making swift decisionsand having information instantaneously. But when making aninvestment, you need to take precautions. A person’s past per-formance is often indicative of future behavior. Although muchinformation is available at our fingertips, it takes time to con-duct an appropriately rigorous background check. References
CHAPTER • INTRODUCTION 3
must be contacted, degrees must be confirmed, lawsuits mustbe reviewed, media and Internet attention must be considered,and so on. These steps cannot be done overnight. As PresidentRonald 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 oreven resuscitate investments that otherwise looked murky. As morestate and federal regulations clamp down on the investment industry,businesses will be (and some already are) required to implementmeticulous due diligence techniques. These techniques shouldinvolve a lot more than a quick Google search or simple check-the-box criminal record review. If you look at Bernie Madoff, RobertAllen Stanford, and Danny Pang, the perpetrators of three of thebiggest investment scandals in 2009, you will find all three had some-thing in common: no criminal record history (until now). This alone isproof that you cannot rely on meager background checks. Securingyour investment is crucial; comprehensive background checks areyour most reliable tools.
We have found that although a tremendous amount of informa-tion 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 bet-ter serve you in your role as a prudent investor. As we detail through-out this book, the ability to identify discrepancies, vagaries, andhalf-truths is as indispensable as finding overt criminal record histo-ries or regulatory problems.
That is not to say that glaring criminal records are not hazardous.We have uncovered considerable and sizable frauds: complex moneylaundering schemes, a narcotics ring, overt sexual harassment, theftof intellectual property, theft and fraud of investor money and trust,spousal abuse, and blatant lies regarding accomplishments.
Our firm conducts global background checks, business intelli-gence, and corporate investigations. Our clients include lenders, pri-vate equity funds, investors, hedge funds, investment advisers, law
4 DIGGING FOR DISCLOSURE
firms, insurance companies, pension funds, corporations, andgovernment agencies.
Conducting background checks is no longer a cloak-and-daggeroperation devised in a dimly lit and smoky room. The need to knowmore is not only something we preach from our desks but also hasbecome the suggested method of regulators. Background checks area 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 con-duct exhaustive public record and database research, verifications,and independent interviews on individuals and companies beforedeals are inked, companies are merged/acquired, or executives arehired. I have spent more than 12 years with the FBI investigatingwhite-collar crime, and my experiences there were not nearly asenlightening as those I have witnessed since I started Corporate Res-olutions, Inc. What we have encountered in this business is morethan fodder at a cocktail party. The stories are diverse, yet there is onetheme common throughout them all: deception.
Recently media such as The Wall Street Journal, The New YorkTimes, Hedgeworld, Kiplinger’s, CNBC, Bloomberg, and Fox Busi-ness Network have sought out our professional expert investigativeperspective on the Madoff scandal, Robert Allen Stanford, and Ponzischemes in general. Our message has always been the same: There isno such thing as too much due diligence. Desktop research is not suf-ficient. The Madoff scandal was a game-changer for investors. Therisk investors assume no longer impacts just your financials; it is alsoaffects your reputation. As shown throughout this book, blind faithand reputation no longer suffice as solid reasons to invest. We hopeour experiences illuminate some of the warning signs that should notbe overlooked and provide investors with ways they can protectthemselves from future problems.
Just When You Think You Know Someone
It is 6 a.m. on Friday. Your first week on the job. For the fifth dayin a row, you still have to introduce yourself to the sleepy securityguards in the lobby of the low-storied hedge fund hotel in Green-wich, Connecticut, that now houses your 13 employees. You find yourway to your new windowed office and drop your dark brown leathersatchel on the ledge—last year’s Christmas present from your wife.Accustomed to seeing tall buildings and a famous skyline, you are stillnot convinced that clusters of small trees count as a “view.” You stareout the window for a few idle moments. You swing around in yourAeron chair and glance over at the four Ivy League researcherspounding away at their black keyboards. You summon them to youroffice. You need an update.
You have spent the last three months convincing the five old-school members of the board of directors that you, a savvy formerM&A specialist from New York City, are capable of running this pri-vate equity firm—the same firm that over the past four years hasearned the reputation of successfully turning around troubled com-panies and securing investor money. Now you have your chance. With$15 million cash in your hand, you are tasked with selecting the nextinvestment.
