Corporate Investigation…
When references aren’t enough

By Terry F. Lenzner, Chairman
Investigative Group International, Inc., Washington, D.C.

In Pennsylvania, a corporate executive with a superficially distinguished resume is hired by one of the country's leading executive search firms as a company principal and a member of its general practice.

The new executive is abruptly dismissed, however, after the search firm discovers that he earlier was convicted on credit-card fraud charges, then incarcerated in a federal penitentiary. The company acknowledges it never conducted a criminal records check.

In Washington, D.C., a senior government official becomes suspicious of the credentials claimed by a trusted aide. At his request, my firm, the Investigative Group International, Inc., conducts an inquiry--and discovers that the aide has misrepresented both his undergraduate and graduate education.

In Maryland, a large public school system publicly identifies a woman as the leading candidate in its search for a new superintendent. After newspapers report that the top contender filed for personal bankruptcy less than a year earlier, the embarrassed school system "suspends" the search.

Further investigation reveals that the candidate somehow survived a screening process, even though she had more than $850,000 in debts, including thousands of dollars in unpaid bills for vacations and credit card purchases.

In Texas, after a search firm produces a candidate for superintendent of a school system, the news media discover that he was earlier arrested on a drunken driving charge.

In Florida, an executive search firm presents a large school board with two candidates for superintendent. Both withdraw, after the news media report that one had been fired from a previous job for extravagant spending and the other had fathered a child out of wedlock.

In an era of "resume inflation" and even more serious forms of white-collar fraud, both search firms and their clients increasingly are being embarrassed after they hastily embrace candidates for senior positions who subsequently are revealed to have unsavory backgrounds, soiled credentials or both. IGI has encountered cases, for example, where individuals who claim to hold Harvard MBA degrees actually participated in only a limited summer program for business executives.

The traditional cursory reviews of candidates' claimed credentials and professional history--typically in the form of ritual telephone calls to applicant-provided references, college registrars and corporate human resource officers--are no longer acceptable to thoughtful, careful employers committed to a high-quality hiring process.

Increasingly they are turning to corporate investigation firms such as IGI to conduct professional background inquiries on candidates for sensitive executive positions. (Sometimes, those inquiries focus only on the leading contender; on other occasions, they include a small group of finalists.)

Depending on a number of variables-including the importance of the position to be filled, any preliminary concerns about the character of the candidate and other factors--those background checks usually are conducted in a phased manner, so the scope of the investigation is commensurate with the needs of both the search firm and the potential employer.

A first-stage inquiry, for example, would seek to verify all pertinent items in an applicant's resume. It also would include searches for information about the candidate in various specialized online databases, an analysis of the computer search results and a report submitted to the search firm, prospective employer or both.

The online searches rely on a computerized system linked to more than 140 specialized national and international databases, as well as indices to vast amounts of proprietary data.

Those databases provide access to litigation records, news accounts, financial data and other information about the subject of the investigation. The press inquiries allow searches of the archives of daily newspapers and periodicals, general and trade publications, and specialized business information services. Litigation databases can be searched for records of civil, criminal, tax, bankruptcy and other litigation.

A second-stage inquiry would include more comprehensive online database searches, on-site public records research in jurisdictions where the database searches indicated pertinent litigation or other documents were available, limited interviews of individuals knowledgeable about the subject of the inquiry and a written final report.

A third-stage inquiry would include all of the steps listed above, extensive interviews and construction of personal, financial, professional and psychological profiles of the subjects of the inquiry. It also would include a regulatory review and an examination of whether the applicant engaged in self-dealing or other improper activities.

All of those steps are designed to identify instances in which candidates have had a history of financial irregularities or legal problems, were terminated for cause from earlier positions, experienced difficultly in dealing with others in the workplace, or otherwise engaged in conduct that reflected adversely on their character, their competence, their proficiency and their aptitude as leaders.

A professionally conducted background investigation provides crucial information about the subject of the inquiry, it identifies and locates critical documents and potential interviewees, and it verifies applicants' assertions about educational, professional and financial background and capability.

That knowledge provides both search firms and potential employers with an insurance policy that protects them against the risk of encountering unnecessary grief when filling crucial vacancies. At the same time, it can assist in identifying the most thoroughly qualified individuals.

ABOUT THE AUTHOR

Terry F. Lenzner, chairman of The Investigative Group International (IGI), founded the company in 1984 as an adjunct to his former law firm. IGl's founding marked an expansion of Lenzner's investigative law practice begun a decade earlier through his use of an in-house investigative unit at Rogovin, Huge & Lenzner.

In addition, over the years, clients of IGI and Lenzner have included:

* the U.S. Department of State, which hired IGI to establish a multi-national police monitoring force in Haiti and institute a training program for the country's permanent law enforcement personnel;
* the United Way of America, which sought an internal investigation into allegations that included misappropriation of funds and extensive improper expenditures against the publicly funded charity's president and colleagues;
* the Gardner Museum in Boston, which asked the Investigative Group to locate and retrieve $200 million in art masterpieces, a major theft unsuccessfully investigated by the Federal Bureau of Investigation for more than two years; and
* GTE, which asked IGI to investigate its litigation theory that its adversary, the Home Shopping Network, had lost an enormous amount of revenue through mismanagement and self-dealing, rather than due to an alleged faulty telephone system purchased from GTE. In 1989, GTE won the largest commercial libel judgment ever awarded as of that time.

Lenzner began as an attorney in the Civil Rights Division of the U.S. Justice Department, became a federal prosecutor in the Southern District of New York and eventually gained national recognition as assistant chief counsel to the Senate Watergate Committee. The investigation of this committee lead to the prosecution of a score of top government officials and in August 1974, to the resignation of then President Nixon. He also has conducted training sessions on complex investigations for the offices of the Inspectors General at several federal agencies.

Lenzner is a graduate of Harvard College and Harvard Law School, and was a member of the Board of Oversees from 1970 to 1976.

For further information, he can be contacted at (202) 778-1200.

Previous newsletters can be viewed in the Archive.