Vice President, Publisher: Tim Moore Associate Publisher and Director of Marketing: Amy Neidlinger Executive Editor: Jeanne Glasser Editorial Assistant: Myesha Graham Development Editor: Russ Hall Operations Manager: Gina Kanouse Senior Marketing Manager: Julie Phifer Publicity Manager: Laura Czaja Assistant Marketing Manager: Megan Colvin Cover Designer: Chuti Prasertsith Managing Editor: Kristy Hart Project Editors: Jovana San Nicolas-Shirley and Alexandra Maurer Copy Editor: Language Logistics Proofreader: Seth Kerney Indexer: Rebecca Salerno Compositors: Gloria Schurick and Jake McFarland Manufacturing Buyer: Dan Uhrig © 2011 by Pearson Education, Inc. Publishing as FT Press Upper Saddle River, New Jersey 07458 FT Press offers excellent discounts on this book when ordered in quantity for bulk purchases or special sales. For more information, please contact U.S. Corporate and Government Sales, 1-800-382-3419, [email protected]. For sales outside the U.S., please contact International Sales at [email protected]. Company and product names mentioned herein are the trademarks or registered trademarks of their respective owners. All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed in the United States of America First Printing December 2010 ISBN-10: 0-13-138556-9 ISBN-13: 978-0-13-138556-6 Pearson Education LTD. Pearson Education Australia PTY, Limited. Pearson Education Singapore, Pte. Ltd. Pearson Education North Asia, Ltd. Pearson Education Canada, Ltd. Pearson Educación de Mexico, S.A. de C.V. Pearson Education—Japan Pearson Education Malaysia, Pte. Ltd. Library of Congress Cataloging-in-Publication Data Springer, Kenneth S., 1953- Digging for disclosure : tactics for protecting your firm’s assets from swindlers, scammers, and imposters / Kenneth S. Springer, Joelle Scott. p. cm. ISBN-13: 978-0-13-138556-6 (hardback : alk. paper) ISBN-10: 0-13-138556-9 1. Investment advisors—Selection and appointment. 2. Personnel management. 3. Disclo- sure of information. I. Scott, Joelle, 1974- II. Title. HG4621.S75 2011 658.4’7—dc22 2010026248 Contents

Introduction ...... 1 Chapter 1: Just When You Think You Know Someone ...... 5 Really? ...... 6 The Tactic: Turning Over Neighboring Stones . . . . 7 Moving Forward ...... 7 Chapter 2: A Swindler State of Mind ...... 11 The Idea...... 11 The Payout...... 12 The Scenery...... 12 Chapter 3: We Call That a Clue ...... 15 Dried Up Dreier ...... 15 The Situation: Banking With a Binge ...... 16 The Tactic: Dirt In the Documents ...... 17 The Situation: The Subversive CFO...... 17 The Tactic: Collecting Corporate Records...... 19 Chapter 4: The Gray Area: Somewhere Between and Fudging ...... 23 The Situation: A Lazy Loan ...... 23 The Tactic: Don’t Be Complacent ...... 25 The Situation: A Degree of Arrogance...... 26 The Tactic: Canvassing the Cases ...... 27 Chapter 5: Sometimes, You Just Gotta Ask ...... 29 The Situation: Protecting the Innocent ...... 30 The Tactic: Ask And Ye Shall Receive ...... 32 vi DIGGING FOR DISCLOSURE

The Situation: Baby Proofed Résumé ...... 33 The Tactic: The Friends and Family Plan ...... 34 The Situation: Case of Contagious Coercion...... 36 The Tactic: Secrets of Former Employees...... 37 The Situation: Unearthing the Ugly ...... 38 The Tactic: Corralling the Criminals ...... 41 Chapter 6: Crossing Borders: International Investigations ...... 43 The Situation: The Facility That Never Was ...... 43 The Situation: The Meandering Hedge Fund Manager...... 44 The Situation: Son of Scam...... 46 The Tactic: International Sources...... 47 The Foreign Corrupt Practices Act ...... 48 The Situation: Blackmail in Brazil ...... 49 The Tactic: Changes in Brazilian Business...... 50 Chapter 7: Digging for Disclosure ...... 55 The Situation: The Empty Suit...... 56 The Whitest Lie Is Always Gray ...... 56 Navigating Through Nicholas Cosmo...... 57 The Tactic: Capturing Criminal Records ...... 59 The Situation: Cocktail Party Perpetrator ...... 60 The Tactic: Debunking The Deceit ...... 62 Best Practices...... 63 Chapter 8: The Competitive Edge ...... 65 The Situation: The Backdating Bluff ...... 65 The Situation: The Medicaid Fraud Mix ...... 67 The Tactic: Going Old School...... 69 The Situation: The Grapple in the Garment Industry ...... 70 The Tactic: Combing Through Corporate Documents...... 72 CONTENTS vii