For the past week, your research team has spent countless hoursfocusing on target companies. When they rush to your office, eager toplease the new boss, they show you the balance sheet of a strugglingMidwestern plastics business that lacks the necessary funds to take
1
5
6 DIGGING FOR DISCLOSURE
the company to the next level. Two days later, you fly out there andmeet the owner of the business. You like his enthusiasm. You walkthrough the facilities and meet a few of the 57 employees whose jobsyou intend to save. Back in Connecticut, you do some legal due dili-gence and run some financial models. Over the course of six months,you get to know the owner, his employees, and the way the companyoperates; you like what you see.
You decide you want to acquire the company and prepare a termsheet. The thought of screwing up your first investment makes yourpalms sweat, so you decide to do a little more homework before youink the deal. You call a private investigations firm like ours to checkout the owner of the company.
One week later, we call you back. The owner of the company has,well, an interesting history: He was arrested and convicted on threeseparate occasions for “exposing himself” at the drive-thru of differ-ent local fast-food joints. Given that “wardrobe malfunction” was notan option on the police report, you rethink your decision.
Really?
Yes, really. The story illustrates that no matter how much youspend on legal and financial due diligence, how many company walk-throughs you endure, scotches you sip together or rounds of golf youplay, a person’s true character (or lack thereof) is often only unveiledwhen you run a background check that complements your ownresearch. If a person you are about to invest in is solid, then the infor-mation uncovered in a background check will support that. If, how-ever, the person is not who you thought, then you need to know thisimmediately in order to make sound investment decisions.
CHAPTER 1 • JUST WHEN YOU THINK YOU KNOW SOMEONE 7
The Tactic: Turning Over NeighboringStones
We found out about the exhibitionist tendencies of the businessowner by reviewing criminal records in the areas where the ownerlived and worked. Trouble is not confined to a person’s hometown.You must consider where the person lives, works, and travels. Thecriminal matters filed against the pants-dropping executive were filedin a different state than where the executive resided. We alwaysreview criminal records and court records in multiple jurisdictions tomake sure that if there is something to be found, we will find it.
If It’s Criminal, Then It’s Relevant
To the investor who thinks a person’s extracurricular activities areirrelevant to the deal as long as the person produces or performs:Consider what your limited partners or co-investors would think ofthat philosophy in light of the case just described.
Moving Forward
You never really know the person who is responsible for yourmoney. What’s important is to be comfortable with his or her charac-ter. We all have different definitions of ethics, morals, and success.You need to confirm that the person who has access to your moneymeets your expectations, and background checks are an integral com-ponent of the process.
Whether for individual investments, acquisitions, or new hires,your due diligence process should, at the outset, include conductingan exhaustive background check. From that point forward, we alsorecommend incorporating the following
8 DIGGING FOR DISCLOSURE
1. Dig deeper. If the background check uncovers any civil orcriminal cases or bankruptcy filings, you should always reviewthe documents filed in these matters. The same goes for anyregulatory actions that have been taken against the company orperson(s). Taking a look at these public records allows you tofind out what the issue was and see the person’s demeanor dur-ing the situation. If a person were accused of wrongdoing, didhe or she embrace a Mel Gibson-esque attitude, or did the per-son cooperate with attorneys, law enforcement, and/or regula-tors? How did the matter get resolved? The answers to thesequestions may surprise you. Talk to independent third partiesto confirm how it was resolved to make sure the matter will notbecome your problem in the future. If the problem happensagain, you can explain to your board of directors, limited part-ners, co-investors, or others that you did everything to addressthe issue. You will not be subject to redress for being eager; youwill, however, for being lazy.
2. Interview managers/management. If you find a person hasbeen involved in any controversies, compromising reputationalissues, or inflammatory lawsuits, or there were factual discrep-ancies on his resume, talk to the person. Document his state-ments so you have it in the file and on the record, shouldanything happen down the road. Also, public records only tell apart of the story. If you find an executive was sued for securitiesfraud, get the executive’s side of the story. There may be miti-gating circumstances that explain what happened.
