ScherzerBlog | Scherzer International

A pharmaceutical company already engaged in a long-term business relationship with an accounting firm, as part of its rebranding, brought on several new executives, including a chief financial officer. After learning that this client had not performed background investigations on these individuals, the accounting firm ordered due diligence investigations from SI.

Everything looked great with the chief financial officer: an MBA degree from a prestigious university was confirmed, as well as employment history in financial positions with large companies.

However, in digging deeper, SI’s investigation discovered that the subject, in his capacity of chief financial officer at a previous employer, had been named as a defendant in several federal lawsuits, including a civil complaint filed by the Securities and Exchange Commission which alleged that the subject falsified financial documents. The subject paid $50,000 in fines to the SEC without admitting or denying the charges and agreed to a permanent injunction. His CPA license was revoked, and he was expelled from the AICPA. The former employer was forced to restate its earnings which, in turn, resulted in a shareholders’ class-action lawsuit against the subject and the company. Unrelated to the securities matters, an open federal tax lien filed in 2008 for $469,500 against the subject was located in searches of his previous jurisdiction of residence.

As part of an international company’s standard protocol, a background investigation was ordered regarding an applicant being considered for an administrative position. The investigation verified the subject’s JD degree and employment dates; however, further checks revealed that the subject’s most recent employment (in healthcare) was at a rate less than half of the salary for previous employment as an attorney. The subject indicated no reason for the shift in professions, so SI’s research analyst searched online records of the state bar to determine if something was amiss. The state bar reported that the subject was no longer practicing law, but provided no further details. As other elements of the investigation were completed, the full picture of the applicant’s professional history came into focus.

Criminal record searches located a misdemeanor case which indicated that the subject pleaded guilty to a charge of deadly conduct two years prior; the subject was sentenced to one year of jail time (probated), fined and ordered to permanently forfeit the license to practice law. A follow-up call to the state bar authorities revealed that the subject had resigned the right to practice law in lieu of disciplinary action taken by the board in connection with the offense. The deadly conduct charge stemmed from the subject’s offer to kill someone for a fee.