Due Diligence Background Investigations: A 3-Step Process .
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comDue Diligence BackgroundInvestigations: A 3-Step Processfor Minimizing RiskMarcy Phelps, CFEMarcy Phelps & Associates, Inc.www.MarcyPhelps.comDue Diligence Hall of ShameTRUST, BUT VERIFY21
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy ts‐doubts‐about‐theranos‐146420728542
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy OW WELL DO YOU KNOW THE PEOPLE ANDCOMPANIES YOU’RE WORKING WITH?63
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comAgendaWhat? Why? Who?Levels of investigations3-step process for investigations7Background investigations:What? Why? Who?What it is and isn’tWhy botherWho should conduct the investigation84
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comDue diligence – What?Investigation of a business or personbefore entering into an agreement9Types of due diligenceOperationsLegalFinancialIntellectual propertyMarket / competitiveBackground investigations105
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comDeep investigationCreate a profile of professional/private lives360-degree viewPast and presentGood and badWhat happened and what they did next11GoalsConfirm all supplied informationUncover any missing informationReconcile any inconsistenciesIdentify warning signsAnalyze/report findings126
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy e diligence Reactive Proactive Tactical Strategic Limits No limits Looking for problems Creating a profile Checklist-oriented Open-ended13Why?Risky business Do your researchM&AInvestmentsPartnershipsVendor/supply alliancesExpert witnesses147
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comMinimize riskIt all affects the bottom line:Falsified claims (degrees, credentials, experience)Mismatched culturesOverlooked warning signs, potential for riskReputational risk Financial risk15Online background investigationsPublic records researchWeb research (news, social media, trade publications)Proprietary databases (news, company info, personal info)AnalysisReporting168
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comWho?Unbiased third partyNo stakeholdersAnother department (library, research, etc.)Outside investigator17Levels of investigations189
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comPersonal InfoRegulatoryRegulatory filings, sanctions, watch listsIdentifiersFamilyEducation/CredentialsKnown addressesCourtsCV, resume, biosCompany InfoAddressFederal/State/other civil, criminal court recordsMediaIndividualsOwnership, history, legal structureWork historySubsidiariesAffiliationsSOS, corporation filingsCareerExecutive managementEducationAssets/LiabilitiesReal estateVehicles, watercraft, aircraftLegal, regulatoryMiscCompaniesCredit historyHistoryFoundations, sponsorships, other causesNewsUCC filingsLegal, regulatory issuesBankruptcies, foreclosures, judgments, liens19Align level of due diligence with level of risk2010
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comLevels of investigations1. Preliminary online research2. Deep dive (online)3. “Boots on the ground” (manual court searching, site visits,interviews)21ConsiderationsWhat’s your purpose?Deal stage (identifying targets, pre-deal, ongoing)?Time/budget restraints?What do you need to make decisions or take action?What’s feasible?2211
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.com3-Step ProcessPrepareResearchAction23Step 1 - PrepareKnow your limitsKnow the warning signsKnow your sourcesKnow the rules2412
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comKnow your limitsMythsLawsFree vs. fee25Online investigating mythsI can find everything onlineIt’s on the internet, so it must be trueEverything’s in one placeI can find it fast2613
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comName searchingFull legal nameCommon/business name(s)Middle name/initialNicknameFirst name first/last name firstMaiden/married namesScreen namesVerify, verify, verify!27Know the lawPrivacy/security of non-public personal information:Fair Credit Reporting Act (FCRA) -credit-reporting-act.pdfGramm-Leach-Bliley Act (GLBA) -security/gramm-leach-bliley-actDrivers Privacy Protection Act (DPPA)http://en.wikipedia.org/wiki/Driver%27s Privacy Protection ActFamily Educational Rights and Privacy Act .html2814
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comKnow when to paySpecialized contentEasy formattingAuthoritative sourcesCustomer servicePro search toolsCopyright complianceSearch multiple sourcesAdded analysis/opinions29Manage expectationsYours, othersWhat’s available, time frame, costsDisclaimersNote that online databases do not cover all courts, cases, ordates. In light of these limitations, it is recommended that you askall subjects to disclose present and past litigation involving themand/or their company(ies).“Reasonable effort” aligned with risk, constraints3015
