due diligence

The term “due diligence” gets bandied about a lot these days. People use it to refer to their shopping habits (as in, “I need to do my due diligence before making an offer on that car”) and even in the dating world (“I need to do my due diligence before I agree to meet someone”). But the term due diligence has its origins in the legal and business worlds, where failing to check up on the trustworthiness of a person or organization can result in costly and unpleasant consequences.

We’ve all been burned at least once in our lives. Maybe you loaned a friend some money that was never repaid. Or you thought you could trust someone with a secret that was later shared with others. After that experience you probably told yourself you’d never let it happen again, and that next time you’d check out in advance the trustworthiness of the person you are dealing with. Businesses and individuals deal with such a challenge on a nearly daily basis, albeit in different forms. Often it’s a matter of deciding whom to do business with, but in some cases it’s about learning about a rival’s business practices or legal circumstances.

The due diligence services we provide at Hillard Heintze come in many forms. Below are some of the most common.

Pre-transaction due diligence

Many of our corporate clients rely on our investigations team for due diligence of companies and corporate leadership with whom they would like to do business. This typically means checking the subject’s legal and financial history as well as the subject’s assets, press coverage and social media footprint. Our clients know that information is invaluable in making good business decisions, and knowing who you are doing business with is essential.

Due diligence in hiring and advisory roles

Clients sometimes ask us to investigate the backgrounds of potential new hires, to make sure the information they provide about their professional track record is true and that the person is honest and trustworthy. This can mean vetting anyone from the prospective CEO of a large corporation to a nanny candidate for a wealthy family, a potential board member or advisor, and anything in between. Regardless of the individual’s job title, we approach this responsibility with the utmost seriousness, with the end goal of alerting our clients to any red flag issues discovered during our investigation.

Vetting of financial professionals

Just as you wouldn’t hire an important employee without checking out his or her background, you also shouldn’t hire someone to manage your money without doing the same. We are experts in vetting financial professionals. In fact, our high-volume financial advisor background investigation team provides due diligence services for the NFL Players Association, vetting the credentials and backgrounds of players’ agents and financial advisors and making sure they live up to the standards required by the association. (Howard Fisher, Hillard Heintze’s Senior Vice President, Strategic Relationships blogged about the “insider threat” posed by unscrupulous financial advisors in this blog.)

Due diligence in litigation

Before deposing a key witness or litigant, many of our legal clients rely on us to conduct a background investigation of the individual. During these investigations we often identify key information that allows the client to go into a deposition armed with important facts about the person’s legal and/or financial history, professional history, ties or associations, criminal history or areas of concern, as well as personal details that, in some cases, provide a sense of the person before our client ever meets them.

Vetting expert witnesses

Another benefit of due diligence investigations as they relate to litigation involves expert witnesses. A client may want to know more about an expert witness before a deposition, or may be interested in learning whether there are any professional controversies or credibility questions in the person’s background.

Self due-diligence

An often overlooked yet useful tool is the self-due diligence investigation. In such cases a client asks us to conduct a background investigation of themselves. This helps the client see what information others might be able to glean about himself or herself. Such insight can be especially helpful when engaging in a business transaction or applying for a new position, or simply as a way to learn what exists in the public record that may help the client see himself or herself as others do.

Failing to conduct due diligence before making important financial or legal decisions means taking on added risk. Think of a due diligence investigation as a risk mitigation tool, one that provides greater insight and confidence when it comes to decision-making.

 

Pre-transaction due diligence: is a Google search enough?
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