Ex-con fools investment bankers

DDC was recently engaged by a private equity focused family office to conduct investment due diligence on a person and business that claimed to be in the midst of a geographically focused “roll up” of smaller companies in a very fragmented industry in the eastern USA.

DDC found that the founder had been using a similar name to his actual name, was previously incarcerated for fraud, had been banned from the securities industry, had negligible assets while running large expenses (lease luxury vehicle, luxury rental home, etc.), and misrepresented his employment and education history.

During the course of this assignment DDC found that this person had raised almost $50 million from individuals and family offices who were shown the “opportunity” by two different investment bankers. Both investment bankers claimed to have done due diligence on this person and business.

The best way to avoid scenarios like this one is to (1) do a thorough check on a person or entity everywhere there is a contact or connection to the most original source level possible, and (2) do your own due diligence rather than rely on what someone else says they have done (especially if you are not given a copy of the written report).

********************************************************************

Peter Barakett

President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

 

Hedge fund manager has $15m tax lien

DDC was recently engaged to conduct a thorough pre-investment background check on an established hedge fund manager on behalf of a major investor group.  During early stage research DDC discovered that the manager had a 2016 federal tax lien for approx. $15 million. Rather than “run the meter” and do as much as we can to inflate the cost of this assignment, per established DDC policy we immediately contacted our client and shared the details.  Our client decided not to pursue an investment with this manager. We refunded the unused retainer amount, reflecting almost 80% of the client’s retainer based on its budget.

Our client’s rationale was simple and direct: “we are not going to invest with anyone who can’t manage their own finances.”

********************************************************************

Peter Barakett

President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC