Criminal Activity Archives

Background investigation reveals untruth in advertising

SI was engaged to investigate a national company along with two of its principals as part of our client’s risk management program. The company’s ads have appeared almost daily in major newspapers and on the Internet, and the merits of its consumer services (for confidentiality, we can’t say what they are) have been touted in the professionally scripted testimonials of “real” customers. But SI’s investigation found media reports and court documents showing that the claims were not so credible. There is a pending federal class-action lawsuit against the company and its principals alleging several fraudulent business practices, including the misleading advertising of a service guarantee that “is riddled with restrictions, waivers and limitations” and service enrollments without authorization. Six additional lawsuits for similar causes of action are pending in various county-level courts.

Further, SI’s investigation uncovered the checkered backgrounds of the two principals behind the company. Searches of bankruptcy records revealed that both subjects had filed for protection from creditors – and in the co-founder’s case, had filed multiple times. Also missing from the company’s pitch was that the co-founder’s previous career in a similar business culminated in a federal judge’s order barring him from “promoting, offering for sale, performing or distributing any product or service related to

[consumer] services.” Had our client’s decision-makers relied on the company’s presentation of itself and its principals, they would not have been able to realistically assess the risk of engaging in business with the subjects. While a search of media stories might reveal complaints against a potential client, it’s a full in-depth investigation that brings all the pieces together.

The not-so-good deeds of a charitable organization director…

As part of a business transaction for an accounting firm, SI was engaged to investigate one of the most respected charitable organizations in the US. The organization itself showed many years of humanitarian service, but among its countless good deeds, SI uncovered the not-so-charitable actions of a former chapter director. In 2008, this individual was sentenced to six years in a federal prison following his conviction on 15 counts of fraud, money laundering and interstate transportation of stolen property. The fraud charges involved swindling an Ohio man out of more than $9 million in a bogus investment scheme.

Additionally, in 2006, the Utah Division of Securities had fined the subject $60,000 and obtained a default cease-and-desist order barring him from future acts of securities fraud in an unrelated matter. Court records also revealed that the subject had convictions for grand theft and forgery dating back to the 1980s. By employing a risk management strategy like our client’s, the charity would have avoided its association with a felon, and thus prevented significant expenses and continuing embarrassment.