Listen to Your Gut

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Listen to Your Gut

A due diligence investigator had been engaged to prepare a comprehensive background report on a real-estate developer and the associated projects. The funding was for $22 Million and represented a fair sized mixed-use-development. When the research was completed everything seemed to be as it should, with no untidy histories and no title questions. In fact there were no problems of any sort: The developer’s credit was perfect! Now, while this may look good, it actually sounds terrible. No entrepreneur of experience and credentials got that way without mistakes: It’s how they learned. [We have always preferred the term learning experience as opposed to mistakes— it hurts less.]

The principal of the real-estate developer was a cultured man who seemed to have no visible means of support and a good lifestyle. The due diligence investigator relayed this information to the group of accountants, lawyers, and investment bankers overseeing the financing. Though not bothered nearly as much as the investigator, the accountants suggested we continue to try to resolve the contradictions.

To make a long story short, the investigator checked birth and death records where the principal of the developer was born. It appears the unfortunate man died only a week after his birth. Since witness protection is more thorough, it had to be the other guys, organized crime. The investigator brought this to the attention of the accountants, the lawyers, the investment bankers, and the developer at the “all hands” meeting just before underwriting. At the moment of disclosure the developer became red faced and screamed “You’ve ruined everything, everything,” and reached below the table. The investigator figured a shooting was going to occur (with him as the primary target) and hopped behind a credenza. The developer reached for his briefcase and stormed out. The accountant and the attorney had gone absolutely white. The lead underwriter said “Soo, its still a good deal!”

Some brief educational four lettered words from the accountant and the attorney finally got through to the underwriter and then he turned white too. All three suggested to the investigator that in the future he phone in his information ahead of the meeting, or fax a memo. The investigator, still behind the credenza, agreed. This editor was that investigator. Listen to your gut. And use a fax or a phone when appropriate….

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