3. Contact former employees. Former employees are con-stantly overlooked and undervalued in the due diligenceprocess. These people often have enormous amounts of valu-able information that will assist you in your deal.
4. Ongoing monitoring. A background check should not be con-sidered finite. Conduct annual or biennial background checks,get daily news alerts, and monitor relevant blogs. Stay on top of
CHAPTER 1 • JUST WHEN YOU THINK YOU KNOW SOMEONE 9
your investment. Just because someone met your investmentstandards at the beginning does not necessarily mean they willstay true to your expectations.
5. Consider a whistleblower hotline. Many investors do notrealize how easy it is to implement an anonymous tip line. It isan inexpensive preventive type of insurance where you offeremployees, vendors, and others a vehicle to anonymouslyreport not only fraud and unethical behavior but also unsafework conditions, violence in the workplace, drug use, and soon. There are no downsides to the hotline; it is a win-win foremployees, investors, board members, and regulators.
INDEXAaccuracy, 33
active lawsuits, 131-132
activist hedge funds, 65-67
Agape World Inc., 57
age discrimination, 35
American Recovery andReinvestment Act of 2009, 103
analysis of information, 101,145-158
anonymous tip line, 9, 104
archives of websites, 62
Asia, 46
asset investigations, 121-129
Association of Certified FraudExaminers, 103
attorneys, 107-110, 112
179
Bbackdating options, 66
background checks
as deal-killers, 3
conducting, 3-4
corporate records, 19
court records, 7
criminal records, 7
frequency of, 63
frequency recommended, 8
importance of, 1-3, 6-7
mandates for, 4
recommended frequency, 26
what they find, 15-21
what to include, 7-9
BaFin, 110
bankruptcy petitions, 28
Bayou Hedge Fund Group,169-170
Bernard L. Madoff InvestmentSecurities, 160
180 INDEX
Better Business Bureau(BBB), 133, 175
blogs, 64
Bloomberg, 93, 145, 149, 177
bottom-line blockade, 2
bragging, 56
Brazil, 51-52
BRB Publications, 25, 175
CCalifornia Sex Offender
Registry, 39, 174
campaign contributions, 175
career history, investigating, 35
Cayman Islands, 127
CBOE (Chicago BoardOptions Exchange), 152, 174
Certified Public Accountant (CPA), 151
CFTC (Commodities FuturesTrading Commission), 152
Channel Islands, 127
character, 7-9
Chartered Financial Analyst,151
chat rooms, 64
Chicago Board OptionsExchange (CBOE), 152, 174
child abuse, 39
ChoicePoint, 155
co-ops, 109
Code of Ethics policy, 133
college degree verification, 20
Commodities Futures TradingCommission (CFTC), 152
Companies House (United Kingdom), 47
competitive intelligence, 65-72
complaints from consumers,175
computers
imaging, 84
policies about, 71
spyware, 86
conducting backgroundchecks, 3-4
conducting interviews, 29-41,64, 74-77
construction companies andorganized crime, 115-118
consumer complaints, 175
consumer credit reports, 98, 155
corporate crime, 170-172
corporate discrimination, 35
corporate fraud, 103-106
corporate governance, 4
corporate records, 19, 72, 146
Corporate Resolutions, Inc., 2, 20
Cosa Nostra, 113
Cosmo, Nicholas J., 57-59
INDEX 181
court records, 7, 25, 27-28, 64
CPA (Certified Public Accountant), 151
credentials, exaggerated, 15,20-21
credit reports, 98, 155
crime
corporate, 170-172
organized, 113-120
white-collar, 120
criminal background, 57
criminal behavior, 89-92, 94-101
criminal records, 7, 28, 59
Ddegree verification, 20
Delaware, 19, 146
Delaware Secretary of State,174
Department of Education, 88
Department of Justice, 48-49
diploma mills, 88, 176
discrimination, 35
disorderly conduct, 140
domain name registrations,129, 176
DowJones, 93
Dreier, Marc, 15-16
due diligence, 1
EE.F. Hutton, 114
EEOC (Equal EmploymentOpportunity Commission),35
embezzlement, 94-98, 103
employees
finding former employees,35-38, 74, 77, 126, 136
whistleblower hotlines, 103-106
employment history,investigating, 35
Enron, 105
Environmental ProtectionAgency (EPA), 135, 176
Equal EmploymentOpportunity Commission(EEOC), 35
Equifax, 155
Ethics Hotline, 64
exaggerated credentials, 15,20-21
Experian, 155
expunged records, 153
FFAA (Federal Aviation
Administration), 99, 128, 175
Facebook, 34-35
Factiva, 93, 149, 177
182 INDEX
Fair Credit Reporting Act(FCRA), 98, 155
faultless fraud, 78-79, 81
FCC (FederalCommunicationsCommission), 135, 176
FCPA (Foreign CorruptPractices Act) of 1977, 48-49,51, 53
FCRA (Fair Credit ReportingAct), 155
FDA (Food and DrugAdministration), 135
Federal AviationAdministration (FAA), 99,128, 175
Federal Bureau of Prisons, 39, 41, 174
Federal CommunicationsCommission (FCC), 135, 176
Federal Election Commission, 128, 175
Federal Trade Commission(FTC), 132, 176
fidelity insurance, 77
Financial Crimes Task Force, 20
financial due diligence, 1
Financial Industry RegulatoryAuthority (FINRA), 45, 134,152, 173
Financial Services Authority(FSA), 47, 152, 173
Finding former employees, 35-38, 74, 77, 126, 136
FINRA (Financial IndustryRegulatory Authority), 45,134, 152, 173
flock funding, 2
FOIA (Freedom ofInformation Act), 68-70
Food and Drug Administration(FDA), 135
Foreign Corrupt Practices Act(FCPA) of 1977, 48-49, 51, 53
Form ADVs, 134
fraud, 77-81, 103-106
fraudulent wire transfers, 92
Freedom of Information Act(FOIA), 68-70
FSA (Financial ServicesAuthority), 47, 152, 173
FTC (Federal TradeCommission), 132, 176
G–HGang Land News, 118
General ServicesAdministration (GSA), 135,175
German Federal FinancialSupervisory Authority, 110
INDEX 183
global investigations, 43-53
Godfather, 113
Google, 145
GSA (General ServicesAdministration), 135, 175
Guidestar, 72, 177
health problems, 32-33
hedge funds, 65-67
hidden assets, 127
hip pocket sources, 39
Hong Kong, 47-48
Iidentifiers, 38, 147
imaging computers, 84
ImClone, 55
Insider Trading database, 66, 177
insurance
fidelity insurance, 77
fraud, 77
key man policy, 32
theft, 77
insurance fraud, 139
intellectual property, 129
Internal Revenue Service(IRS), 176
Internal Security Association,120
international investigations,43-53
international sources, 47
Internet, 15, 69
InterPacific Capital, 167
interviewing people, 29-41, 64,74-77
IRS (Internal RevenueService), 176
Isle of Man, 127, 170
Israel, Sam III, 169-170
IT staff, 88
Italian Mafia, 114
J–K–Lkey man policy, 32
Know Your Customerguidelines, 4, 119, 142
Latin America, 52
law firms, 107-110, 112
lawsuits, 131-132
legal due diligence, 1
LexisNexis, 15, 19-20, 72, 93,124, 145-146, 149, 157, 177
liars, thinking like, 11-14
LinkedIn, 35
Luxembourg, 127
184 INDEX
MMadoff, Bernie, 1-3, 160-162
mafias, 113-120
Marino, Dan, 169-170
Mauritius, 127
media, 116
media databases, 149
media research, 93
media sources, 64
Megan’s Law, 39
Middle East, 46
military records, 62, 152
military service, investigating,175
money laundering, 56, 90
monitoring
companies, 64
executives, 64
moral compass, 137, 139-143
mortgage records, 25
NNational Archives and Records
Administration, 175
National Association ofSecurities Dealers (NASD),134
