Blog

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.”

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Peter Barakett

President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

Bauer Hockey accused of fraud, channel stuffing

Performance Sports Group, which owns the Bauer and Easton brands, has been accused of fraud and stock market manipulation stemming from channel stuffing.  Channel stuffing is more common than people think, and can occur in various forms / schemes.  We see it most often in direct to affiliated retail and distributor arrangements in clothing, home goods, and tech, but it can happen in any industry, in a myriad of ways.

Detailed and professional due diligence can often identify various forms of channel stuffing early. Channel stuffing not only affects the accounts of public companies and their stock price but is also common in the sale of a privately held business in order to inflate revenue that will be subject to a negotiated multiple the parties agree upon for valuation. One example is a law firm that asked its clients for retainers in advance of anticipated work, using the retainer amounts to inflate sales and represent to an acquirer that the retainer amounts were part of services invoiced and collected, thus inflating the price paid by the acquirer. For more info, click here.

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Peter Barakett

President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

Lululemon Director resigns amid bio issues

Lululemon Director Rhoda Pitcher has resigned after her bio was called into question.  Among other things, she claimed to have had a masters degree from University Associates, which could not be confirmed. You can read more from the NY Post here. RealMoney.com has a detailed article here. What’s amazing is how many times her bio was vetted or she was background checked, including presumably by Lululemon itself, without any person or firm catching any of this or thinking such a person was qualified to be on the board of a public company.

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Peter Barakett

President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

 

Man charged with investment fraud a 4th time

A few years ago we were engaged by an investor group to research a man who claimed his firm was the largest pasta, olive oil and tomato sauce importer in the USA. The client was introduced to this man by a trusted source with whom they had co-invested and/or shared investment ideas with from time to time. Our research showed numerous aliases, dozens of false claims, and 3 prior arrests for fraud (2 for bank fraud and 1 for mail fraud). In 1998 he was arrested for scheming to defraud a Canadian investment firm out of $180 million, while serving time in jail for a different fraudulent scheme. Based on our report, our client did not invest, and told the person who referred him to them of our findings. He was arrested by the FBI again in June 2016.

The most recent scheme, hatched around 2012, involved soliciting loans and other financing from investors in Kansas City and Florida to purchase olive oil in order to deliver on contracts to major retailers that did not exist. The man created phony bank statements and tax records to show the investors, and he did not have the cash, inventory and contracts that he said he had. He faces up to 20 years in jail should he be convicted, after serving approximately 9 years for the prior offenses.

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Peter Barakett, President

Due Diligence Consulting LLC

DDC Investigations LLC

Hedge fund manager convicted of sexual assault

A recent DDC assignment for a very large investor group uncovered that a hedge fund manager was arrested outside the USA for sexual assault on a woman while at a hotel.  DDC was able to access the case files, and the video tape and still pictures of the HF manager show him chasing the woman down a hotel hallway in his underwear.  This criminal case went to trial, and the HF manager was convicted and incarcerated for approximately one year.  DDC believes most hedge fund investors are not aware of this incident because they, and the background check service providers they use, do not check a person everywhere there is a contact or connection, and/or under all name variations ever used.

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

War criminal passes TSA background check

A Somali man accused of war crimes in a US court was found to be working for the TSA in Washington DC.  The firm engaged to do the background check missed the man’s open court case alleging him of war crimes. You can read the story from Fox News here.

Depth of research, level of employee training and a quality / sourcing review process are key considerations when evaluating a background check service provider.  Too often the government and companies focus on getting the lowest possible price and the result can be errors or omissions such as this one.

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Peter Barakett

President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

 

 

Director falsifies bio

DDC’s research recently found that a director of several public companies had stated in some of his professional bios that he was a CPA when in fact he never had a CPA, nor a degree in accounting. He did have a law degree but never practiced law.

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

Partnership Fraud

DDC was engaged to research an investment partnership, its principals & CFO, and review   certain documents including, but not limited to, investor presentations, the offering memorandum, partnership agreement, LLC agreement, side agreements, tax returns, and unaudited financial statements. DDC found multiple instances of fraud and mismanagement, and our client has filed suit.  DDC notes that no background checks or doc review were conducted prior to, or after, each capital investment was made because the principals were “reputable lawyers who must know what they are doing”.

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

Florida ponzi scheme

DDC’s recent research on behalf of an investor led to the discovery of a ponzi scheme in Florida.  DDC also located the perpetrator, who was trying to evade service of process, after other firms had failed to find him, by using deep research techniques that are unfamiliar to the typical PI, former law enforcement officer, or military veteran.  How DDC researches, and what DDC researches, makes all the difference in generating actionable information to our clients.

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC