Investigative Due Diligence: Reputation and Public Record Analysis Case Study

By Nona Patronite, Managing Director

Introduction

This case study examines the critical role that LCG’s Investigative Services Group (ISG) played by performing investigative due diligence for a client during their acquisition of a large, privately held national commercial facilities company.

Objective

The primary objective of the investigation was to assess potential risks associated with the acquisition by evaluating the target company and over 20 key personnel and associated entities. The employees’ reputations were scrutinized through public record analysis, identifying controversies and ethical concerns, and examining their online presence, including social media.

Investigative Methods

ISG deployed a systematic approach to analyzing both individual and corporate subjects. To counter the challenge of common names among the subjects, ISG examined each subject through a variety of channels including civil litigation, criminal records, bankruptcy records, tax liens, judgments, compliance, and sanction databases, as well as social media platforms.

Reputation Analysis

The perception of the target company, related entities, and individual subjects was evaluated through in-depth review including analysis of media coverage. Sources reviewed included articles, press releases, coverage of contract awards, and industry publications, as well as posted complaints, accolades, and social media platforms.

Public Records Research & Analysis

ISG examined all county, state, and Federal litigation including pending actions involving the target company, individual subjects, and other related entities. The analysis involved a thorough inspection of pleadings to identify issues and details that could negatively impact the acquisition. Financial aspects such as bankruptcies, tax liens, judgments, and Uniform Commercial Code (“UCC”) financing statements were also scrutinized. Regulatory filings, both present and historical, were inspected to uncover potential issues, including compliance or legal concerns.

Key Findings

The investigation brought to light several potential issues concerning the subjects:

• The target company’s owner had been disqualified from several contracts due to rumors of associations with questionable individuals.
  
• The target company and its owner were defendants and counter-claimants in substantial ongoing lawsuits, including a dispute over a contract worth over $100 million.
  
• The CFO of the target company claimed to hold an active CPA license but had let it lapse for nearly three years.

Outcome

ISG’s thorough research and analysis equipped the client with accurate information to make a well-informed business decision. Although the reputational issues and rumors surrounding the company’s owner were shown to be unfounded, the investigation revealed significant ongoing litigation. Ultimately, after all diligence was completed, the deal was finalized and executed.

Conclusion

Thorough investigative due diligence is critical when it comes to business acquisitions. ISG’s investigative due diligence ensured the client received all deal-critical details involving the acquisition subjects and wouldn’t encounter any surprises following the closing of the transaction.

For assistance with background checks and all other investigative due diligence needs, please contact Nona Patronite, [email protected]. Our experts are ready to conduct the investigations you need to assist in making the best business decisions.