Background
Due diligence plays a crucial role in assessing the true value, risks, and potential of a person, business, or investment opportunity, and organizations that cut corners in this area often regret such decisions. The process involves a comprehensive evaluation of all pertinent factors, including criminal and civil records, as well as thorough open-source research, to support informed decision-making. Without due diligence, individuals and organizations risk being misled by false information, encountering undisclosed issues, or falling victim to fraudulent activities. Thus, due diligence is vital for making wise business decisions and avoiding costly errors.
Situation
Recently, a client organization found itself in a difficult situation upon learning that the monthly rent, already exorbitant, was set to double by 2025. With only a few months left to find a new business location, they embarked on an urgent search for a new property. Their quest led them to a promising opportunity nearby, where a larger space would soon become available.
Upon contacting the property owner, our client was pleasantly surprised to learn that the rental price was several thousand dollars lower than their current monthly cost. This price seemed too good to be true, which led the client to request thorough due diligence on the company and owner.
Solution
Integras Intelligence methodically collected relevant information and launched an in-depth investigation into the company and its owner. The investigation uncovered a few red flags for both the company and its owner.
- The company had numerous lawsuits naming them as the defendants, some as recent as this year.
- A Secretary of State business search revealed no filings for the company name—or variations.
- Open-source research revealed the owner and members of their family had connections to organized crime, with several relatives having been arrested for fraud and money laundering. Law enforcement sources confirmed this information.
When the client received the final report, they immediately decided against moving their operations to this location.
Conclusion
The adage “if it is too good to be true, it probably is” perfectly encapsulates this situation. Fortunately, our client trusted their instinct and conducted due diligence before signing the lease. We cannot overstate the importance of conducting thorough due diligence, particularly when considering new business ventures or investment opportunities. We’ve seen too many cases in which someone discovers issues after the fact and realizes that a closer look would have uncovered the information. Even when things seem proper or you know the parties involved, don’t make the mistake of skipping proper due diligence before entering into any agreements.
