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11/16/2009
Kroll Hiring in Big Pharma Slap-Fight Brings Calls for Congressional Investigation
The bad blood between rival drug developers Amphastar and Momenta has bubbled over into public view. Questions over the firms' competing franchise for a generic version of the blockbuster blood thinner Lovenox has led to allegations of misconduct at the FDA, the hiring of a prominent security firm to investigate those accusations and the announcement of a Congressional investigation into the hiring of said security company.

Amphastar
and Momenta are both seeking approval to sell a their own version of the blood thinner heparin. While the companies are neck-in-neck for approval, Amphastar actually applied two years ahead of Momenta. The years of regulatory delays, while billions of dollars hang in the balance, have seen the competition between the two pharmaceutical companies turn decidedly ugly. Squabbling over the fairness of the FDA's drug approval processes has led to charges of favoritism.

Amphastar has gone so far as to file a complaint alleging that Momenta had received preferential treatment from Janet Woodcock, director of the FDA/s Center for Drug Evaluation and Research. The Amphastar complaint sought Woodcock's recusal from the proceedings, and cited supposed special access to Woodcock enjoyed by Momenta and the fact that Woodcock had co-autored a scientific paper with Momenta researchers during the period both companies were pursuing FDA approval for their generic version of the blockbuster blood thinner.

For its part, Momenta contends that the contact with the FDA has been appropriate and that Momenta has certainly lobbied the government to utilize a higher standard for approving a heparin generic - one that presumably Momenta would be able to meet, but Amphastar might not. The FDA has seemed responsive to Momenta's line of argument citing evolving science and the complexity of the drugs in question.

The FDA has defended its neutrality, noting that their calls for more details on immune reactions affected both drug makers.

Not content with the FDA's administrative investigation into Woodcock (the FDA will not even confirm such an investigation) Amphastar sought outside help from noted investigative firm, Kroll. That move has caught the attention of senators Max Baucus and Chuck Grassley. The two informed Amphastar of their probe in late September via a joint letter, citing concerns over a drug company hiring an outside firm to investigate a Federal regulatory agency.

We'll see what comes of it...

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8/05/2009
What Might Have Been - Kroll at One Time Vied for Stanford Recievership
It retrospect, this would have been bad:
...Antiguan authorities moved Friday to take control of Stanford's offshore bank, an action that could put the Caribbean island government at odds with the SEC. Antiguan regulators named British-based Vantis Business Recovery Service as a receiver for the bank that purported to have $8.5 billion in assets in December.

The SEC, which has installed its own receiver over Stanford Financial's US operations, says it can’t account for the money in the bank. The SEC and Antiguan officials could not be reached for comment. Vantis declined to comment. The little-known London-based firm is said to have beat out some better-known corporate clean-up firms for the job, such as Kroll.

It’s not clear if Antiguan authorities consulted with the SEC before making the pick. A person familiar with the Stanford investigation says for months Antiguan authorities were thumbing their noses at the SEC and rebuffing attempts by US regulators to get information on Stanford's offshore operation.

Not only is the Stanford investigation still unfolding. Now it seems it may get ugly too.
Ugly for more than just Allen Stanford, at this point.

-- MDT



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8/03/2009
R. Allen Stanford Point-Man, Tom Cash, Out at Kroll
Due to the controversy (and litigation) surrounding his connection to accused ponzi fraudster, R. Allen Stanford, Thomas V. Cash has stepped down from his position at Kroll. Cash had served as Kroll's Executive Managing Director in Miami. Cash's bio page on the Kroll website has already been removed.

-- MDT

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7/23/2009
That Was Quick - Make that TWO Stanford Investor Suits Filed Against Kroll
UPDATE: A colleague in the know has clarified something for me. Despite what the FT said, there are not two separate lawsuits. Rather, there are two complaints, one from Electri as we've previously described. The second complaint comes from National Electrical Contractors Association, which is the organization behind Electri. So to the best of my understanding - two aggreived parties, two complaints, one lawsuit.

