Who are these people, and why are we giving them our money?
Most of us prefer to deal with people whom we like. Often these are people with whom we identify. Con artists tend to be appealing people with whom we identify. This means that in financial transactions it is prudent to look past personalities and make sure we know with whom we are dealing. In most frauds we have seen, the participants – one is often hard-pressed to call them victims until after the fact – do not do any appropriate check on the background of their new best friend. While the exercise of due diligence may seem a little cold, it really is better than having to hire us to find the money that has been stolen from you.
While we are generally able to locate swindlers, they can do a lot of damage before they end up in jail. In one case with which we are familiar, a man twice sold a major landmark New York Office building. Selling it even once would have been a major coup for a legitimate real estate agent, but to sell it twice when it was not for sale – well, that is just dazzling. And a trifle embarrassing – not to mention costly – to the purchasers.
The sad truth is that most swindles could be prevented by checking on the background of the person with whom you are doing business. Sure, there are times you give money to people without checking too carefully: When you open a bank account in a brick-and-mortar bank, or when you invest in a major mutual fund, for example. But when you are investing with an individual, even an individual masquerading as a corporation, it is best to make sure who they are, where they came from, and where they are likely to take you, no matter how charming they are, or how religiously committed.
Indeed, our experience tells us that the closer a bond you feel, the more prudent it is to exercise due diligence. If you find nothing, you can be happy because it confirms what you knew all along. If you find some bad history you can bring it up and see if it can be explained away. If it can’t be explained away, you will feel very clever, because you have been, for having done the prudent thing.
Is this advice only for the small investor? Absolutely not! We have been brought in by major financial institutions and major corporations to look into the participants in deals, sometimes even major, well-known participants. Most of the time we find nothing bad. But sometimes we find things so bad that to continue the transaction would surely lead to a loss. So be prudent, not sorry.