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comKnow the warningsigns31Red FlagsPast fraudFalse credentialsCriminal actionsCivil suits – active, subject is defendantRegulatory, compliance issuesBankruptcies, judgments, liens3216
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comYellow flagsBiographical issuesOverly vague / missing infoUnverifiable credentials, claimsUnnecessary content, grandiose , ethics issues33Yellow flagsNow I’m a Job switchingSquare peg / round holeReverse Midas TouchOstentatious charitable giving3417
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comOther yellow flagsSilent, obscure partnersDistractions, overly committedLots of related (shell?) companiesNot forthcoming with information35Know your sourcesTypes, content availableDirect (e.g., County Clerk) or aggregator (e.g., LexisNexis)?How to use – hidden features?LimitationsHow to evaluateInterfaceContentAgreement/contract3618
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comRules of the roadGather known info (DDQ, signed consent, bios, identifiers)Start with the end in mindManage expectations (yours and clients)Determine level of risk/due diligenceKnow stage of DD process – Do they know they’re beinginvestigated?37Rules of the roadDevelop a processChecklists – use with cautionTemplatesSave everythingKnow the warning signs3819
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comStep 2 - edentialsPublic RecordsNews/Social MediaWatchlists/Sanctions39Can you do business with them?Do you want to do business withthem?4020
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comRisks from customers, suppliers, other business partnersCompanies where irregularities are present, or where potentialfor corruption existsTerrorism, politically exposed person (PEP), other regulatory risk41Watch lists – SourcesSystem for Award Management (SAM) https://www.sam.gov/Export.gov Consolidated Screening List (CSL)https://legacy.export.gov/csl-searchLists of Parties of idance/lists-ofparties-of-concernNonproliferation Sanctions http://www.state.gov/t/isn/c15231.htmOFAC Sanctions List Searchhttps://sanctionssearch.ofac.treas.gov/4221
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comWatch lists – AggregatorsRefinitiv (risk & compliance, enhanced due ck-kyc-screening/Dow Jones Risk and mpliance/LexisNexis Risk Solutions http://www.lexisnexis.com/risk/43Background – IndividualsLook for names, locations, ways to verify identitiesIdentifiersFull legal nameSSN, DOBCurrent/past addressesSpouse/partner, children, other family namesUse for later – Courts, assets/liabilities, media, etc.4422
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comSourcesNews, social mediaProperty records from asset searches (mortgage, deed,assessment)Credit headers – not public com45IssuesPrivate info, limited accessData entry errorsMixed identitiesVerifying identities can be difficult4623
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comBackground CompaniesAddressOwnership, history, legal structureTrade/fictitious namesSubsidiaries, divisions, other unitsExecutive managementSOS, corporation filings47Look for –Are they a real company?Who’s the parent company?Which companies/units to include?What locations to include?4824
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comCompany-supplied infoDue Diligence Questionnaire (DDQ)Marketing materialsCompany websiteSEC, state security filings10K, 10Q, 8K, Form D, Form our-regulatorAnnual reports www.annualreports.com49Sources – Corporation filingsLexisNexis, other aggregatorsSOS websites: BRBpub.com, SearchSystems.netGoogle [state/country] business entity searchLook for addresses, owners, directors, incorporation dates,active/good standing?5025
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comNon-U.S. entitiesCompanies House (UK) https://beta.companieshouse.gov.uk/DatoCapital.com (UK, Gibralter, Cayman Islands, Malta,Netherlands, Luxembourg, BVI, Panama, Spain, others)Official Company m51Other omHooversPrivCo.com5226
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy isciplinary historyUnreported affiliationsFull legal name ‐ individual,company/units53Financial industryU.S.SEC .gov/litigations/sec-action-look-upFINRA A /CFTC K. Financial Conduct Authority: https://register.fca.org.uk/Note: The FCA’s Financial Services Register format does not state if thereare no disciplinary actions. It includes the disciplinary section only if thereare disciplinary actions against the individual/firm.5427
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comOther financial regulatory agencies/warningsWikipedia - List of financial regulatory authorities by country:https://en.wikipedia.org/wiki/List of financial regulatory authorities by countryInternational Organization of Securities Commissions (IOSCO)Investors Alert Portal:http://www.iosco.org/investor protection/?subsection investor alerts portal55A-Z Index of U.S. Government Departments and Agencieshttps://www.usa.gov/federal-agenciesGoogle itAsk a librarian5628
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comEducation /CredentialsVerificationComplaints, disciplinary historyFull names?57Verify degreesOfficial verificationBest alternativeDirect / verification servicesNews, social mediaNeed signed consent, otherdocumentation (only reasonyou need this document in DD)Alumni, university websitesAcademic searching5829
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comDegree verification servicesDegreeVerify.com - National Student Clearinghouse (U.S.)Hedd.ac.uk – Higher Education Degree Datacheck (U.K)QualificationCheck.com – (global)59CredentialsAssociations – member directoriesState licensing boardsGoogle:[entity] member search[state] professional licensingThe Alphabet Soup of Financial /01/101001.asp6030
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comMember directoriesAre all members included?What info is available?Consent needed?Pick up the phone61Public recordsAssetsLiabilitiesCourts6231
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comAssets / LiabilitiesFinancial strengths & weaknessesOther namesLocationsAffiliations63AssetsReal property – homes, investmentsVehicles, watercraft, aircraft, business equipment, other personalpropertyBusinessesIntellectual propertyFoundations, sponsorships6432
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy ForeclosuresJudgments, liensCredit reportsUniform Commercial Code (UCC) filings*Liabilities point to assets*65Court RecordsFederal, state, county, localCivil, criminalDivorce, child custody/supportTrafficSpecialty: tax, contracts, environmental, etc.6633
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comMediaNewsSocial mediaAcademic content67Why bother?Info not in the public recordAdds colorCompletes the profile6834
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comMedia researchGo beyond Google and use more than one sourceLexisNexisDow Jones FactivaProQuest DialogBingSpecialized sources69NEGATIVE NEWS searches?Avoid, if possibleMay not catch all negative newsMiss the positive infoReports lack “color”Helps narrow search, when needed7035
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.com{company} w/s (accus! OR antitrust OR arbitrat! OR bankrupt!OR charg*** OR crime OR criminal! OR defendant* OR defraud!OR discipline! OR ethic! OR exodus OR falsif! OR fired OR firingOR fraud! OR guilt* OR illegal! OR insider information OR insidertrading OR investigat! OR let go OR litigat! OR mass exit ORmisconduct OR reparation* OR resign! OR sanction*** ORscandal! OR settl*** OR settlement OR stepp*** down ORsubpoena! OR unlawful! OR violat! OR censur! OR aml ORmoney laundering)71Start with GoogleSocial media profilesOther found bios (speaking bios, etc.)Leads to sourcesIgnore news for nowKeep track of past employers, schools, geographic locations7236
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comGoogle – preliminary searching[name] [current/recent employer][name] [university]73Premium newssourcesNexis.comDow Jones FactivaProQuest Dialog7437
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comNexis.comfirst name w/2 last name and employer1 OR employer2 OR employer3Factivafirst name near2 last name and (employer1 OR employer2 ORemployer3)Dialogfirst name n/2 last name and (“employer1” OR “employer2” OR“employer3”)75Go back to GoogleFind news that premium sources missedUse spouse/partner nameTake advantage of Google’s advanced featuresGoogle search:(“first name last name” OR “last name first name” OR “othername variations”) (“employer1” OR “employer2” OR “employer3”)7638
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comUse another search engineBing.comBiznar.comDuckDuckGo.comWayback Machine www.Archive.org/webCarrot2 https://search.carrot2.org/#/webGoogle Scholar https://scholar.google.com/Microsoft Academic https://academic.microsoft.com/home77Social MediaDirect to social sitesGeneral search enginesSocial search engines7839
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comSocial sitesLinkedIn.comMore info/access with accountBiosConnectionsUse advanced searchFacebook.comNeed accountTry spouse/partner profileAvoid TMI, respect privacy79Social sitesTwitter.comNeed accountAvoid TMISlideshare.net – presentations8040
