I dig up dirt on the wolves of Wall Street. Image 1.

Charles Reinhardt

Author, as told to

I dig up dirt on the wolves of Wall Street. Image 2.

Elizabeth Sanchez



In the latest installment of Hopes&Fears’ anonymous interview series, we talked to a private investigator who runs background checks on the finance industry’s top brass.

What we do is produce a very extensive business background report on companies, and the individuals running those companies, for clients who are considering, typically, either some form of investment in the company—usually in the many millions of dollars—attempting to buy another company, or looking to hire someone at a high level for their company.

This is called “background due diligence.” We look through an individual’s history to find anything the client might be interested in. That’s everything from corroborating their biographical information, including schooling and work history, to checking court records, to looking at regulatory filings and corporate documentation, to searching, very actively and extensively, in the news. Through those public records we develop a written narrative of the individual in question and essentially compare what this person has said about themselves with the data that’s available on them.

So, there could be someone who said they graduated from a certain school at a certain time with a certain major and it turns out that the time and school are accurate, but the academic office reports that they actually had a different major. We give the client information they can use to go back and ask further questions.

Character is subjective 

We’re certainly not in the business of telling clients what to do with the information we provide. We’re not a consultancy. However, our research is used to help the client make more informed decisions. One of the pieces of feedback we get all the time is that a client may or may not do a deal based on the way someone answers questions that they gave them based on the information they got from us.

Character is subjective. It’s not like we’d ever say, “So-and-so exaggerated this or that, which means they have a questionable character.” That’s up to the client to determine. Of course, clients use our service to read someone’s character or reputation, but what we’re trying to do is establish a pattern of behavior that can guide further analysis. We don’t look at the current finances of the individual either, so we don’t know what they’re up to right now. We screen their past activity, which helps our clients know how they might act in the future.

Our clients’ risk tolerance differs. When it comes to interviews, you’re going to get someone’s former secretary or supervisor on the line and they may very well tell you a few things about that person’s history that have nothing to do with their character or reputation or integrity, but do touch on questions of compatibility or performance.

A 2012 study found that job applicants routinely lie on their resumes.

70% of college students say they would lie on a resume to get the job they want. 

53% of resumes and job applications contain falsifications. 

7% of job applicants have a felony record.

3% of job applicants have a misdemeanor record.

Source: Society of Human Resource Managers via Statistic Brain Research Institute

Crooks and criminals

Most firms in our industry don’t search news sources properly and end up with the worst results. We cover the media as broadly as possible. So if we’re going to search your name, we might limit it to some degree if your name is super common, but beyond that we’re casting as wide a net as possible. The vast majority of similar businesses are doing what’s called an “adverse news search.” They limit their search terms to the person’s name and a few keywords like “crook” or “criminal” or “fraud.”

This method is all wrong. Think about it: how can I anticipate the exact language you’re going to use to describe a certain event or incident? Take Bernie Madoff for example. There was a deluge of news stories that pretty much went after him, yet this wouldn’t have been picked up by a traditional adverse news search because the reporters didn’t necessarily use specific terms like “crook” or “criminal.”

Not to sound like a total douche, but the scandals with Bernie Madoff and Galleon Group were the best thing that ever happened to us. Prior to that, the investor base looking into hedge funds made up the bulk of our clientele. They were already on board with the idea that due diligence was a good thing. It wasn’t new or a mystery to them.

A 2014 study found that employers are largely wise to this fact.

 58% OF HIRING MANAGERS have caught a lie on a resume.

— 51% OF HIRING MANAGERS say they would automatically dismiss a candidate if they caught a lie on his or her resume.

— 40% OF HIRING MANAGERS say it would depend on what he or she lied about.

— 33% OF HIRING MANAGERS say they've seen an increase in resume falsifications and embellishments since the recession. 

Source: Harris Poll for CareerBuilder

It really started with Bayou Group, which was even before that, around August of 2005—a guy named Sam Israel. The Wall Street Journal went after him with a huge cover story and then, after many years of back and forth, he was nailed for stealing something like $450 million from investors. That was the first big hedge fund scandal, and with each subsequent one the fallout seemed to get progressively bigger. It put businesses like ours firmly on the radar. Anyone even vaguely connected to the finance community knows you can’t get away with half-assing due diligence. It’s not a place to cut costs. To the contrary, it’s something that’s saved corporations and investors tremendous amounts of money.

For the most part, investors are getting their money from pension funds who are getting their money from private individuals. Knowing that our work isn’t just for some nameless, faceless corporation but ultimately for the common man is what keeps me going. There were charity foundations and other non-profit organizations that went down the toilet because of people like Madoff and Israel.

The industries most likely to report resume fudging are:

— FINANCE, 73%



— HEALTHCARE (more than 50 employees), 63%

— RETAIL, 59%

Source: Harris Poll for CareerBuilder

I dig up dirt on the wolves of Wall Street. Image 3.

