Category: Interesting Findings…

Interesting Findings..., Investment Due Diligence, Private Companies, Private Equity

CEO who served time for wire fraud had launched a hedge fund from prison

DDC specializes is detailed executive background checks, and often finds information others do not.

DDC was recently engaged by a private equity firm to conduct a detailed background check on the founder and CEO of a privately held technology company.  DDC found that about 10 years ago the CEO was indicted for wire fraud and bank fraud while employed as a trader, and had pled guilty. He was sentenced to approximately 2 years and restitution of over $1mm.  DDC’s research also found that after 2 months in federal prison he formed an entity that he claimed in various bios to be either a hedge fund or a diversified financial services company, and the applicable dates of employment covered his entire sentence plus several other years, less those 2 initial months in prison.  In addition, he later provided our client with a written statement expressing remorse and regret while mischaracterizing the charges, claiming it was “a regulatory matter” and that it was settled without “admitting guilt”.

DDC’s client passed on this potential investment and later provided DDC with a background check done by an investigation firm that was engaged by a potential co-invest partner. That report did not find the indictment, the guilty plea or the prison sentence.

Interesting Findings..., Investment Due Diligence, Public Companies, Resume fraud

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

 

Interesting Findings..., Investment Due Diligence, Private Companies, Private Equity

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 Funds, Interesting Findings..., Investment Due Diligence

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

Hedge Funds, Interesting Findings..., Investment Due Diligence, Private Equity, Public Companies

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

Interesting Findings..., Investment Due Diligence, Private Companies

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

Interesting Findings..., Investment Due Diligence, Private Companies, Uncategorized

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

Hedge Funds, Interesting Findings..., Investment Advisors, Investment Due Diligence

Hedge fund manager’s tax liens

DDC was engaged to conduct a thorough background review of a prominent hedge fund manager.  DDC found that he had several million dollars in tax liens. DDC believes his prominence led many investors to believe a background check was not worthwhile. In addition, investigators that rely on one federated database or that provide a low cost / less detailed report may not have found the liens because of the unusual way that they were filed. The question now is: would you pay someone to manage your money when they can not manage their own finances?

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

Hedge Funds, Interesting Findings..., Investment Due Diligence, Private Companies

Businessman burns his residence

DDC was engaged by a hedge fund to research certain persons and entities as part of a potential investment.  DDC found that one person was arrested and convicted on 4 felony counts of arson for burning of his own residence.  The subject served approx. 7 years in jail.  Notably, major federated databases did not associate these arrests, and convictions, with this businessman, just his traffic related violations.  DDC uncovered his criminal history by reviewing his divorce case file, and found that his wife listed “imprisonment” as grounds for divorce.  DDC then contacted the courts relevant to the time frame and was given partial details.  DDC subsequently contacted the relevant dept. of corrections and was able to gain the missing details.

10 years later, a person DDC believes may be the subject’s brother was arrested and convicted for burning his residence, in the same small town.

 

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

Hedge Funds, Interesting Findings..., Investment Due Diligence

CFO arrested 3 times

DDC’s research recently found that a well regarded CFO was arrested 3 times in a state other than that in which he currently resides, twice for drug related offenses and once for a DUI, within the last 7 years.  All three arrests were not included in “comprehensive reports” from two major databases widely used by law firms and private investigators.  DDC was able to discover the arrests and related documentation, including police reports, by researching this CFO everywhere he had ever been, to the most original source possible.

 

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC