We turned to licensed investigator and certified protection specialist Don Aviv, the President of global corporate intelligence agency Interfor International, for insight on due diligence in personal and professional background checks. Interfor was founded in 1979 by a former intelligence officer. Over the past 40 years it has provided investigative and intelligence services for individuals, companies and major law firms in the United States and around the world.
What kinds of due diligence do your clients generally need?
Interfor’s clients generally require in-depth background information on persons and businesses. Our investigations have provided vital intelligence on principals, prospective employees, counterparties and joint venture partners, and we have assisted corporations, law firms and governments on a wide array of cases and controversies in every corner of the world. There are many types and levels of background checks and due diligence investigations: the scope of an investigation depends on the needs of the client and specific circumstances.
However, at minimum, a comprehensive examination in the U.S. should include a thorough litigation check, 50-state criminal check, bankruptcy check, verification of educational degrees and licenses, name screenings on government terrorist and criminal lists, country-wide media search and government regulatory agency checks. Many of Interfor’s due diligence investigations include reputation inquiries. In these cases, we canvass those who know, or may have worked with, the subject of investigation. Speaking with those individuals can provide a wealth of information, far more than any database-driven search.
How often do your clients or prospects decide against undertaking due diligence, even when you advise them that it is necessary?
Unfortunately, as a full-service investigative firm, we often see the consequences of ineffective or inadequate investigations. Our litigation support and asset search services often sees those consequences when they are called on to investigate, analyze and track cases involving theft, financial fraud, embezzlement and duplicitous conduct. Failure to conduct adequate due diligence makes you and your company vulnerable to substantial losses and liabilities. In many situations a thorough due diligence investigation would have uncovered troubling facts and circumstances before the parties began their ill-fated relationship. The old adage ‘penny wise, pound foolish’ comes to mind. In addition to financial and reputational harm, the damage caused by these omissions may result in very uncomfortable confrontations with business associates, employees, boards, investors and shareholders. As we always tell our clients: who you work with is your business—making sure who they really are is ours.
What would you say to companies that don’t carry out thorough verifications?
In the old days, when you began a business relationship with a known company checking references was about all the background verification you would do. Bernie Madoff and his ilk have turned that standard on its head. The past 15 years have seen a steady stream of financial frauds, scams and Ponzi schemes. The sheer size of these schemes has been astounding. A few years back, a scam of several million dollars was noteworthy; now we are confronted with frauds in the billions. There is no substitute for thorough, comprehensive due diligence on every significant player in your life—from an overseas business partner to your local financial planner. “Trust” and “verification” are the watchwords of the 21st century.
In addition, client feedback suggests that the commoditization and automation of due diligence is turning out to be a short-lived trend. Ultimately, clients are realizing they prefer strong analytics and a human touch as opposed to mass-generated reporting or cut-rate services from providers who almost always miss subtle red flags, if not glaringly obvious ones as well.
We often see crises in the news that may have been prevented with due diligence. What are some that have struck you recently?
Many cases of financial fraud and misconduct could have been prevented with a thorough vetting of the offending party. Financial fraud can take many forms (e.g., investment schemes on the East Coast, high-return financial instruments in Florida, oil and gas drilling investments in the Southwest), but all have the same aim: to separate good and trusting people from their money. In our long experience, there has never been a shortage of aberrant behavior and conduct.
Just a few weeks ago, a security director at Borg Warner (a publicly traded US auto-parts manufacturer) was arrested in Russia on charges of espionage. While the true reasons for his arrest remain murky and geo-politically charged at this time, the coverage quickly yielded the fact that he had been dishonorably discharged from the military for larceny and fraudulent behavior. This was a surprise to not only the company, but also the individual’s family! It turns out the company only did a cursory background check, with a cut-off at 7 years of history. A policy which required a more thorough and comprehensive check would have saved them the bad publicity.
Other recent examples:
- A U.S. money manager with a checkered past takes up practice in France, with activities including illegal stock promotion, securities fraud, wire fraud and money laundering.
- A highly experienced and qualified scientist engages in misconduct including plagiarizing, falsifying, and fabricating information in a government study, resulting in his suspension.
- A founding partner of a global money management firm is party to numerous lawsuits in the Russian Federation and subject to an international arrest warrant.
- A managing director at a hedge fund hires an investment manager with a history of Securities & Exchange Commission (SEC) investigations and a long trail of bankruptcies and bankrupt companies.
- A prospective employee is found to have a record of criminal violations, drug and alcohol convictions and robbery charges.
- A hedge fund manager is discovered to have a history of hard drug use and an affinity for prostitutes–as well as what associates termed a nervous, unstrung, and unstable personality.
How do clients respond to due diligence findings?
Obviously, when potential problems or issues come to light at an early stage clients are relieved. When nothing untoward is turned up, there should be a huge measure of satisfaction knowing that the people you are hiring or working with are good, stable and qualified. Clients have a respect for the process of due diligence – that best practices now dictate that employees, partners and associates undergo a thorough and complete vetting. With that process comes the peace of mind from knowing that what should be done has been done.
We’re seeing clients who respect the value of comprehensive due diligence now opting to conduct periodic checks at standard intervals on existing employees with access to sensitive data, or after internal promotions. If someone has been with the company 10-15 years it’s important to know if there have been any significant incidents which may affect an employee’s suitability to handle certain information, such as customer data or trade secrets.
Are there any new services clients are requesting?
Yes, absolutely. There is a clear need in the market for real-time threat intelligence. In a world driven by social-media conversation, conspiracy theories or perceived injustices can quickly metastasize into violent action. Strikes, vandalism, and protest can materialize before a company or organization even realizes that the conversation has turned south. To meet this need, Interfor has developed a threat monitoring and intelligence program called Sentinel. It is designed to provide a continuous overwatch of open-source discourse, in order to provide actionable intelligence as it arises. This type of coverage can help prevent or mitigate security breaches, whether it’s for a specific event, foreign travel, or potential workplace violence. It’s also helpful for immediate incident alerts, in cases such as natural disasters or civil unrest. The response has been great.
Don Aviv is a Board Certified Protection Professional (CPP), a Board Certified Physical Security Professional (PSP), and a Board Certified Professional Investigator. He is also a licensed New York State Private Investigator. He holds a B.A. from the University of Rochester and an Alpha Phi Sigma M.S. in Criminal Justice from Suffolk University. Mr. Aviv is an Adjunct Professor at the University of Maryland University College and Vice Chairman of the Security Services Council of ASIS International. He also serves as an Advisor to Canary, a manufacturer of revolutionary home security products. This is the fifth in a series of interviews with experts whose work relates to online reputation management.
