Protect your firm from phonies and fraudsters

Protect your firm from phonies and fraudsters

Protect your firm from phonies and fraudsters
Do you really know who you’re about to go into business with? We spoke to former FBI agent and Certified Fraud Examiner Kenneth Springer about the importance of conducting thorough background investigations.

Risk management

“It’s not only about avoiding financial damage but reputational damage,” says Springer, “you have to make sure you know enough about the people you’re working with to avoid headline risk.”

While some industries consider all publicity good publicity, it’s a sentiment that the financial services sector just doesn’t share. In a world where the likes of Madoff, Stanford and Isreal are the headline hitting names, firms are more interested in building a trusted and unquestionable reputation.

FINRA has already pushed ahead with plans that would force brokerages to conduct more thorough checks on job applicants but, according to Springer, it’s important to vet everyone you’re going to be professionally affiliated with, whether you’re hiring, merging or investing.

Corporate Resolutions

Springer’s worldwide investigations firm, Corporate Resolutions Inc. provides business intelligence to professionals seeking “information, investigation and leverage”. His company has exposed many scammers and swindlers over the past 23 years, ultimately saving several companies from disrepute.  So what’s his advice?

“It’s not always what they tell you that’s important but what they don’t tell you,” reveals Springer, “the key is to conduct comprehensive research to find out what other issues are out there.”

Allen Stanford’s massive Ponzi scheme eventually collapsed in 2009 when he was charged with fraud involving US$7 billion in CDs but Springer says the indicators were there beforehand, if someone had just checked.

“If you just went to you would have found that although [Stanford] was licensed, he’d also been disciplined for not meeting the capital requirements and was fined for overstating information regarding the CDs. He was even involved in seven arbitrations where investors sued him for fraud!”


According to Springer, there are lots of key indicators which are pretty straight forward but can often be missed. His main lines of inquiry include if the subject has worked with other companies but hasn’t disclosed them, if they have adverse regulatory history or controversial media attention (including social media), if they have exaggerated their credentials and accomplishments, if there is any indication of financial stress or if they have a pattern of law suits.

He also adds that it’s good to be aware if a company has a high-turnover of CEOs, repeated law-suits, late earnings, too many family members or one-man accounting firms.

“When we do our background checks our goal is to confirm someone’s good name but we firmly believe past history is often indicative of future performance so you’ve got to look in the past for what they did. Did they perform well? Were they honorable? Did they live up to their obligations? If they did, chances are they’ll do that again. If you found inconsistencies, reputational issues or patterns of law suits then that’s probably an indicator for the future,” says Springer.


Maintaining the integrity of your firm is key and one of the best ways to ensure your future employees and partners are honest is by interviewing them and their references. “Interviewing people, talking to references and to the subject themselves is the most underutilized tool,” says Springer.

By interviewing old colleagues you can gain valuable insight and perspective, “They can tell you if they have good people skills or can they take the company to the next level,” reveals Springer, “but people also say the darndest things,” he laughs.

“We did this background check on this senior executive to be on the board of a publically traded company and everything came out great except one of the references said ‘he cheats at golf.’ He’d kick a ball out or he’d lie about his shots, well that’s a character issue and that’s why it’s important to do reference checking.”

While sub-standard sportsmanship might not be enough to sway your decision, there may be a few unfavourable things that will. By combining internet research, traditional data sources, verification of credentials and interviews, Springer and his team conduct thorough background checks and protect the integrity of many companies. Are you doing the same?