Infortal specializes in Finding Bad Actors™ and rogue players to reduce your business risks. This is particularly important when hiring new executives and during Mergers and Acquisitions (M&A) activities. These are the times when your company may be at risk from bad actors. Executive due diligence will reveal far more information than a simple background check which is typically very limited in scope.
In this era of increasing scrutiny of executives and boards of directors, thorough and extensive analysis of executive candidates is a must. Screening executive hires has become an essential tool to help a company’s corporate governance and protect it’s Board of Directors from unethical and illegal activities, which may also cause reputational harm to the company.
Infortal specializes in Best Practices Executive Due Diligence; we look at the profile of candidates from many angles, learning about a candidate’s reputation and behavioral history, seeking out both embellishment of education and work accomplishments, in addition to their criminal history and civil litigation issues, including SEC violations, breach of contract issues as well as bribery and corruption issues. Additionally, falsification of information and hidden alias names or other identities, which in turn may hide criminal activities, sanctioned business relationships, and regulatory violations. If the company you choose to invest in, or to acquire, includes executives with serious issues in their history, these may cause your company serious reputation damage, or regulatory fines and penalties, and potentially shareholder lawsuits, and may ultimately negate the benefits envisioned when they were acquired. These situations are easily avoided when effective executive due diligence is conducted.
You may already be familiar with the concept of executive due diligence. While most companies do conduct legal and financial due diligence, this will not uncover the human side of these issues which can only be found through executive due diligence. Finding Bad Actors™ is not typically part of legal or financial due diligence. Often this is done through routine background checks which will reveal less than 1% of serious issues as compared to 20% of serious issues found when due diligence investigations are conducted.
Infortal specifically handles executive and corporate due diligence in regards to hiring corporate executives, merging or acquiring another business (M&A), and vetting third party vendors and business partners (TPRM Third Party Risk Management) for FCPA regulatory compliance purposes.
Executive due diligence provides organizations and companies with the information they need to make low-risk hiring decisions for C-suite or executive management positions. More specifically, executive due diligence is far more extensive and comprehensive than a typical background check performed for potential new hires. During this process, we conduct investigative analysis of both public records and also conduct a deep, dark and historical OSINT (Open Source Intelligence) investigation looking for anything that could cause potential embarrassment or serious risk exposures to your company. It’s an extensive vetting process that ensures candidates do not have a history of criminal activity, civil litigation issues, regulatory sanctions, important business conflicts, ownership in other entities, hidden and undisclosed information, or other compromising behaviors that cannot be revealed during basic background checks.
Typically, this type of vetting is only needed for high-level executives. Infortal’s due diligence investigations provide an extra layer of fiduciary protection to board members, key insights into candidates, and informing the company’s risk management and legal teams of potential issues to protect the company, its shareholders, and employees.
Corporate due diligence involves the investigation, audit, or review of a business to confirm facts or details prior to finalizing an M&A acquisition or other business transaction. In many situations, corporate due diligence includes an examination of financial records, beneficial ownership information, corporate compliance and taxes, reputational history, negative media and social media publicity, and other types of data, before a company proceeds with any new business transaction.
A corporate due diligence investigation is necessary for all companies and organizations that are engaged in international trade for compliance with the Foreign Corrupt Practices Act (FCPA), Mergers and Acquisitions, and other business relationships. The goal of these investigations is to uncover any instances of business risk such as non-payment of corporate taxes, non-existent facilities, and cases of criminality (including money laundering, bribery, and corruption), negligence, outstanding lawsuits, conflicts of interest, the company’s board and executives, and other potential risks that could affect a merger, acquisition, or business transaction. It is important to first identify potential risks so that these risks can be effectively mitigated and managed for optimal outcomes. Including improved profitability, reduced regulatory fines and penalties, and informed strategic business decisions.
While due diligence investigations do look for and prioritize any findings of a criminal nature, there are many other factors that can pose a risk. Potential civil litigation can be a concern because the behavior of high-profile executives can negatively reflect on the business. When we uncover court records and other concerns, we provide your legal team with all of the information available to determine whether the risk involved is within the company’s risk tolerance or needs additional review before proceeding.
For example, if a senior executive has a history of breach of contract matters, there may be a trend involved which could prevent serious harm and/or financial implications to your business or major contracts that are under consideration. Similarly if an executive has had long-standing relationships with sanctioned foreign governments, this would be vital to know before onboarding them into your organization or if they are on the executive team of a potential M&A deal this would have serious implications for your risk management strategy. Context is also important. A CFO that was named in a case involving SEC violations, could have serious implications for any business that hired the individual. For example, the executive could have been brought in to resolve the violation issues. Consequently, they were simply named because of their role as the new CFO at the company. Learning this context is vital to the decision-making process, and it’s why you need a due diligence partner who does deep dive due diligence and is willing to go beyond a basic public records search.
