Monday, July 26, 2010

Due Diligence and Deep Research

An article in this month’s PI Magazine called, “Evolving Background Checks into a Reputational Due Diligence Model,” while severely over-titled, is a fairly comprehensive outline of how to start a standard background investigation.

The very idea of trying to market something called a Reputational Due Diligence Model to clients is preposterous, and, I believe, even redundant. In the context of business intelligence, a background investigation should be included in the due diligence process.

[FIND] Lexicon

due diligence - noun 1 : the care that a reasonable person exercises under the circumstances to avoid harm to other persons or their property; 2 : research and analysis of a company or organization done in preparation for a business transaction (as a corporate merger or purchase of securities)

Now that we have the phrase defined, let’s break it down. Note the words I’ve highlighted: first, we’re defining the term based on what a “reasonable person” would do under “…the circumstances.” Second is the “research and analysis” component -- not just a gathering of facts, but analysis of the information.

My problem with simple due diligence as defined here is the idea that we have to limit ourselves to the research and analysis and level of care that a reasonable person would exercise. I, personally, like the idea of research and analysis being conducted by an unreasonably anal person who pays attention to detail in approximately the same infuriating manner that my tenth-grade English teacher graded my essays. A background investigation should be at least thorough, if not exhaustive. That said, common sense must be employed. You don’t want to spend valuable time chasing down obviously erroneous tangents.

Many investigators think a background investigation is simply a reporting of facts, when it should always include thorough and thoughtful analysis of the information. Granted, any licensed professional investigator with a basic level of competency can query the various databases available to him or her and get a quick list of criminal, civil, and other publically available records. But a worthy investigator should always dig deeper.

Deep Research

One standard we that must employ as a matter of practice is Deep Research. The objective of deep research is discerning observation and smart analysis. Discernment in observation calls to mind the notion of not just sensitivity, but also intelligent, wise, and judicious thought. Smart connotes sharp, shrewd, and clever, with a touch of brash and sass for good measure. The entire premise of this method is based on investigators being astute, which comes from the Latin astus, which has both the positive sense of adroitness or dexterity and the… more ambiguous, shall we say, concept of craft or cunning.

Once the initial database inquiries have been made, the basic information is compiled for further study. At this point, look to some proprietary data services that offer more information. Sources like LexusNexis and Westlaw allow natural language and Boolean queries and gather more data from a broader set of sources. This is the second phase of deep research and it involves discernment. Again don’t waste valuable investigative time chasing useless tangents.

Once the basic information and more extensive details available through various data providers are compiled, it’s time to be astute: adroit, dexterous. A dose of cunning is often useful as well. Now we’re down to…craft, or as it’s known in our circles, tradecraft.

Initial Probe

An investigator places a call, either direct or under pretext, to all references. Verify as much information as possible from the subject’s own character witnesses. Confirm all employment, education, and associations. Any claims of advanced degrees, professional designations, and awards should be authenticated. Create a synopsis of the universities attended, professional organizations, and sources of awards. If the subject attended Phoenix University and earned that MBA via the post office, let the client know. If the Association of Bank Managers is made up of four guys and a poker table, the association is most likely of no real value. If the Frank Stevens Award for Legal Letters was conferred by the next-door neighbor, your subject has been creating fiction. Investigate the veracity of all claims.

Digging Deeper

A thorough and exhaustive background investigation should include, but should not be limited to, on-site courthouse research, visits to colleges, interviews with professors, chats with neighbors and old friends, and other methods of tradecraft. The last two methods of gathering primary reference materials are straight out of the world of spycraft and almost always yield valuable insights.

It is almost always useful to place the subject under surveillance for a period of time. Get an idea of lifestyle, character, and habits. This is a chance to expand the list of associates and friends. Often an investigator can identify the subject’s true associates and check this list against the references listed. Actual physical surveillance affords the investigator a chance to get to know the subject, to study his daily routines. With physical surveillance, the investigator can develop a more intimate and realistic picture of the subject’s lifestyle.

The last piece of tradecraft discussed is arguably one of the most underhanded methods available to the field operative. Trash Cover, refuse audit, pulling trash, dumpster diving…whatever an investigator chooses to call it, it’s a messy job, but almost always produces results. The legality of this method is fairly well established. In most states, once a person has placed their rubbish in the bin and rolled it to a publically accessible place, the trash is fair game. One month of garbage usually generates a clear profile of the subject. Groceries, prescriptions, movie/theater tickets, alcohol, illicit drugs, porn, letters to girlfriends, notes to boyfriends, retail receipts, credit card statements, and on, and on, and on…To muster this information into a cohesive portrait of the subject simply takes time, rubber gloves, evidence sleeves, a few notebooks, and meticulous organizational skills.


A background investigation for due diligence should be a thorough exploration of the facts and a thoughtful rendering of those facts into a portrait of the subject. The subject provides a head shot, their best side in the nicest possible light. Our objective should not be to destroy that ideal, but to augment it with a serious dose of reality. Many investigators approach this type of work with a broad-brush methodology. They simply gather computer-generated information and report that under their letterhead with no verification or support. (Actually, a lot of investigators will just copy and paste the database information into their report.) A worthy investigator will dig deeper. They will corroborate their initial research with several sources. They will contact the original source of information and verify in person or via telephone the virtue of all claims. The true professional will take it even further. He will conduct primary research in the form of observation and evidence gathering.

The “reputational due diligence model” sounds a bit pedantic and purposefully overwrought. A quality background investigation should be thorough and thoughtful and doesn’t need a long meaningless name. Spies have been doing this work for ages. I think they simply call it a dossier.

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