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comGoogle:[name] site:linkedin.com81Social der.com8241
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comLocal newsAdds focus, depthHometown hero/companyaccomplishments & failures83Local News – SourcesABYZ News Links (global) http://abyznewslinks.comAmerican City Business Journals www.bizjournals.com8442
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comFilling in the Gaps85Local researchers/investigatorsAssociation of Independent Information Professionals onal Council of Investigation & Security Services (NCISS)www.nciss.org/member-searchWorld Association of ctoryCouncil of International Investigators http://bit.ly/1UULrKE8643
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comPackaged reportsThomson Reuters Enhanced Due Diligence nced-due-diligenceDow Jones Risk & Compliance – Due Diligence iance/LexisNexis Business Assurance ss-assurance-report87Packaged reportsWhat’s included?Can the report be shared with client?Other copyright / ownership issuesHow much customization is available?Updates?Time frame?Cost?8844
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy Phelpsmarcy@marcyphelps.comStep 3 - ActionAnalysisReportFollow‐upNow what?89AnalysisIdentify gaps – additional searching?Identify warning signsConnect the dotsWhat’s it mean for your organization, deal, situation?9045
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy onsRecommendationsKeep your readers and goals in mind91ReportsVisually appealingWhite space, tables, timelines, diagrams, etc.Summarize - No data dumpsConnect the dots – Don’t make reader do the workPossible implications for client9246
Due Diligence Background Investigations: A 3‐Step Process for Minimizing RiskMarcy P
Reverse Midas Touch Ostentatious charitable giving 34. 18 Due Diligence Background Investigations: . Data entry errors Mixed identities Verifying identities can be difficult 46. 24 Due Diligence Background Investigations: .
RGF Due Diligence Engagement Template Terms . 1 Introduction The [Applicant] is required to submit to BIS a Due Diligence report prepared by the Due Diligence Service Provider which covers the scope of the Due Diligence work set out in Appendix 7 of the Conditional Grant Offer Letter (the "Due Diligence report"). These termsof engagement set
Section 01 - Legal Due Diligence 04 1.1 Purpose of Legal Due Diligence 05 1.2 Conclusion 1 4 Section 02 - Finance Due Diligence 1 5 2.1 Purpose of Finance Due Diligence 1 6 2.2 Conclusion 2 8 Annexure 2 9 Annexure 01 - Statement of Comprehensive Income 30 Annexure 02 - Statement of Financial Position 31
Phase 1 is concerned with the basics of due diligence with a focus on tools and techniques of due diligence analysis. Day One: The basics of due diligence in the oil and gas business The changing dynamics of the global oil and gas business The strategic relevance of due diligence in market analysis
finalizes the due diligence report - The due diligence report must seek to prov ide the most pertinent information at a gi i i i i h il b bd f ibliven point in time in the most easily absorbed form possible - It is particularly critical to relate the due diligence report to the strategic objectives of the due diligence process.
§ 1.03[1] DUE DILIGENCE 1-8 § 1.03 Benefits of the Due Diligence Investigation If not carefully conceived and managed, due diligence investiga-tions can become expensive boondoggles that never end and never lead anywhere. It should be kept in mind that process without results is useless. The due diligence investigation is all about producing .
5. Anti-bribery due diligence starts sufficiently early in the due diligence process to allow adequate due diligence to be carried out and for the findings to influence the outcome of the negotiations or stimulate further review if necessary. 6. The partners or board provide commitment and oversight to the due diligence reviews.
Loan Purchase Due Diligence Transaction Checklist (Commercial Real Estate) The length of the due diligence period. The amount the purchaser is willing to spend on due diligence. The quality of the material provided by the seller. The age of the loan. The older the loan, the more likely that the loan file information is out of date.
INTERNATIONAL CRIMINAL COURT FROM AMERICA’S PERSPECTIVE JOHN R. BOLTON* In the aftermaths of both World War I and World War II, the United States engaged in significant domestic political debates over its proper place in the world. President Wilson’s brainchild, the League of Nations, was the center-piece of the first debate, and the United Nations the centerpiece of the second. The .