Chapter 9: Never Too Late: When Problems Arise Post-Investment ...... 73 The Situation: Buy Now, Pay Later ...... 73 The Tactic: Employee Reunion ...... 74 How to Get the Most from an Interview ...... 75 The Situation: The Misled Lender ...... 77 Insuring Investments...... 77 Protecting the Innocent ...... 78 The Situation: The Faultless Fraud ...... 78 The Tactic: Don’t Stop Digging ...... 80 Chapter 10: Tracking Down a Threat ...... 83 The Tactic: Three Principles of Wrongdoing . . . . . 86 You Have an Internal Problem: Now What? . . . . . 86 Chapter 11: Now That Is Criminal ...... 89 The Situation: The Criminal Connection...... 89 The Tactic: The Merits of Media ...... 93 The Situation: Employee Embezzlement ...... 94 The Tactic: Combing Credit ...... 98 The Situation: Fraud in Flight ...... 98 The Tactic: Connecting the Dots ...... 101 Chapter 12: Dial ‘F’ for Fraud: The Benefits of an Ethics Hotline ...... 103 The Situation: The Spread of Swindlers...... 104 The Tactic: Hotline Help ...... 104 Prime Time Whistleblowers ...... 105 Chapter 13: This One Goes Out to the Attorneys . . . . . 107 The Situation: The Bragging Banker ...... 108 The Situation: A Leg Up for Lawyers...... 109 Chapter 14: The Godfather in the Boardroom ...... 113 The Situation: Crime in Construction ...... 115 The Tactic: The RICO Reason ...... 116 Crime Beyond Construction ...... 117 viii DIGGING FOR DISCLOSURE

The Situation: The Russian Racket...... 118 The Situation: Connected ...... 119 Chapter 15: Show Me the Money: Asset Investigations ...... 121 The Situation: Going for Broke ...... 121 The Tactic: The Property Paper Trail ...... 123 Finding Hidden Assets in the Real Estate Business ...... 124 The Situation: The Driver Has the Keys ...... 126 The Tactic: Human Sources ...... 126 Methods for Finding Assets ...... 127 Chapter 16: Investigating the Inc...... 131 The Situation: Submitting to a Scam ...... 132 The Tactic: Regulators Rule ...... 133 Chapter 17: You, the Referee ...... 137 The Situation: Fraud vs. Brothel: You Choose ...... 137 The Situation: Sex, Documents, and a Deal. . . . . 140 The Situation: Thieves Then; Executives Now ...... 140 The Tactic: Assessing Your Appetite...... 141 Chapter 18: The Secret Sauce ...... 145 Chapter 19: Testing, Testing ...... 159 The Brazen Bernie ...... 160 Stanford’s Instabilities ...... 162 The Sting of Pang ...... 166 Remember Bayou? ...... 169 And the Moral of the Story Is...... 170 Resource Guide ...... 173 Index ...... 179 Introduction

“I should have done more.” “I did not even think to look into it.” “I didn’t think this would happen to me.”

