You may recall the recent report in Vanity Fair magazine that highlighted the cozy, long term relationship between white collar fraudster, R. Allen Stanford and Kroll - one that involved Stanford paying the investigative firm millions, reportedly, to run interference with inquisitive regulators.

Kroll is facing its first lawsuit relating to the Sanford relationship, filed in Florida's Southern District Court. The complaint has been brought by Electri International, which lost millions investing in Stanford's Stanford International Bank only after hiring - you guessed it - Kroll to vet the deal.

Kroll reportedly issued SIB a clean bill of health in their review, which they claim was "limited due diligence" costing Electri in the neighborhood of $15,000.

Even more interesting, Electri's contact at Kroll in the matter was Thomas V. Cash, Kroll's managing director for investigations in Latin America and the Caribbean. According to Electri's complaint, Cash had been hired as a consultant by R. Allen Stanford in the late 1990s and Kroll never disclosed this relationship. Vanity Fair also named Cash as Kroll's point man with Stanford.

Kroll and Cash are keping mum about the particulars of the Electri lawsuit, but Cash did have this to say to the New York Post:

"I wouldn't believe everything I read in Vanity Fair because most of it's wrong."

Lets take him at his word for the moment and keep close eyes on Florida's Southern District Court.

-- MDT

Labels: due diligence, Electri, Kroll, lawsuit, R. Allen Stanford, Thomas Cash

Focusing on alternative asset investors:

"The service will encompass tll types of hedge fund and CTA strategies.All exchange-listed securities within the major asset classes - global equities, foreign exchange, global fixed income, and commodity futures - will be targeted. Cash and derivative securities will be evaluated. "

More details at Hedge Fund Review.

-- MDT

Labels: Augustus Capital, due diligence

Lawsuits, liens - who is giving these folks money? Do your homework people! Check out the related articles on the right-hand side of the page. Looks like a long year for pensioners in Detroit.

-- MDT

Labels: due diligence, GVCwinstar, Kirkland Dudley

An investigator by any other name...

Check out this piece on investment-related due diligence from the Detroit Free Press.

-- MDT

Labels: due diligence

Good stuff, here, from Bloomberg. Taking the obligatory stroll through Madoff country, they've put together a decent piece on how hedge fundies are using investigators to avoid being the next ones burned.

Investment firms using P.I.s is certainly nothing new, but one might imagine that recent headlines combined with a reenvigorated regulatory apparatus have heated up the market a bit.

Look for comments from Randy Shain of Backtrack/First Advantage Corp. as well as Pete Turecek of Kroll.

And a word of thanks to the friendly tipster who pointed me toward the article.

-- MDT

Labels: Backtrack, due diligence, First Advantage, hedge fund, Jules Kroll, Pete Turecek, Randy Shain

The Meister in question would be Howard Trivers, Sr. Reference Librarian at Baker & Daniels, who recently gave a presentation entitled, “Information Professional: The New Private Investigator.” You can see read the re-cap right here, via the InfoToday blog.

-- MDT

Labels: due diligence, librarian

People send me the coolest things... Case in point: here's a nice little marketing strategy from Minneapolis-based investigative firm, Disclosure Insight.

Check out their site and try a search in the company box in the upper right. A chronological list of comment letters, many that would otherwise not be available online, are yours for perusal.

-- MDT

Labels: Disclosure Insight, due diligence, SEC

Ugh...

Dear WSJ,

CC: Tim Hay

Note: Drawing erroneous parallels between corporate investigators and the fictional hard boiled gumshoe set - Sam Spade, Phillip Marlowe and the like - is so, so tired.

Perhaps U.S.A. Today could reasonably use that kind of lame comparison for the benefit of their mouth-breathing clientèle, but The Journal is supposed to be written for sophisticated people.

Please respect the intelligence of your readers and trust that they are capable of understanding the role of investigators in the business world at a level beyond clichéd references to mustaches, Ferraris and Hawaiian shirts.

Your pal,

The Daily Caveat

Whew, now that that is out of the way, IF you can get past the pitiful lede, you might enjoy this WSJ piece focusing on investigators serving the venture capital market. It is really not so bad once you get over the hump.

-- MDT

Labels: background checks, due diligence, venture capital

Good advice from Ken Yormark - Managing Director with Protiviti, a risk consulting firm - available via The Metropolitan Corporate Counsel.

-- MDT

Labels: due diligence, Protivity

You've simply got to read this one to believe it. Con man (man-child?) Sung "Lawrence" Hung convinced his Seattle-area neighbor to lend him funds for a mutually beneficial investment, but when the deal went south, Hung threatened that mafia types were coming to do them both in. The most amazing thing is that Hung and his mom have been running scams like this since at least 1997.

Read about his arrest and the schemes that preceded it, here.

These people are out there (well, not Hung, he's currently in the hoosegow) and background checking is your friend. Keep in mind though, that all background checks aren't created equal. When you hire an investigator or investigative service to aid you in vetting potential business associates, know that protecting your interests takes time and attention to detail. Human attention, that is. A $15 internet chop-shop job isn't going to cut it with a guy like Hung. Databases don't do well with non--standard names - especially when they include westernized nicknames.

As a friend in the industry reminded me just days ago, only an investigator, with the benefit of his or her on-the-job experience can anticipate and circumvent issues that would thwart an automated search. It takes a human hand in order to ensure that your ass is well and truly covered. Not conducting a background check and ending up like Hung's victims is bad enough. But even worse is actually paying for a background check that doesn't give you the early warning that you are paying for. So choose wisely...

-- MDT

Labels: background checks, Con artist, due diligence, Sung "Lawrence" Hung