Checks and balances

The average day for me has morphed over time as we’ve grown. Right now, it’s mainly spent doing two things. I like to be on both sides of the house. I deal with current and potential clients, selling accounts and servicing existing ones. I also have a hand in the production side, editing what we call “updates,” or briefs that we provide our clients while they wait for a final report, which can take four or five weeks to turn around. That keeps me abreast of all the developments taking place in the industry so I can talk about them more intelligently. Otherwise, I start to lose touch with the industry. The third thing I do is long-term marketing and systems strategy. I enjoy dealing with both customers and staff. Figuring out why a staff member isn’t performing as well as they could be, I don’t view that as a burden. It’s something I prefer over sitting through endless meetings.

We have a team of individuals who are responsible for nothing but the verification of academic and professional credentials. Then, we have another group of people who only do court searches and retrievals. There are also the people who look at the databases, and, finally those who put all of it together into a final report. We have editors. We have a sales team. We’re organized in such a way that there are a lot of checks and balances in place. There’s nothing that’s getting cleared by only one person.

We train our employees to uncover and make connections between various data points instead of just ticking boxes on individual items. We have to hire the right people from the outset. The training is both very specific and very continuous. We explain to our staff, “Your job is to try to understand what, if anything, could be a cause for concern that prompts the client to ask the subject a follow-up question.” It’s never just, “Please verify whether this is true.” The point is to tell a story.

Let’s say someone has a two-month gap on their resume. Nine times out of ten, you’d think they had some money saved up, took the summer off and found another job. But then we’ll find a PR Newswire announcement saying the person was hired at a different company that doesn’t appear on any of their resumes. We’ll call the company and they’ll say, “That person only worked here for two months”. Our employees take pride in finding and synthesizing information that others might have missed.

The most common embellishments and falsifications on resumes include:

— SKILL SET, 57%



— JOB TITLE, 34% 





In addition, people also lied about...  



Source: Harris Poll for CareerBuilderSociety of Human Resource Managers via Statistic Brain Research Institute


I dig up dirt on the wolves of Wall Street. Image 4.

Beggars should be choosers

I’ve been in this line of work since 1987. I grew up in New Jersey and went to Rutgers. I graduated in May and got hired in August. My studies were only loosely connected to my career. When I first got there, I looked through the course catalog, saw a criminal justice class, sensed it could be interesting, took it and loved it. I took the second class the next semester, but when I tried to major I was told, “Oh, those are the only two classes that we offer in the field. Sorry.” I ended up majoring in marketing.

After graduation, I was trying to figure out what I wanted to do with myself and that experience came up. I had an uncle who was an investigator for the Newark Department of Labor and always told very funny stories. That stuck with me. I then read this book called What Color Is Your Parachute? by Richard Nelson Bolles, and it also pointed to the criminal justice field. I started dialing up investigative firms in New York and New Jersey until I found one that would hire me.

In 1993, my partner and I left another company to start this one. We’d been working there for a while and, like any two young people, decided, “We can do this on our own. Let’s put our money where our mouth is.” Our initial premise has been borne out by twenty-some-odd years of results. You can be a successful, growing firm solely by focusing on high-level background work. You don’t need to do what most investigative firms do, which is take every case that comes to your door.

From the outset, we were turning down work. My late father-in-law—God rest his soul—told us, “You’re crazy. You’re starting a business. You should take any work you can get.” Our friends and family were skeptical. But our view was exactly the opposite. All that does is create a distraction. Our employees are trained to do this type of work. They’re not trained to do surveillance, or find assets, or uncover accounting flaws or any number of other types of investigative work. Nor are we equipped to produce hundreds of low-level employee reports.

The top 10 corporate scandals by the numbers: 

 BERNIE MADOFF, Bernard L. Madoff Investment Securities LLC. Madoff was accused of perpetrating a $65 BILLION Ponzi scheme and pled guilty to 11 charges of fraud. In 2009, he was sentenced to 150 years in prison. 

 &  KENNETH LAY AND JEFFREY SKILLING, Enron. Lay and Skilling ran the energy-trading behemoth into the ground with a series of skeezy accounting maneuvers, before Skilling abruptly resigned, cashing out $60 MILLION in stock. In 2006, Lay died of a heart attack while awaiting sentencing. That same year, Skilling was handed $45 MILLION in fines and a 24-year prison sentence.

 DENNIS KOZLOWSKI, Tyco International Ltd. Kozlowski made headlines for throwing his wife a lavish $2 MILLION birthday party on the company dime. In 2005, he was convicted of misappropriating corporate funds and is currently serving a 25-year prison sentence.

 JOHN RIGAS, Adelphia Communications Corp. Rigas was charged with hiding $2.3 BILLION in liabilities from investors and failing to record $3.1 BILLION in loans. In 2004, he was convicted of bank, wire and securities fraud and sentenced to 15 years in prison.

