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

Hedge Fund CFO’s $2mm tax lien

In the course of our regular investment due diligence on behalf of an investor client, DDC discovered that the CFO of a large hedge fund has a tax lien for approximately $2mm.  The tax lien does not appear on the major federated databases used by most law firms and private investigators.  It does show up as unsatisfied through a detailed court search. DDC then confirmed it remains unsatisfied (open). We believe many investors may not be aware of this tax lien because they don’t perform detailed background checks on the CFOs of their underlying investments, and/or the party performing the checks relies on a major federated database.  DDC does not rely merely on one database and a google search.  DDC checks everywhere a person has ever been, to the most original source level possible.

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

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

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

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

The importance of sources and research process

Mark Malik was arrested earlier this week for scamming investors into believing he has a top performing hedge fund with assets over $100m.  You can read the WSJ article here.

The interesting thing in this case was the reliance on sources that are known to be unreliable.  Twitter, google, LinkedIn, business directories, ranking lists, and databases are often not reliable because they may derive some information from the subject’s own claims. The best way to verify anything is by checking with the most original source possible.

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

A bio of errors

DDC recently conducted a thorough background check of a private company executive as part of our client’s pre-investment due diligence.  DDC found that every line of the executives bio had an issue.  He listed some employers, with incorrect dates, or incorrect titles, or both.  He misrepresented his titles, and/or his duties and responsibilities.  He claimed to have a degree that he did not have, from a school that he did not attend.  He omitted some employment from his work history. Each one of his credentials, licenses, and affiliations was incorrect. The only thing that was right was the spelling of his name.

Peter Barakett, President

DDC – Due Diligence Consulting LLC

DDC Investigations LLC

Best Reference Ever…

“[Jim’s] the man. [Jim] is the best board member I have ever had. He flew out to the west coast the day before every board meeting, and joined me for dinner the night before. He had always read the board package in detail, and had many comments, questions, and helpful suggestions, including contacts who he followed up on. [Jim] did cave in to the other VCs on the board in the end, which ended up destroying our company and losing his entire investment (and ours), but while things were working, before the other VCs pulled out their [Bain] play books, he was great – I just wish he’d stuck to his principles.”

Peter Barakett, President

Due Diligence Consulting LLC

DDC Investigations LLC