Ken Springer makes it his business to know your business—dirty business especially.
And business is booming, thanks to financial scandals involving Bernard Madoff, R. Allen Stanford and others.
“What came out of the Madoff case and the Stanford case made everybody think about their processes,” Springer said.
A former FBI agent and since 1991 the head of his own firm, Corporate Resolutions Inc., the New York investigator this month added author to his resume, with the publication of Digging for Disclosure: Tactics for Protecting Your Firm’s Assets From Swindlers, Scammers and Imposters (FT Press, $29.99).
About half the firm’s business is sponsor work. Springer said he works with 85 to 90 firms, mostly mid-market shops located in Chicago and New York. The biggest part of the job is performing background checks on executives at target companies, although the firm also conducts internal investigations at portfolio companies and operates a “whistleblower hotline.”
Don’t expect to get any dirt on your competition from the book, however. Springer and co-author Joelle Scott carefully blind each item in the book (with the exception of scandals that are already part of the public record), making references to “Duped LLC” and “Kevin Axtagrind” and fudging details to make the actual companies unrecognizable.
Springer said there is no benefit to identifying the companies, especially when the stories are essentially private. “It is not about the mechanics of what we do,” Springer said. “People love stories.”
What Springer does is essentially old-fashioned, shoe-leather police work. (He disdains searching online records, saying it pays to track down the real thing.) Court records are a customary starting place, along with checks with former employers and the like.
A search might turn up lawsuits against the president of a target company, but if all the cases have been settled, it may appear that the problem is solved. That is not necessarily so, Springer said. “Settlement doesn’t mean they are innocent. They might just be smart enough not to fight it.”
One executive Springer checked had been involved in 120 lawsuits, including nine filed by former lenders. That gave the sponsor pause about taking the deal to the bank.
In other cases, such as material nondisclosure, “former employees are the secret sauce,” Springer said. One target company had employed temps during the sponsor’s on-site inspection, to make it appear that unused factory equipment was actually in production, and the target’s executives had specified that the temps be non-English speakers to make it difficult to interview them, a former employee disclosed.
Of course, a background check must guard against misidentifying people with common names, and sometimes the innocent are exonerated. One executive in a Springer investigation turned out to have been indicted in a criminal conspiracy, but he insisted he didn’t do it. After a check with the prosecutors in the case and examination of the court records, Springer said, “It was true. He didn’t do it.”