This quagmire seems to get nothing but deeper...

The Diligence / IPOC story is a convoluted one, but at the meat of it are two Diligence investigators who apparently pretended to be British Intelligence operatives in order to pump KPMG emplyees for information on an onging money lanudering investigation into the Bermuda based, Russia connected IPOC International Growth Fund.

Diligence was subsequently sued by KPMG alleging bribery, deception, and computer hacking. Diligence was also sued separately by law firm, Barbour Griffith & Rogers, their apparent client in this mess. BG&R had reportedly hired Diligence on behalf of the Alfa Group, an entity competing against IPOC for control of lucrative Russian telecom business.

Meanwhile, a lawyer representing IPOC made claims that another investigative firm, Kroll, had broken into the email of Bermuda law firm, Wakefield Quin, seeking data on the matter. While this claim was ultimately unsubstantiated, Kroll WAS also active in the matter - not in Bermuda, but rather in Europe.

Kroll's IPOC involvement was confirmed by the chair of a Geneva audit panel charged with making decisions about whether IPOC or the competing Alfa Consortium would end up with the rich prize of OAO MegaFon telecom shares - worth about $2.5 billion (and you wondered what all the fuss was about...). Kroll is (was? - need to check on this) currently under investigation by Russian authorities due to their activities in the case.

But I digress. Back to the (relative) here and now. Let's let Law.com do the talking:

Diligence’s problems began in earnest in September 2005. Court documents show that the company accused its then-chief financial officer, Igor Alexeev, of stealing internal documents, directing employees to erase data from Diligence computers, and encouraging workers to leave the company. Nick Day, Diligence’s CEO, fired Alexeev on Sept. 28.

Weeks later, a sheaf of Diligence e-mails appeared at the offices of accounting firm KPMG in Montvale, N.J. The messages detailed an operation straight out of a John le Carré novel. (The document drop and details of the operation were first reported by BusinessWeek in February.)

Posing as British and American intelligence agents, Diligence operatives infiltrated a KPMG office in Bermuda, according to court papers. The goal: to get their hands on a draft audit KPMG had conducted on IPOC International Growth Fund.

The audit contained potentially damaging financial information that could be used against IPOC in a high-stakes fight over control of Megafon, a $1.5 billion Russian telecom.

Diligence had been hired by Barbour Griffith, which, in turn, had been hired by Alfa Group Consortium, a Russian conglomerate, to turn up dirt on IPOC. Alfa was also battling for Megafon and would later use the information from the audit against IPOC in an arbitration over Megafon’s ownership.

Officials at Diligence were virtually certain, according to media reports, that Alexeev had burned their investigation and tipped off KPMG. Claims and counter claims were filed between Diligence and Alexee and the whole thing turn ten shades of ugly, even as the ramifications of Alexeev's alleged leaks took their toll on the company.

Currently the whole mess is in arbitration, which is where the story takes another interesting turn...

Lawyers for Diligence have subpoenaed any communications between Alexeev and Terry Lenzner, head of the DC-based Investigative Group International. The material turned over so far suggests that Winston & Strawn hired IGI to assist in IPOC’s lawsuit against Diligence. Well slap my face and call me Aunt Sally... Beat that for your scandal dollar: Diligence, Kroll and IGI all wrapped up in one tangled international mess.

Check out the full Legal Times article for expanded details. There is also a load of past reportage relating to IPOC available via the TAGS below.

-- MDT

Labels: Alfa, corporate scandal, Diligence LLC, Investigative Group International, IPOC, Kroll