The Crucial First Step Of Phased Due Diligence Investigations

In this world of fake-it-till-you-make-it founders, win-at-all-costs politicians, and just plain old-fashioned hucksters, due diligence is more important than ever. In the realm of business and legal investigations, it’s become the bedrock upon which sound decisions are made.

Take, for example, the recent fall-from-grace of George Santos. In 2022, six weeks after Santos was elected to US Congress from New York’s 3rd Congressional District, he admitted to The New York Times that he’d lied about his education and his work history. Soon after, the press exposed a cascade of further lies. In May of 2023, he was indicted on 13 criminal charges including seven counts of wire fraud and three counts of money laundering. After almost a full year in Congress, he was finally expelled.

This episode could have been avoided if anyone had bothered to with due diligence to vet his claims. Simply embarking on the first phase of an investigation would have exposed his blatant dishonesty.

Exploring the background of George Santos, or any other individual or company, it’s important to start a solid due diligence investigation appropriately. It’s also important to know that it can take longer than you anticipated, be more than you may have been budgeted for, and may result in speculative information.

A reasonable solution to meet these concerns is phased due diligence, which takes a step-by-step approach to investigating what truly matters to you.

The foundation of due diligence

It begins with the first phase: Online Intelligence Gathering. This initial phase isn’t just a starting point, but a critical step that sets the tone for the entire investigation, helping to uncover early red flags and build a comprehensive profile of the subject.

Within the delicate balance of due diligence, it’s often said that you can prioritize cost, quality or speed, but you can rarely achieve all three. However, a robust Phase One hits all these markers. It keeps costs manageable, ensures high quality information, and provides a swift and effective initial assessment.

Phase One is the cornerstone of a thorough due diligence investigation. By leveraging digital tools and resources, investigators can gather a wealth of information that provides a broad understanding of the subject. This phase involves several key activities:

• Internet research: Scouring the web for general and specific information about the subject, from news articles to blog posts and public records.

• Social media intelligence: Analyzing the subject’s presence on social media platforms to understand their behavior, connections, and public persona.

• Open-source intelligence: Utilizing publicly available data from diverse online sources to gather comprehensive insights.

• Government databases: Accessing official records, such as court documents, business registrations, and regulatory filings.

 • Media searches: Reviewing local, national, and international media for any mentions or reports related to the subject.

 • Litigation research: Investigating any past or ongoing legal proceedings involving the subject.

By systematically collecting and analyzing this information, investigators can create a detailed profile that highlights potential risks and areas of concern.

The benefits of a strong Phase One

Starting with a robust Phase One offers several significant advantages:

• Early identification of red flags. By gathering extensive online data, investigators can identify potential red flags early in the process. This early detection allows for more focused and effective subsequent phases of the investigation, if needed.

• Comprehensive background understanding. A thorough Phase One investigation provides a broad understanding of the subject’s background — including personal identifiers, financial history, legal issues, and reputational standing. This comprehensive view is essential for making informed decisions.

• Cost-effective initial screening. Conducting extensive online research is a cost-effective way to screen subjects before committing to more expensive and time-consuming on-the-ground investigations. It helps prioritize cases that require deeper scrutiny.

• Establishing a solid foundation. The data collected during Phase One serves as the foundation for all subsequent phases of the investigation. It ensures that investigators have a clear and accurate starting point, reducing the risk of missing crucial information later.

Building the investigation report

The culmination of Phase One is a detailed report that compiles all findings into coherent sections. This report typically includes:

1. Personal identifiers and assets: Information about the subject’s name, address, educational background, and personal property.

2. Financial history: Details about personal debt, bankruptcy records, real property ownership, and other financial data. 

3. Civil and criminal filings: Records of any criminal convictions, pending legal actions or civil proceedings.

4. Reputational standing: Insights from social media, news articles, and public comments that reflect the subject’s public image and potential risks.

This comprehensive report not only summarizes the findings but also provides an analysis of any red flags and recommendations for next steps.

Phase One of due diligence is more than just the beginning of an investigation—it’s a critical step that lays the groundwork for uncovering essential information and potential risks. In the complex and often high-stakes world of business and legal investigations, a strong start with Phase One ensures that due diligence is both effective and efficient, ultimately leading to better-informed decisions and reduced risk.