In a world of fake-it-until-you-make founders, win-at-all-cost politicians, and plain old charlatans, due diligence is more important than ever. In business and legal research, due diligence is the foundation for making sound decisions.
Take, for example, the recent downfall of George Santos. In 2022, six weeks after Santos was elected to the U.S. Congress representing New York's 3rd Congressional District, he The New York Times He was accused of lying about his educational and work history. Soon after, the press exposed a chain of further lies. In May 2023, he was indicted on 13 criminal charges, including seven counts of wire fraud and three counts of money laundering. After spending almost a year in Congress, he was finally expelled.
This incident could have been avoided if someone had carefully vetted his claims; simply undertaking the first stage of an investigation would have revealed his blatant dishonesty.
When investigating the background of George Santos, or any other individual or company, it is important to start properly with a solid due diligence investigation, and know that it may take longer than expected, exceed your budget, or result in information that is based on speculation.
A reasonable solution to address these concerns would be In stages Due diligence is a step-by-step approach that explores what really matters to you.
Due Diligence Basics
It all starts with the first stage: collecting online information. This first stage is more than just a starting point; it is a critical step that sets the tone for the entire investigation, helping you spot early red flags and build a comprehensive profile of your target.
Due diligence is often delicately balanced between cost, quality and speed, but rarely all three can be achieved. A robust Phase 1 meets all these criteria – keeping costs manageable, ensuring high-quality information and providing a fast and effective initial assessment.
Phase 1 is the foundation of a thorough due diligence investigation. Digital tools and resources allow investigators to gather a wealth of information to gain a broad understanding of the subject. This phase includes several key activities:
• Internet research: Scour the web for general and specific information about your subject, from news articles to blog posts to public records.
• Social Media Intelligence: Analyze your subjects’ presence on social media platforms to understand their behavior, connections, and public personas.
• Open Source Intelligence: Leverage publicly available data from various online sources to gather comprehensive insights.
• Government databases: Access official records such as court documents, business registrations, and regulatory filings.
• Media Search: Check local, national and international media for mentions and reports related to the subject.
• Litigation Research: Investigate any past or ongoing legal proceedings relating to you.
By systematically collecting and analysing this information, investigators can develop detailed profiles that highlight potential risks and areas of concern.
Strong Phase 1 Advantages
Starting with a robust Phase 1 provides several significant benefits:
• Early detection of warning signsBy collecting extensive online data, investigators can identify potential red flags early in the process. This early detection allows subsequent investigative phases to be more focused and effective, if necessary.
• Comprehensive background understandingA thorough Phase 1 investigation gives you a broad understanding of your target's background, including personal identifying information, financial history, legal issues, reputation, etc. This comprehensive view is essential to making an informed decision.
• Cost-effective initial screeningConducting an extensive online search is a cost-effective way to screen subjects before conducting more expensive and time-consuming on-site investigations, helping to prioritise cases that require deeper scrutiny.
• Building a strong foundationThe data collected in Phase 1 forms the basis for all subsequent investigative phases, giving investigators a clear and precise starting point and reducing the risk of missing important information later.
Preparation of investigation report
The culmination of Phase 1 is a detailed report that consolidates all findings into coherent sections. This report typically includes:
1. Personally Identifiable Information and Assets: The subject's name, address, educational background, and information about personal assets.
2. Financial History: Details regarding personal debts, bankruptcy records, property ownership, and other financial data.
3. Civil and Criminal Actions: Records of criminal convictions, pending lawsuits or civil proceedings.
4. Reputation: Insights from social media, news articles, and public comments that reflect the target's public image and potential risks.
This comprehensive report not only summarizes our findings, but also provides analysis of red flags and recommendations for next steps.
Phase 1 of due diligence is more than just the beginning of your investigation. It's a critical step that lays the foundation for discovering important information and potential risks. In the complex and often high-stakes world of business and legal investigations, getting off to a strong start in Phase 1 ensures that your due diligence is effective and efficient, ultimately leading to more informed decisions and reduced risk.