No, I am not a psychologist, and these are not quotes from my patients. These are some of the painful comments made by who have been fleeced. Whether you have been monetarily slammed by Bernie Madoff or simply misled by a borrower, hedge fund man- ager, or executive with whom you have invested, the economic pain and embarrassment has the same pinch. As a former Special Agent with the Federal Bureau of Investigation (FBI) and the president of a business investigations firm, I have accumulated a number of preven- tive business methods that help investors of all sizes protect their interests and avoid being the victims of fraud. Even if you have made successful investments over the years and have, thankfully, not been ensnared in a ring of investment fraud, on any scale these methods illuminate the need for gathering intelligence to ensure you keep your track record. From my vault of cases I have investigated over the past 20 years, I have compiled these practices, lessons, and stories to share with you and hope you will arm yourself with these tools before making your next investment. Financial and legal due diligence are accepted norms in the investment community. What is often overlooked, however, is the importance of conducting proper background checks on a manage- ment team, fund manager, or investment adviser. Background checks are your “people due diligence.” The success of your investment 1 2 DIGGING FOR DISCLOSURE relies solely on the abilities of the people (or person) who oversee your money. Although not a line item on the balance sheet of a com- pany, management is your biggest asset. Unfortunately, many investors only realize this when damage has been done and liabilities are being tallied. At Corporate Resolutions, Inc., the business investigations firm I formed in 1991, I have conducted background checks on thousands of individuals and companies. Three of the biggest mistakes that we have seen investors make repeatedly are 1. Flock Funding. Investors hire based on reputation instead of research (the perfect example is Bernie Madoff’s affinity fraud). Everyone assumes someone else did the homework. If someone says, “He is well-known,” “I checked them out,” or “I know him; he is a good guy,” what does that mean? The onus is on you. You need to do your own investigating because not everyone adheres to the same definition of risk (or comfort). Very few investors get cheated by people they do not like; Bernie Madoff’s investors liked him. While Madoff did not cause a recession, he did cause us to reassess our processes. 2. The Bottom-Line Blockade. Investors tend to have blinders on. They are focused solely on the predicted returns of a deal and thus overlook the yellow or red flags that exist. Keep your mind open to all the information you can gather and remember that high rates of return on your investment are worthless if your money is in the wrong hands. 3. Precipitate, Not Investigate. Investors often move too quickly and do not take the time to look into an individual’s background. We are all accustomed to making swift decisions and having information instantaneously. But when making an investment, you need to take precautions. A person’s past per- formance is often indicative of future behavior. Although much information is available at our fingertips, it takes time to con- duct an appropriately rigorous background check. References CHAPTER •INTRODUCTION 3

must be contacted, degrees must be confirmed, lawsuits must be reviewed, media and Internet attention must be considered, and so on. These steps cannot be done overnight. As President Ronald Reagan used to say, “Trust, but verify.”

Background checks are often viewed as deal-killers. In actuality, background checks rescue investors from inevitably explosive deals or even resuscitate investments that otherwise looked murky. As more state and federal clamp down on the investment industry, businesses will be (and some already are) required to implement meticulous due diligence techniques. These techniques should involve a lot more than a quick Google search or simple check-the- box criminal record review. If you look at Bernie Madoff, Robert , and Danny Pang, the perpetrators of three of the biggest investment scandals in 2009, you will find all three had some- thing in common: no criminal record history (until now). This alone is proof that you cannot rely on meager background checks. Securing your investment is crucial; comprehensive background checks are your most reliable tools. We have found that although a tremendous amount of informa- tion is available online, it is imperative to know what is not available. The gap between the two is wide, and the awareness of this will bet- ter serve you in your role as a prudent . As we detail through- out this book, the ability to identify discrepancies, vagaries, and half-truths is as indispensable as finding overt criminal record histo- ries or regulatory problems. That is not to say that glaring criminal records are not hazardous. We have uncovered considerable and sizable : complex money laundering schemes, a narcotics ring, overt sexual harassment, theft of intellectual property, theft and fraud of investor money and trust, spousal abuse, and blatant lies regarding accomplishments. Our firm conducts global background checks, business intelli- gence, and corporate investigations. Our clients include lenders, pri- vate equity funds, investors, hedge funds, investment advisers, law 4 DIGGING FOR DISCLOSURE firms, insurance companies, pension funds, corporations, and government agencies. Conducting background checks is no longer a cloak-and-dagger operation devised in a dimly lit and smoky room. The need to know more is not only something we preach from our desks but also has become the suggested method of regulators. Background checks are a mandated component of the Sarbanes-Oxley Act, U.S. Patriot Act, Know Your Customer, and corporate governance. With the help of investigators and intelligence analysts, we con- duct exhaustive public record and database research, verifications, and independent interviews on individuals and companies before deals are inked, companies are merged/acquired, or executives are hired. I have spent more than 12 years with the FBI investigating white-collar crime, and my experiences there were not nearly as enlightening as those I have witnessed since I started Corporate Res- olutions, Inc. What we have encountered in this business is more than fodder at a cocktail party. The stories are diverse, yet there is one theme common throughout them all: deception. Recently media such as The Wall Street Journal, The New York Times, Hedgeworld, Kiplinger’s, CNBC, Bloomberg, and Fox Busi- ness Network have sought out our professional expert investigative perspective on the Madoff scandal, Robert Allen Stanford, and Ponzi schemes in general. Our message has always been the same: There is no such thing as too much due diligence. Desktop research is not suf- ficient. The Madoff scandal was a game-changer for investors. The risk investors assume no longer impacts just your financials; it is also affects your reputation. As shown throughout this book, blind faith and reputation no longer suffice as solid reasons to invest. We hope our experiences illuminate some of the warning signs that should not be overlooked and provide investors with ways they can protect themselves from future problems. 1 Just When You Think You Know Someone

