Integrated Security Services, Inc., New York

Why Private Investigators Are Great for Investors

07 May

Investors scrabble tiles

The field of financial investments is more fraught with risk than ever. Here are some reasons why hiring a private investigator is a virtual necessity in today’s overwhelming world of investment.

Like many things in life, making an investment is like diving into water — before you leap, it’s important to make sure that you won’t hit any rocks on the way down. That’s why many investors are turning to private investigators to ensure that the people they’re giving their hard-earned money to are, in fact, who they seem.

A reporter at Fusion was recently contacted by a private investigator looking for any unturned stones regarding John Zimmer and Logan Green, the co-founders of the popular ride-sharing company Lyft. Why? According to the source, a potential foreign investor was baffled that such young and successful entrepreneurs could approach him with such clean, gleaming slates.

While the jury is still out on these two young businessmen, there’s no doubt that thoroughly researching your prospects is a common and necessary precaution for any smart investor.

More Than Anything, Business Is Character

Whether you’re thinking of investing in a Fortune 500 company or your local mom-and-pop shop, you can’t be too careful when placing your trust (and money) in someone else’s hands.

As the investigator contacting Fusion noted, a PI’s basic duty is to ensure that any future colleagues are people of their word — and look for red flags like a fluffed-up résumé or lies about their college degrees. These shady tactics only typify the kind of values and morals this person might uphold while dealing with your money.

An investigator might also discover some murkier issues, such as past lawsuits, criminal records, bad publicity, and claims of negligence, tax evasion, liens, and other generally improper business practices.

There are also, of course, the intangibles of business relationships. It deeply matters whether or not a potential investee is trustworthy or has long-lasting business connections. Just finding out how the individual’s previous contacts speak of them can go a long way towards determining the risk associated with your investment.

More broadly, an investigator can help you determine whether their business practices and past behavior align with how they’ve presented themselves to you.

Only Skin Deep

According to Bloomberg, one of today’s most pernicious and tricky-to-spot threats to investors is the so-called “shelf corporation,” an entity that legally files to start and grow a business without actually conducting any — instead, it’s left dormant for months or even years to acquire the appearance of legitimacy.

In a particularly devious form of trickery, multiple shelf corporations in cahoots with one another will begin to bill each other, building their mutual credit ratings and developing the appearance of legitimate businesses that pay their bills on time.

Any potential investor — or bank, for that matter — will see a seemingly solid record of business transactions and a sparkling credit history, yet the companies themselves are actually worth nothing more than the pieces of paper on which their titles are printed.

In fact, creating a shelf corporation is legal, and there are sometimes legitimate reasons for doing so — which is why they can so easily lead you into bad deals. If your investment were to fall through — which, with a fake company, it would — it’s impossible to reclaim your losses from a corporation that holds no money or assets.

With schemes this complex, it goes without saying that nothing short of significant, professional research can spot these major phonies.

Covering All Your Bases

Despite the Fusion reporter’s initial surprise at the contact from a private investigator, hiring one is a no-nonsense part of any practical investor’s due diligence. This isn’t to say that you should be inherently skeptical about all potential investees — but like any relationship, if you’re going to be committing for the long-term, you want every assurance that all parties involved have the same intentions.

Using a trusted investigation team, like those here at Integrated, will ensure that everyone is putting their best foot forward — it’s almost irresponsible to not have these proper checks in place. Don’t jeopardize your business by skipping a simple step — secure your future with the help of a qualified investigator.