 JOE NACCHIO, Qwest International. Prosecutors allege Naccho illegaly sold $52 MILLION of the failing telecom company's stock. In 2001, he was convicted on 19 counts of insider trading and sentenced to six years in prison.

Source: Time Magazine


I dig up dirt on the wolves of Wall Street. Image 5.

Needle in a haystack

Two things have changed the industry dramatically in the last couple of decades. When I was first starting out, the computer was a lot less important than it is now and the internet was virtually nonexistent. We were sort of at the forefront of the digital revolution by accident. Back then, we did everything on the phone or on paper, calling up companies, extracting every little piece of data, compiling all that information into a cohesive narrative. It was incredibly difficult but gratifying as hell.

Now, that’s not difficult at all because most basic processes and tasks have been automated. What’s difficult is the exact opposite. There’s so much data on individuals, especially in the fields we’re covering—high level executives, hedge funders, employees of public companies, basically, people reporters like to write about. Think about it, most hedge fund managers are close to me in age: they’ve been working fifteen, twenty years and over those past fifteen, twenty years they’ve been getting news stories written about them three, four times a week. Add that up, and you’re looking at tens of thousands of items that we have to wade through. That’s tough. People think we just click a button in a browser, but that couldn’t be more wrong. It’s actually harder now than it was fifteen years ago to investigate someone because of the sheer volume of data we have.

Most people would think of the task of verifying someone’s work history as a very straightforward process. Where this falls apart is that there is a tremendous number of companies that are no longer in business or have merged. It’s not like most people work for IBM or GE. On top of that, people’s biographies are scattered in five or six different places. So they’ll have a LinkedIn profile, an article in The New York Times, resumes they’ve circulated among their professional connections, and so on. It’s about taking these different biographical streams and painting a picture. 

The other thing is that data is so permanent now. None of these profiles ever go away. I submitted my first resume to my first boss in early 1987. There’s no chance that resume exists anywhere. It got tossed in the trash, and that’s that. Now, this never happens, and I have yet to figure out why people aren’t more careful about sounding credible and consistent with what they put out there about themselves. Someone will post something on LinkedIn that they don’t include in their resume or vice versa, which is astonishing to me.

The volume of records, the permanency of data and the power of computing are the major changes to our industry. The reason why most of our competitors don’t do this work very well is it’s way too expensive to sift through all the archival material and, if you do, it’s time-intensive to identify or interpret certain minute details. It’s like looking for a needle in a haystack.

And, the list goes on...

 JAMES MCDERMOTT, JR., Keefe, Bruyette & Woods. McDermott, the high-rolling chairman and CEO of a Wall Street investment bank, leaked secret information about several pending bank mergers to his mistress, the Canadian porn star Kathryn Gannon. In 2000, he shelled out $25,000 in fines and spent five months behind bars on an insider trading conviction.

 SAM WASKAL, ImClone. Waskal, an immunologist turned entrepreneur, convinced Bristol Myers to purchase $1 BILLION of stock in his biotech company. When the FDA refused to approve its cancer-fighting drug Erbitux, Waskal alerted his pals, including domestic diva Martha Stewart, to dump. In 2002, he paid $4.3 MILLION in fines and tax restitution and served 87 months in prison for securities fraud, bank fraud, obstruction of justice, and perjury.

 SAM ISRAEL, Bayou Group. Israel, head of a Connecticut-based hedge fund, defrauded investors of over $450 MILLION—and famously faked his own death to avoid reporting for prison. In 2008, he got 20 years for fraud, with an extra 10 tacked on for his hijinks. 

 BERNIE EBBERS, WorldCom. Ebbers' telecom empire came crashing down when he orchestrated an $11 BILLION accounting scheme to cover up its massive debt. The company improperly reported $3.8 BILLION in expenses, in addition to issuing Ebbers a personal loan of $400 MILLION. Since 2005, he's been serving a 25-year prison sentence for conspiracy, securities fraud and making false regulatory filings.

Source: Time Magazine


Fudging is the new normal

I should be jaded by now, and yet I’m always surprised by the number of people who fudge their work and education history. And these aren’t unsophisticated people, for the most part. It reminds me of basketball. Most NBA players exaggerate their height because it’s been exaggerated for them by coaches and managers their whole lives.

In our society, people generally think it’s no big deal to exaggerate or misrepresent things on your resume. If you wanted to bore someone at a cocktail party, you could tell them you lied on your job application—it’s endemic. This isn’t specific to the banking and finance industries, it’s across the board. One thing to keep in mind is that there’s no use in demonizing this community of people. The reason most failed hedge funds fail isn’t because of lack of competence or integrity, but simply because they’ve made some investments that didn’t work out.  

No one should make the mistake of thinking that due diligence exists because people who work in finance are overwhelmingly bad people. That’s clearly an absurd claim. What I continue to be baffled by is why people continue to fudge their biographies and resumes knowing that it’s totally possible to learn whether those deceptions and omissions exist. That’s the thing I can’t quite put my finger on.