It is 6 a.m. on Friday. Your first week on the job. For the fifth day in a row, you still have to introduce yourself to the sleepy security guards in the lobby of the low-storied hedge fund hotel in Green- wich, Connecticut, that now houses your 13 employees. You find your way to your new windowed office and drop your dark brown leather satchel on the ledge—last year’s Christmas present from your wife. Accustomed to seeing tall buildings and a famous skyline, you are still not convinced that clusters of small trees count as a “view.” You stare out the window for a few idle moments. You swing around in your Aeron chair and glance over at the four Ivy League researchers pounding away at their black keyboards. You summon them to your office. You need an update. You have spent the last three months convincing the five old- school members of the board of directors that you, a savvy former M&A specialist from New York City, are capable of running this pri- vate equity firm—the same firm that over the past four years has earned the reputation of successfully turning around troubled com- panies and securing investor money. Now you have your chance. With $15 million cash in your hand, you are tasked with selecting the next investment. For the past week, your research team has spent countless hours focusing on target companies. When they rush to your office, eager to please the new boss, they show you the balance sheet of a struggling Midwestern plastics business that lacks the necessary funds to take

5 6 DIGGING FOR DISCLOSURE

the company to the next level. Two days later, you fly out there and meet the owner of the business. You like his enthusiasm. You walk through the facilities and meet a few of the 57 employees whose jobs you intend to save. Back in Connecticut, you do some legal due dili- gence and run some financial models. Over the course of six months, you get to know the owner, his employees, and the way the company operates; you like what you see. You decide you want to acquire the company and prepare a term sheet. The thought of screwing up your first investment makes your palms sweat, so you decide to do a little more homework before you ink the deal. You call a private investigations firm like ours to check out the owner of the company. One week later, we call you back. The owner of the company has, well, an interesting history: He was arrested and convicted on three separate occasions for “exposing himself” at the drive-thru of differ- ent local fast-food joints. Given that “wardrobe malfunction” was not an option on the police report, you rethink your decision.

Really?

Yes, really. The story illustrates that no matter how much you spend on legal and financial due diligence, how many company walk- throughs you endure, scotches you sip together or rounds of golf you play, a person’s true character (or lack thereof) is often only unveiled when you run a background check that complements your own research. If a person you are about to invest in is solid, then the infor- mation uncovered in a background check will support that. If, how- ever, the person is not who you thought, then you need to know this immediately in order to make sound investment decisions. CHAPTER 1•JUST WHEN YOU THINK YOU KNOW SOMEONE 7

The Tactic: Turning Over Neighboring Stones

We found out about the exhibitionist tendencies of the business owner by reviewing criminal records in the areas where the owner lived and worked. Trouble is not confined to a person’s hometown. You must consider where the person lives, works, and travels. The criminal matters filed against the pants-dropping executive were filed in a different state than where the executive resided. We always review criminal records and court records in multiple jurisdictions to make sure that if there is something to be found, we will find it.

If It’s Criminal, Then It’s Relevant

To the investor who thinks a person’s extracurricular activities are irrelevant to the deal as as the person produces or performs: Consider what your limited partners or co-investors would think of that philosophy in light of the case just described.

