Look Before You Leap – Due Diligence Secrets of an Experienced Investigator

American Business Group

Milan, 16 October 2009

Larry Gurwin, Consultant

Euro Investigation Srl

THE NINE SECRETS

1. Look at the subject of the investigation (the individual or the entity) in context.

Don't ignore other individuals and entities that are related to your subject.

• With individuals, look at close relatives, business associates, etc.
• With entities, look at companies and individuals with close links to the entity.

2. The person who does the investigation should be as independent as possible.

• A dealmaker whose bonus may go up if a particular deal is done should NOT perform the due diligence investigation of that deal.

3. Avoid stereotyping and clichéd thinking.

Examples include:

• Investigations in southern Italy that look only for organized crime connections.
• Investigations in Colombia and Mexico that focus only on ties to drug-trafficking.

4. Start by using free (and very cheap) information sources.

• Examples include Google (free) and Cerved (cheap).
• U.S. examples include:
• EDGAR, the SEC's free database of public companies. Full-text searching is available for documents filed within the last few years.
• PACER, an index of federal court documents. The fees for downloading court documents are quite modest.

5. Be aware of the limitations of checklists.

Checklists can be helpful in organizing your work, but they can also lead to tunnel vision: causing you to ignore things that are not on the checklist.

6. Be aware of the limitations of online research.

• Many publications (such as local newspapers) are not available online.
• Major newspapers that are available online do not go back forever.
• Online databases of corporate records (Cerved in Italy) may have transcription errors, be incomplete, or may not have been updated. It often makes sense to retrieve the underlying paper records.

7. Make a chronology

• It can serve as a simple database, including all your key information in a single document.
• It can help you see the trajectory of a person's career (or the development of a company).
• It can help you notice cause-and-effect relationships and anomalies.
• It can give you a head start in writing up your findings.

8. Human sources may be indispensable

• They can provide information unobtainable in any other way.
• This can be particularly important when you are investigating low-profile companies and individuals.

9. It's impossible to give anyone a "clean bill of health"

Only Santa Claus knows for sure who's been naughty and nice!

lgurwin[----]euroinvestigation.it

+39 340-372-7712