Background Investigation Save Million

A few weeks ago, we were contacted by a Massachusetts investor who was about to get started on a massive construction project. The investor had some concerns about the New York general contractor who they were about to entrust with putting this all together. The exact reasons for the concerns were not revealed, but they knew that they wanted some additional background information on the contractor to help them with their decision about going forward.

We quickly found information supporting the investor’s concerns, to the tune of more than 30 lawsuits—they were launched by subcontractors and former employees as well as several county tax commissions that were pursuing the contractor for failure to pay local taxes.

Personally, the owner of the company had more than $300,000 in judgments filed against him, and he owed a little bit more than $200,000 in federal taxes to the government.

Even more concerning was the fact that he had been charged with two separate misdemeanors relating to bad checks in the past few years. Both cases had been dropped, but nevertheless, this, along with other information we uncovered, showed signs of some serious financial troubles.

It’s probably best to steer clear from starting a multimillion-dollar business relationship with someone who has a troubled past.

The icing on the cake was a 20-year-old criminal case for larceny, for which the contractor had served two years in jail in Colorado.

One could certainly make the argument that a 20-year-old criminal case doesn’t carry all that much weight considering how much time had passed. However, the fact that the contractor’s birth date listed in the case was one year different than the one he was currently using raised the possibility that there were other things out there lurking under a different date of birth or possibly another alias.

After we supplied the investor with the information, I was surprised to hear from the ultimate client that they were probably going to proceed with the deal, but I followed up with the client a few weeks later and was told that they decided to look for a new contractor.

“Based on the information in your report and other concerns we have heard, we are not moving forward,” they told me. “We think it is just a good idea to be cautious.”

I couldn’t have agreed more.

While there was no telling what would have happened had they moved forward, when you have options, it’s probably best to steer clear from starting a multimillion-dollar business relationship with someone who has a troubled past.

At the end of the day, we probably saved the client a lot of heartache and litigation, and more likely than not, a couple of million bucks.

While it’s not always easy to put a dollar figure on what a background investigation may save you, a background investigation provides you with more than a few pieces of paper. It provides you with:

  • Independent Voice — Information identified in a background investigation is based on factual, independent data. While you can question one’s opinion about the character of a person, there is no questioning 30 lawsuits, a half million dollars in liens and judgments, and three criminal cases, including a felony that included jail time.
  • Verification of Concerns — I find this often with clients—cases in which people (especially investors) need verification of some concerns they have had outside. More often than not, their concerns are supported in a background investigation, but it can still be difficult to make a decision.
  • Expert Opinion — Anytime you have to make a major decision in your life, you typically consult an expert, whether it be an accountant, lawyer or financial planner, or even your parents. So if you are about to “get into bed” with someone who could have a major impact on your business or your life, don’t you think it might be a good idea to check on their character?

The truth of the matter is, even when you have the results of a background investigation in your hand, there is no cut-and-dry answer here. But it’s better to have all the information in front of you so that you can make that decision more intelligently.

And possibly even save yourself a few million dollars.

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