Modern Tools for the Modern Investigation

Case Study: Risks of Incomplete Background Investigations in Partnerships

Company profile 

McCann Investigations is a full service private investigations firm providing complete case solutions by employing cutting-edge computer forensics and traditional PI tools and techniques.  For 25 years, McCann’s investigators have worked in the public and private sector encompassing law enforcement, physical and electronic security and computer forensics. 

McCann works with Law Firms, Financial Firms, Private and Public companies and individuals in cases including contentious divorce, child custody issues, fraud, embezzlement, spyware/malware detection, civil and criminal background investigations, due diligence. 

McCann Investigations tools include:

  • Computer Forensics
  • Mobile Device Forensics
  • Spyware/Malware Detection
  • Network Breach Detection
  • Digital Debugging
  • IT Network Vulnerability Assessments
  • Background Investigations
  • Under Cover Work
  • Surveillance
  • Corporate Intelligence
  • E-Discovery

Business Situation 

Partnerships are key to the growth of many companies.  However, while partnerships share the profits and losses proportionally, partnerships also share risks.  In a legitimate partnership, each partner has a fiduciary responsibility to hold all profits as a trustee for the partnership.  Unless partner’s consent, the duty of loyalty of a partner restricts that partner from using the partnership property for personal benefit and restricts the partner from using partnership property for personal benefit.  A partner cannot compete with the partnership or engage in self-dealing that could damage partnership opportunities.

A partner who does not adhere to the above responsibilities of a partnership can be disastrous to the co-partner resulting in the risk for loss of profit and legal issues.  It is imperative to know who one is partnering with given the risks involved.   These risk can include, but are not limited to the following:

  • Unintentional involvement with a “serial litigant”
  • Falling victim to a fraudster
  • Involvement with a partner who has a history failed businesses
  • Involvement with a partner who is heavily in debt 

Company Z, a leading clean energy power provider, was looking to expand its market reach, and had been approached small geothermal company to help to expand its product offering.  A company’s typical due diligence efforts often focus on the financials, but do not do more than a basic criminal investigation of the executives and officers of the company.  The lack of the civil information can be detrimental to a company should the entity become involved with serial litigants or fraudsters.  

Company Z contracted McCann Investigations to do fully comprehensive background investigations on the owners and officers of the geothermal company.

Technical Situation 

While current data will provide national criminal records, presently, there is no unified database which produces results for all civil records.  In order to facilitate a comprehensive background investigation, criminal as well as civil data must be gathered in order to build a complete picture of the subject under investigation.  Because of the lack of a national civil records database, investigators must search each court separately.  Some courts are more technologically advanced and provide public records that can be searched online.  However these records are still fairly difficult to search as they provide very limited information.  Many of the court systems are antiquated, still storing records on microfilm requiring that an investigator go to the courthouse in person to search for court records.  Given that there are 2500+ different courts in the state of Texas alone, the task of gathering completely accurate information on civil records is virtually impossible and cost prohibitive because of the amount of man hours involved in undertaking manual civil searches. 

Criminal databases have more functionality and connectivity and thus will produce more accurate (but not 100%) results.  When a “red flag” appears in the criminal background check, the information must be verified and then re-verified, often by obtaining actual copies of the public records.  A background investigation resulting in a criminal record can be detrimental to a person should the information be false.  

Often, when investigations are focused on corporate intelligence and due diligence in the case of acquisitions and partnerships, executives and managers do not have criminal backgrounds.  However, in many cases, there may be civil matters that will be of concern to potential partners.  Facilitating a basic criminal investigation will not reveal civil litigation, nor will it reveal other companies that the subject may have excluded from their backgrounds.  Without a civil background investigation, there would be no knowledge of past and current litigation, failed companies, bankruptcies or undisclosed business interests. This will leave the unknowing partner in the dark and could possibly perpetuate involvement with a serial litigant or business fraudster. 

Given the limited availability of a centralized and unified database for all U.S. court systems, investigators must take information from the basic background check and base the civil investigation on the districts associated with the subject’s current and past addresses.  If the court system’s public records associated with those districts is not available online, then the records must be searched in person at the courthouse. 

Solution 

Investigators conduct comprehensive background investigations beginning with a basic background check.  The first step is ensuring that correct information for the subject has been acquired.  Often, very basic background tools commonly found on the internet do not have adequate functionality to positively identify the subject.  Once the subject has been verified through advanced investigative tools, information is then built upon and pieced together to create a complete picture. 

Company Z contracted a fully licensed Private Investigative firm to perform comprehensive background investigations on the geothermal company.  The names of the individuals were provided as well as addresses and social security numbers, if available.  McCann Investigators initiated the background investigation by acquiring basic data and building upon that data to form a complete picture of each individual officer of the geothermal company.  There are several steps that must be taken in order to ensure that the investigation is comprehensive. 

  1. Basic background investigation using PI exclusive tools
    1. Verify identity
    2. Criminal
    3. Judgments, Liens, Bankruptcy
    4. Properties and addresses
  2. Discern addresses and district courts in which the subject has lived for civil filings
    1. Search those courts either through online public records, or if necessary, in person at the court
  3. Search the Secretary of State public records
    1. Other companies for whom the subjects are officers                                           i.    Gather background information on those companies
  4. Find other individuals associated with those companies
  5. Run a complete background check on those individual
  6. Digital Footprint
    1. Social Media (LinkedIn, Facebook, Twitter)
    2. Company Websites
    3. Google Search (Press Releases, News) 

The background investigation revealed that the officers and executives for the potential partner company had business interests which were not disclosed in the initial due diligence interviews.  Additionally, it was found that several of the officers had liens that were significant enough to warrant extreme caution before proceeding. 

The information delivered by the private investigator is meant to help the client develop a greater understanding of the potential business partner in order to make an informed decision, and mitigate risks. 

Products and Services Used: 

  • Licensed Private Investigators
  • Specialized Background Investigation Tools Available to Private Investigators
  • Civil Investigations in local and state courts, including court “runners” who obtained records in person at courts that did not have records online
  • Secretary of State Public Information Online
  • State Comptroller Public Information Online
  • Pacer – Public Access to Court Electronic Records

 

The McCann Suite of Investigation Tools:

McCann Investigations are accredited members of...