Moving Forward

You never really know the person who is responsible for your money. What’s important is to be comfortable with his or her charac- ter. We all have different definitions of ethics, morals, and success. You need to confirm that the person who has access to your money meets your expectations, and background checks are an integral com- ponent of the process. Whether for individual investments, acquisitions, or new hires, your due diligence process should, at the outset, include conducting an exhaustive background check. From that point forward, we also recommend incorporating the following 8 DIGGING FOR DISCLOSURE

1. Dig deeper. If the background check uncovers any civil or criminal cases or bankruptcy filings, you should always review the documents filed in these matters. The same goes for any regulatory actions that have been taken against the company or person(s). Taking a look at these public records allows you to find out what the issue was and see the person’s demeanor dur- ing the situation. If a person were accused of wrongdoing, did he or she embrace a Mel Gibson-esque attitude, or did the per- son cooperate with attorneys, law enforcement, and/or regula- tors? How did the matter get resolved? The answers to these questions may surprise you. Talk to independent third parties to confirm how it was resolved to make sure the matter will not become your problem in the future. If the problem happens again, you can explain to your board of directors, limited part- ners, co-investors, or others that you did everything to address the issue. You will not be subject to redress for being eager; you will, however, for being lazy. 2. Interview managers/management. If you find a person has been involved in any controversies, compromising reputational issues, or inflammatory lawsuits, or there were factual discrep- ancies on his resume, talk to the person. Document his state- ments so you have it in the file and on the record, should anything happen down the road. Also, public records only tell a part of the story. If you find an executive was sued for , get the executive’s side of the story. There may be miti- gating circumstances that explain what happened. 3. Contact former employees. Former employees are con- stantly overlooked and undervalued in the due diligence process. These people often have enormous amounts of valu- able information that will assist you in your deal. 4. Ongoing monitoring. A background check should not be con- sidered finite. Conduct annual or biennial background checks, get daily news alerts, and monitor relevant blogs. Stay on top of CHAPTER 1•JUST WHEN YOU THINK YOU KNOW SOMEONE 9

your investment. Just because someone met your investment standards at the beginning does not necessarily mean they will stay true to your expectations. 5. Consider a whistleblower hotline. Many investors do not realize how easy it is to implement an anonymous tip line. It is an inexpensive preventive type of insurance where you offer employees, vendors, and others a vehicle to anonymously report not only fraud and unethical behavior but also unsafe work conditions, violence in the workplace, drug use, and so on. There are no downsides to the hotline; it is a win-win for employees, investors, board members, and regulators. INDEX

A B accuracy, 33 backdating options, 66 active lawsuits, 131-132 background checks activist hedge funds, 65-67 as deal-killers, 3 Agape World Inc., 57 conducting, 3-4 age discrimination, 35 corporate records, 19 American Recovery and court records, 7 Reinvestment Act of criminal records, 7 2009, 103 frequency of, 63 analysis of information, 101, frequency recommended, 8 145-158 importance of, 1-3, 6-7 anonymous tip line, 9, 104 mandates for, 4 archives of websites, 62 recommended frequency, 26 Asia, 46 what they find, 15-21 asset investigations, 121-129 what to include, 7-9 Association of Certified Fraud BaFin, 110 Examiners, 103 bankruptcy petitions, 28 attorneys, 107-110, 112 Bayou Hedge Fund Group, 169-170 Bernard L. Madoff Investment Securities, 160

179 180 INDEX

Better Business Bureau Code of Ethics policy, 133 (BBB), 133, 175 college degree verification, 20 blogs, 64 Commodities Futures Trading Bloomberg, 93, 145, 149, 177 Commission (CFTC), 152 bottom-line blockade, 2 Companies House (United bragging, 56 Kingdom), 47 Brazil, 51-52 competitive intelligence, 65-72 BRB Publications, 25, 175 complaints from consumers, 175 C computers imaging, 84 California Sex Offender Registry, 39, 174 policies about, 71 campaign contributions, 175 spyware, 86 career history, investigating, 35 conducting background checks, 3-4 Cayman Islands, 127 conducting interviews, 29-41, CBOE (Chicago Board 64, 74-77 Options Exchange), 152, 174 construction companies and Certified Public Accountant , 115-118 (CPA), 151 consumer complaints, 175 CFTC (Commodities Futures Trading Commission), 152 consumer credit reports, 98, 155 Channel Islands, 127 corporate crime, 170-172 character, 7-9 corporate discrimination, 35 Chartered Financial Analyst, 151 corporate fraud, 103-106 chat rooms, 64 corporate governance, 4 Chicago Board Options corporate records, 19, 72, 146 Exchange (CBOE), 152, 174 Corporate Resolutions, Inc., child abuse, 39 2, 20 ChoicePoint, 155 Cosa Nostra, 113 co-ops, 109 Cosmo, Nicholas J., 57-59 INDEX 181 court records, 7, 25, 27-28, 64 E CPA (Certified Public E.F. Hutton, 114 Accountant), 151 EEOC (Equal Employment credentials, exaggerated, 15, Opportunity Commission), 20-21 35 credit reports, 98, 155 embezzlement, 94-98, 103 crime employees corporate, 170-172 finding former employees, organized, 113-120 35-38, 74, 77, 126, 136 white-collar, 120 whistleblower hotlines, criminal background, 57 103-106 criminal behavior, 89-92, employment history, 94-101 investigating, 35 criminal records, 7, 28, 59 , 105 Environmental Protection D Agency (EPA), 135, 176 degree verification, 20 Equal Employment Opportunity Commission Delaware, 19, 146 (EEOC), 35 Delaware Secretary of State, Equifax, 155 174 Ethics Hotline, 64 Department of Education, 88 exaggerated credentials, 15, Department of Justice, 48-49 20-21 diploma mills, 88, 176 Experian, 155 discrimination, 35 expunged records, 153 disorderly conduct, 140 domain name registrations, F 129, 176 FAA (Federal Aviation DowJones, 93 Administration), 99, 128, 175 Dreier, Marc, 15-16 Facebook, 34-35 due diligence, 1 Factiva, 93, 149, 177 182 INDEX