National Futures Association(NFA), 152, 173
National StudentClearinghouse, 20, 61-62, 174
net worth, verifying, 63
New Jersey, 19, 146
New Jersey Secretary of State, 174
New York Sex OffenderRegistry, 174
NFA (National FuturesAssociation), 152, 173
nondisclosure, 55, 60-63
nonprofit entities, 72
O–POccupational Safety andHealth Administration(OSHA), 133, 175
Office of Foreign AssetsControl (OFAC), 135, 175
organized crime, 113-120
PACER (Public Access toCourt Electronic Records),28, 58-59, 152, 174
Pang, Danny, 3, 166-168
past performance, as indicatorof future behavior, 23
Patent and Trademark Office,129, 136
patents, 176
INDEX 185
PEMG (Private EquityManagement Group), 166, 168
personal judgment, 137, 139-143
personality traits, 30
Petters Company, Inc., 105
Petters, Thomas, 105
pilot’s licenses, verifying, 175
political contributions, 128
political donations, 175
polygraphs, 96-97
Ponzi schemes, 57, 105
Ponzi, Charles, 12
post-acquisition problems, 73-74
post-investment research, 78
preventing fraud, 78
Private Equity ManagementGroup (PEMG), 166, 168
property records, 25, 85, 108-109, 124, 127, 157
property transfers, 150
protecting assets, 123
Public Access to CourtElectronic Records(PACER), 28, 58-59
pump and dump scams, 117
Q–Rrace discrimination, 35
Racketeer Influenced andCorrupt Organizations Act(RICO), 116-117
The Real Deal magazine, 125
references, 34
regulatory agencies, 132-136
regulatory filings, 64
regulatory issues, 132-136
research
media outlets, 116
media sources, 93
post-investment, 78
strategies for, 145-158
résumé fraud, 15, 20-21
Reuters publications, 93
RICO (Racketeer Influencedand Corrupt OrganizationsAct), 116-117
Rowley, Coleen (FBI), 105
Royal Dutch Shell Plc, 52
Russian mafia, 118-120
SSarbanes-Oxley Act, 4, 142
Searcey, Dionne (Wall StreetJournal reporter), 52
SEBI (Securities andExchange Board of India), 45
186 INDEX
Securities and ExchangeBoard of India (SEBI), 45
Securities and ExchangeCommission (SEC), 45, 134,152, 173
Securities and FuturesCommission (SFC), 48, 174
sex offenders
California Sex OffenderRegistry, 174
New York Sex OffenderRegistry, 174
registries, 39-40
SFC (Securities and FuturesCommission), 48, 174
Siemens AG, 48
slumlords, 85
The Sopranos, 114
sources
hip pocket sources, 39
international sources, 47
media outlets, 149
spyware, 86
Stanford Group Company,162-163, 166
Stanford, Robert Allen, 3, 162-166
Stewart, Martha, 55
Sun Microsystems, 52
swindlers, thinking like, 11-14
TTARP (Troubled Asset Relief
Program), 171
tax assessors, 25
telephone calls, 69
theft, insurance for, 77
thinking like a liar, 11-14
Thomas publications, 93
threats, 83-88
three principles ofwrongdoing, 86
tip-line, 104
tracking origins of threats, 84-88
trademarks, 176
TransUnion, 155
Trojan software, 86
Troubled Asset Relief Program(TARP), 171
two-person interviews, 76
U–VU.S. Department of
Education, 88, 176
U.S. Department of Justice,48-49
U.S. Patent and TrademarkOffice, 129, 136, 176
U.S. Patriot Act, 4, 119
U.S. Tax Court, 176
INDEX 187
Uniform Commercial Code(UCC), 108-109
United Kingdom, 47-48
UTStarcom, Inc., 49
Vendex, 115
verifying net worth, 63
W–ZWall Street, 101
The Wall Street Journal,52, 153
Watkins, Sherron (Enronwhistleblower), 105
Way Back Machine, 62, 176
website archives, 62
wedding announcements, 150
Westlaw, 27, 93, 124, 149, 157, 177
whistleblower hotlines, 9, 103-106
white-collar crime, 120
WHOIS database, 129, 176
wrongdoing, three principlesof, 86
