Not as magic bullets, but as helpful reference librarians. Courtesy: Arlington, VA Public Library Remember in middle school when you had to write a report about how many lobsters were caught in Maine each year? You went into the library and told the librarian your project. She (and in my middle school days, it was always she) would never tell you the answer because very probably she had no idea. Instead, she would suggest that you consult the latest Maine State Yearbook, or perhaps a publication from the federal government. Then, you had to do your own digging. That is how a good investigator ..read more

Clients who have seen the online “Nationwide criminal background check, $69” come-ons sometimes ask why we won’t ever say that someone has no criminal record. They also wonder why doing a proper criminal check in even a single state costs more than $69. This is why: Unless you are tapped into law-enforcement databases (which if you aren’t law enforcement, you shouldn’t be), you need to look for criminal records either by state or sometimes, by county. We once looked at a prominent chief executive and found a whole bunch of drunk driving convictions in his recent and not-so-recent past. They ..read more

Remember those law school exams that depended not as much on getting the right answer as on issue spotting? Usually you got a fact pattern and you had to look at all the ways those facts would present interesting legal questions for a judge to consider. Investigation is something like this, but instead of legal issues, you are spotting factual issues. You don’t always get the entire answer, but sometimes, the very action of showing a looming factual issue means you’ve earned your fee. Factual issue spotting often means that you are looking for the answer by figuring out first where to go to fi ..read more

You are the Chief Investment Officer screening possible targets for a $5 million investment in a non-public asset. Whether you work at a family office, a private equity fund or somewhere else, the prospective deal flow should be coming at you good and hard. The People: They can make or break an investment If you are not seeing a flood of potential investment targets, you probably aren’t seeing enough. Last month at a gathering for family offices at UBS, one veteran, Mike Ryan of Bullet Point Network, told the assembly that if you aren’t looking at 100 deals for every one you take, you aren’t g ..read more

Hiring good people is getting a lot harder, and not just because there are fewer candidates in a lot of industries. With AI-enabled cheating, grade inflation, and the shunning of standardized tests by colleges and graduate schools, how is a hiring manager supposed to know who’s a good fit? My prediction: Good companies will have to think more like creative investigators to figure out who’s smart at their work, and who’s just smart at beating the system. They will have to rely less on outsourcing the evaluation of people through grades and school brands. ChatGPT Makes. Stuff. Up. Do you want c ..read more

Investors in Madoff Securities and FTX were both warned, but by different sets of people. If it turns out to be true that without customer knowledge FTX took billions of dollar of customer account money to invest in a risky company owned by FTX’s CEO, this will truly compare to the Madoff scheme for audacious fraud (though smaller in dollar size). The major difference is that with Madoff, whistleblowers were trying to alert regulators that his stated returns didn’t make sense, not to mention his use of a tiny accounting firm and having no independent custodian for his funds. Regulators on Mad ..read more

You want to invest $3 million into a real estate project. Time is tight because it’s closing in 12 days. The developer (51 years old) seems to have a decent track record and takes credit for billions of dollars of projects, but this project doesn’t yet have zoning approval and the previous owner dumped the property because his plans to develop it got tied up in court by angry neighbors. Scenario one: You find the developer has no criminal record and no bad press. Your lawyer looks over the contract and you send the developer your $3 million because the return looks attractive. Four years go ..read more

One indispensable part of due diligence is to check for regulatory sanctions. Was a company found by the SEC or FINRA to have misappropriated investor money? Put them in unsuitable investments? Lied on a filing to induce people to invest money under false pretenses? While we never pronounce “Invest” or “Don’t Invest,” “Hire” or “Don’t Hire,” regulatory sanctions are something our clients can put into their personal mix that determines risk tolerance. But what about when you don’t find any regulatory problems? That too can flag a problem. And the bigger the prospective deal, the more the comple ..read more

When not at work, I like to do many things, and one of my favorites is to watch New York Mets baseball. Since moving to New York I’ve grown to love the team and I make common cause with the many Mets fans I run into (even in my Bronx neighborhood just a few stops from Yankee Stadium).[1] Keith Hernandez, 1986: Barry Colla Photography, Public domain, via Wikimedia Commons One benefit of watching the Mets is that our team has what many consider to be the finest broadcasters calling their games. The radio team led by Howie Rose is unmatched for its knowledge of the game and willingness to critici ..read more

Many of us love optical illusions. It’s a safe thrill to know we’re being tricked, and yet are still unable to tell our brains to “get real” and stop the illusion. Bridget Riley, section of Blaze 4 (1964) When you’re doing an investigation, the same kind of thing can take over your brain: You want to look at facts in one way, but your brain won’t let you. That can lead you to the wrong conclusions. There’s a great explanation for the evolutionary reasons optical illusions work on us, at the American Museum of Natural History site. I wrote about illusions in my book, The Art of Fact Investigati ..read more