(What’s it like on the front line supporting the firm’s clients?  What are the challenges the firm’s experts help senior business executives, general counsel, board members and other decision-makers address?  Welcome to ACTION WEDNESDAY.  Every Wednesday, the Front Line Blog publishes a new case study.)

You don’t usually set out to find evidence of financial fraud. But if you regularly conduct due diligence background investigations on key personnel, you shouldn’t be surprised when you find it. Just before formally engaging in a contractual relationship with a company based in New Zealand, a U.S.-headquartered financial services firm engaged Hillard Heintze to conduct a thorough background investigation and due diligence of the entity and its principals. “We’re looking,” said the firm’s CEO, “for anything that would preclude us from providing services for transactions in commodities and futures contracts, as well as other business transactions or alliances.”

Financial Fraud Artists Often Know How to Hide

The Hillard Heintze team quickly completed a review of multiple international databases and online sources focused on government-prohibited persons and entities; politically exposed persons; corruption and bribery; arms trafficking and war crimes; terrorism; money laundering; organized crime; and corporate fraud and regulatory inquiries.  But it was old fashioned, hands-on detective work – not online searches – that revealed the most critical information.  The New Zealand online media searches surfaced nothing derogatory on the three principals.  It was only when Hillard Heintze investigators probed further and looked at pre-2001 New Zealand archived media and press reports that negative information emerged.

Evidence of Concern is Uncovered

These newfound reports described activities by the leading principal connected to financial fraud and a criminal prosecution and conviction of two of his New Zealand business associates related to fictitious offshore investment schemes.  Similar financial fraud conspiracies involving this individual surfaced in this search as well, including various “get-rich-quick” schemes in New Zealand, the Caribbean and two U.S. states – though none appeared to involve sufficient evidence to bring criminal charges against him. “This is someone you want to avoid,” counseled Arnette Heintze.  “Our sources in New Zealand indicate that one of the principals is considered a ‘gifted financial fraud expert.’  While he has not been personally convicted, we believe that his ability to avoid prosecution to date attests to his nimble thinking and agile con-artist skills.”  The client immediately ceased all communication with these individuals – a critical and timely step that may have prevented fraudulent losses and brand damage that easily could have measured tens of millions of dollars.

Unplugged: The Project Manager’s Perspective

“There’s no doubt about it.  In my mind, at least.  Not a shred.  If the team entrusted with this assignment were just conducting a ‘by-the-books’ investigation, they would have completely missed these crucial findings – ten times out of ten.”

The ACTION WEDNESDAY Tool Box: Two Key Take-Aways

  1. Don’t be afraid to dig deeper – even if nothing negative has turned up so far: Just because there isn’t evidence in the public record, it doesn’t necessarily mean you should move ahead whether it be with a new employee hire or a company acquisition.  Media searches can reveal critical details about an individual or business that could be enough to sway your decision.
  2. There is a time to ask questions – and a time to simply walk away: This client chose to cease communications with their prospective business partner to limit their liability to potential fraud.  But there are instances where it might be worth discussing your findings with your business contact to see if perhaps the media blew something out of proportion or got the facts wrong.

investigations case study