The ultimate purpose of our due diligence investigation is to provide as much relevant information to your company’s risk managers and/or legal team as possible to make informed business decisions and to prevent harm to your company. From there, you can determine what actions to take based on this risk assessment information. In our experience 20% of executives have serious issues, and 35% of third parties have bribery or corruption-related issues. It is not surprising to see that major FCPA violations mostly (more than 90%) involve third party businesses in corporate supply chains.
In many instances, executive due diligence is a legal requirement. In almost every instance, a board needs more than the standard background check to confidently make an informed hiring decision for C-suite level positions. A typical, low-level background check is very limited and simply will not return a full, comprehensive history of a candidate, their past, and the risk they could present.
“What do we find? 20 percent of executives have serious issues that you cannot find in a background check and 35 percent of global third party business partners have corruption related issues.” – Candice Tal CEO and Founder, Infortal Worldwide
Infortal’s data collected over 25 years show that 20% of executives have serious issues of concern in their history. That is 1 in every 5!
This may include a broad spectrum of issues for example serious conflicts of interest, SEC violations, forged degrees, criminal convictions such as felony fraud, IP Theft, working with sanctioned governments, money laundering, racketeering, trafficking, manslaughter, and even murder.
We may also find business ownership in undisclosed companies or conflict situations, important civil lawsuits, including breach of contract, sexual harassment, SEC violations, in addition to interstate bankruptcies, corporate espionage, con artist behaviors, and a host of other issues which are likely to be of concern.
Due diligence investigations on executives provide 5 significant benefits to a corporation. See below:
1. Protects the interests of the corporation, employees, and stakeholders
2. Adds fiduciary protections for the Board of Directors, particularly for publicly traded companies.
3. Minimizes liability exposures for the company from future inappropriate activities & crime
4. Benefits corporate governance
5. Provides FCPA & Sarbanes Oxley (SOX) compliance
Another recent example of a company that conducted insufficient due diligence on an executive hire is Moderna, which recently paid $700,000 after the new CFO was employed for only one day.
A Rule Of Thumb: if you have not personally known an executive for at least 10 years then you do not know the person well, and if something is being hidden from you, you may never know of it.
Most of the laws that govern companies and how they conduct business both in the US and internationally require businesses to have conducted their own due diligence themselves prior to entering into relationships with third-party suppliers, vendors, agents, and distributors.
Many regulations also require “adequate levels of due diligence” to be performed before bringing new executives onboard. Conducting a routine background check and reference interviews is no longer considered a sufficient level of due diligence according to federal regulators.
Numerous companies in recent times have experienced adverse publicity related to executives involved in personal scandals, corruption, and even easy-to-avoid issues such as not having their claimed credentials including educational degrees. Your business reputation and bottom-line profits may be at serious risk if your executives are not who they say they are, if they over-promise your capabilities to major accounts because they want to achieve quotas, or because they have unethical business practices, or are planted by a competitor.
Additionally, Executives are under increasing pressure to perform successfully in Year 1. Hiring the right person with the skill sets you need is only part of the picture; they need a support structure that enables optimal performance; this is key information for you to know about. Infortal searches for problems, issues, trends and themes in their history, not just the basic facts. People that want to hide their issues will often do so brazenly.
We sometimes hear from clients that they are not worried because the executive has signed a legal document. Unfortunately, this does not help if the executive’s activity is exposed by a national media publication. Also, how will you know whether there is important undisclosed information? Deliberately hidden issues and unresolved problems that the executive does not want to reveal to you often remain undetected through traditional executive recruiting efforts, where often only a few references are checked along with a minimalist background check even for an executive hire.
An executive’s signature on a legal document only protects you after the fact and does not ensure that they are disclosing the entire truth to you.
Infortal designs and implements due diligence of executives and businesses which are strategically-aligned to your company goals. These should also be aligned to your Third Party Risk Management (TPRM) programs and anti-bribery programs for on-boarding new suppliers globally and for new mergers and acquisitions.
These due diligence reviews help your corporation to hire and retain the best executives and business partners globally. We help your organization develop Best In Class compliance programs, reducing legal exposure for the corporation and helping to protect the board from unnecessary litigation issues, personal liability, and activist shareholder lawsuits.
We help you to minimize corporate liability exposure and stay out of headline news.
You will receive thoroughly researched information on your high level candidates through Infortal’s Best Practices Executive Due Diligence Reports.
Deep Level Due Diligence™ Executive Due Diligence searches typically include detailed evaluation of the following information:
A detailed report is provided with Executive Summary, conclusions, recommendations and complete attachments. Updates are provided: Two levels of Executive Due Diligence are available, depending on the number of components searched.
Multiple Key Executive checks may be priced at a discounted rate depending on the number of executives included, and whether international components are involved.
Our executive due diligence investigations include detailed evaluations of multiple public sources of information. While we will gather all of this information into a report for you to review, we do focus on a number of key areas:
For several decades, Infortal has worked with ultra-high net worth individuals (including billionaires) and Family Funds Offices to protect their families, assets and properties.
Reputation damage is often a serious end result that in many cases could have been prevented by effective due diligence to manage or mitigate increased risk factors.