Fair Credit Reporting Act Financial Services Authority (FCRA), 98, 155 (FSA), 47, 152, 173 faultless fraud, 78-79, 81 Finding former employees, FCC (Federal 35-38, 74, 77, 126, 136 Communications FINRA (Financial Industry Commission), 135, 176 Regulatory Authority), 45, FCPA (Foreign Corrupt 134, 152, 173 Practices Act) of 1977, 48-49, flock funding, 2 51, 53 FOIA (Freedom of FCRA (Fair Credit Reporting Information Act), 68-70 Act), 155 Food and Drug Administration FDA (Food and Drug (FDA), 135 Administration), 135 Foreign Corrupt Practices Act Federal Aviation (FCPA) of 1977, 48-49, 51, 53 Administration (FAA), 99, Form ADVs, 134 128, 175 fraud, 77-81, 103-106 Federal Bureau of Prisons, 39, fraudulent wire transfers, 92 41, 174 Freedom of Information Act Federal Communications (FOIA), 68-70 Commission (FCC), 135, 176 FSA (Financial Services Federal Election Commission, Authority), 47, 152, 173 128, 175 FTC (Federal Trade Federal Trade Commission Commission), 132, 176 (FTC), 132, 176 fidelity insurance, 77 G–H Financial Crimes Task Gang Land News, 118 Force, 20 General Services financial due diligence, 1 Administration (GSA), 135, Financial Industry Regulatory 175 Authority (FINRA), 45, 134, German Federal Financial 152, 173 Supervisory Authority, 110 INDEX 183 global investigations, 43-53 international investigations, Godfather, 113 43-53 Google, 145 international sources, 47 GSA (General Services Internet, 15, 69 Administration), 135, 175 InterPacific Capital, 167 Guidestar, 72, 177 interviewing people, 29-41, 64, 74-77 health problems, 32-33 IRS (Internal Revenue hedge funds, 65-67 Service), 176 hidden assets, 127 Isle of Man, 127, 170 hip pocket sources, 39 Israel, Sam III, 169-170 Hong Kong, 47-48 IT staff, 88 Italian Mafia, 114 I identifiers, 38, 147 J–K–L imaging computers, 84 key man policy, 32 ImClone, 55 Know Your Customer Insider Trading database, guidelines, 4, 119, 142 66, 177 Latin America, 52 insurance law firms, 107-110, 112 fidelity insurance, 77 lawsuits, 131-132 fraud, 77 legal due diligence, 1 key man policy, 32 LexisNexis, 15, 19-20, 72, 93, theft, 77 124, 145-146, 149, 157, 177 insurance fraud, 139 liars, thinking like, 11-14 intellectual property, 129 LinkedIn, 35 Internal Revenue Service Luxembourg, 127 (IRS), 176 Internal Security Association, 120 184 INDEX

M National Student Clearinghouse, 20, 61-62, 174 Madoff, Bernie, 1-3, 160-162 net worth, verifying, 63 mafias, 113-120 New Jersey, 19, 146 Marino, Dan, 169-170 New Jersey Secretary of Mauritius, 127 State, 174 media, 116 New York Sex Offender media databases, 149 Registry, 174 media research, 93 NFA (National Futures media sources, 64 Association), 152, 173 Megan’s Law, 39 nondisclosure, 55, 60-63 Middle East, 46 nonprofit entities, 72 military records, 62, 152 military service, investigating, O–P 175 Occupational Safety and money laundering, 56, 90 Health Administration monitoring (OSHA), 133, 175 companies, 64 Office of Foreign Assets executives, 64 Control (OFAC), 135, 175 moral compass, 137, 139-143 organized crime, 113-120 mortgage records, 25 PACER (Public Access to Court Electronic Records), N 28, 58-59, 152, 174 National Archives and Records Pang, Danny, 3, 166-168 Administration, 175 past performance, as indicator National Association of of future behavior, 23 Securities Dealers (NASD), Patent and Trademark Office, 134 129, 136 National Futures Association patents, 176 (NFA), 152, 173 INDEX 185

PEMG (Private Equity Q–R Management Group), race discrimination, 35 166, 168 Racketeer Influenced and personal judgment, 137, Corrupt Organizations Act 139-143 (RICO), 116-117 personality traits, 30 The Real Deal magazine, 125 Petters Company, Inc., 105 references, 34 Petters, Thomas, 105 regulatory agencies, 132-136 pilot’s licenses, verifying, 175 regulatory filings, 64 political contributions, 128 regulatory issues, 132-136 political donations, 175 research polygraphs, 96-97 media outlets, 116 Ponzi schemes, 57, 105 media sources, 93 Ponzi, Charles, 12 post-investment, 78 post-acquisition problems, strategies for, 145-158 73-74 résumé fraud, 15, 20-21 post-investment research, 78 Reuters publications, 93 preventing fraud, 78 RICO (Racketeer Influenced Private Equity Management and Corrupt Organizations Group (PEMG), 166, 168 Act), 116-117 property records, 25, 85, Rowley, Coleen (FBI), 105 108-109, 124, 127, 157 Royal Dutch Shell Plc, 52 property transfers, 150 Russian mafia, 118-120 protecting assets, 123 Public Access to Court S Electronic Records (PACER), 28, 58-59 Sarbanes-Oxley Act, 4, 142 pump and dump scams, 117 Searcey, Dionne (Wall Street Journal reporter), 52 SEBI (Securities and Exchange Board of India), 45 186 INDEX

Securities and Exchange T Board of India (SEBI), 45 TARP (Troubled Asset Relief Securities and Exchange Program), 171 Commission (SEC), 45, 134, tax assessors, 25 152, 173 telephone calls, 69 Securities and Futures Commission (SFC), 48, 174 theft, insurance for, 77 sex offenders thinking like a liar, 11-14 California Sex Offender Thomas publications, 93 Registry, 174 threats, 83-88 New York Sex Offender three principles of Registry, 174 wrongdoing, 86 registries, 39-40 tip-line, 104 SFC (Securities and Futures tracking origins of threats, Commission), 48, 174 84-88 Siemens AG, 48 trademarks, 176 slumlords, 85 TransUnion, 155 The Sopranos, 114 Trojan software, 86 sources Troubled Asset Relief Program hip pocket sources, 39 (TARP), 171 international sources, 47 two-person interviews, 76 media outlets, 149 U–V spyware, 86 Stanford Group Company, U.S. Department of 162-163, 166 Education, 88, 176 Stanford, Robert Allen, 3, U.S. Department of Justice, 162-166 48-49 Stewart, Martha, 55 U.S. Patent and Trademark Office, 129, 136, 176 Sun Microsystems, 52 U.S. Patriot Act, 4, 119 swindlers, thinking like, 11-14 U.S. Tax Court, 176 INDEX 187

Uniform Commercial Code (UCC), 108-109 United Kingdom, 47-48 UTStarcom, Inc., 49

Vendex, 115 verifying net worth, 63

W–Z Wall Street, 101 The Wall Street Journal, 52, 153 Watkins, Sherron (Enron whistleblower), 105 Way Back Machine, 62, 176 website archives, 62 wedding announcements, 150 Westlaw, 27, 93, 124, 149, 157, 177 whistleblower hotlines, 9, 103-106 white-collar crime, 120 WHOIS database, 129, 176 wrongdoing, three principles of, 86