Via the FT:
The allegations have also cast a light on the close-knit world of business advisory. Kroll, a risk consultancy firm, has been accused in two separate investor lawsuits of "gross negligence" and of misleading investors via a "clean report" on Sir Allen's operations in 2007, court documents show. Kroll has denied any liability.
Thanks to our friends at Flaneur de Fraude for the tip. They also uncovered this ironic comment on Stanford from author and Kroll investigator William Brittain-Catlin:

"I'm amazed by the way people were taken in by Sir Allen," says William Brittain-Catlin from Kroll, the risk consultancy, and author of Offshore: The Dark Side of the Global Economy. "There’s so much stuff out there that any one who wanted to do a cursory check would have seen. Various allegations have been flying around for years."

Ahem, yes. Well. That is certainly awkward.

-- MDT

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7/21/2009
Kroll Facing Lawsuit Over Alleged Negligence in R. Allen Stanford Review
You may recall the recent report in Vanity Fair magazine that highlighted the cozy, long term relationship between white collar fraudster, R. Allen Stanford and Kroll - one that involved Stanford paying the investigative firm millions, reportedly, to run interference with inquisitive regulators.

Kroll is facing its first lawsuit relating to the Sanford relationship, filed in Florida's Southern District Court. The complaint has been brought by Electri International, which lost millions investing in Stanford's Stanford International Bank only after hiring - you guessed it - Kroll to vet the deal.

Kroll reportedly issued SIB a clean bill of health in their review, which they claim was "limited due diligence" costing Electri in the neighborhood of $15,000.

Even more interesting, Electri's contact at Kroll in the matter was Thomas V. Cash, Kroll's managing director for investigations in Latin America and the Caribbean. According to Electri's complaint, Cash had been hired as a consultant by R. Allen Stanford in the late 1990s and Kroll never disclosed this relationship. Vanity Fair also named Cash as Kroll's point man with Stanford.

Kroll and Cash are keping mum about the particulars of the Electri lawsuit, but Cash did have this to say to the New York Post:
"I wouldn't believe everything I read in Vanity Fair because most of it's wrong."
Lets take him at his word for the moment and keep close eyes on Florida's Southern District Court.

-- MDT

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7/16/2009
Kroll Investigations, Amazon Book Reviewer?
Exactly why does "Kroll Investigations" have an Amazon reviewer profile? Strike anyone else as an oddity? Then again, the book does sound interesting.

-- MDT

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7/08/2009
More on the Kroll / R. Allen Stanford Relationship
Via Intelligence Online...

Subscription required (but worth your while).

-- MDT

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6/22/2009
Kroll, R. Allen Stanford and Beating Back the Regulators
A nice clip from Felix Salmon, citing this Bryan Burroughs article from the new issue of Vanity Fair (and I must say, that while I don't often read VF, their recent piece of Bernard Madoff was also quite excellent). The Key graph from the Burrough's piece, as it comes to Stanford and Kroll:
...says the former F.B.I. agent Burrough spoke with. "Kroll was essentially running a propaganda campaign in defense of Stanford's good name. They beat on me many times: 'Hey, you got this guy all wrong, he’s not a money launderer, he's a great guy, leave him alone.'
According to Burroughs, the Stanford account was worth millions to Kroll over the years. Allen Stanford was arrested and indicted earlier this month after a lengthy public preamble as well as several close calls from regulators over the years. He is currently in Federal custody.

-- MDT

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6/15/2009
NHL Hires Kroll to Investigate Would-Be Team Owner, Jim Balsillie
Got to hate it when former associates of your target start speaking on the record (negatively) about your interview calls:
...when recently retired Research In Motion vice-president Peter Broughall received a call from one of Kroll's investigators this week, he felt that the line of questioning didn't jibe with what he considered normal corporate protocol.

'If this is due diligence, I found it surprising that the line of questioning was not in line with trying to seek accurate positive information as well as negative,' Broughall says....

'If this is due diligence, I found it surprising that the line of questioning was not in line with trying to seek accurate positive information as well as negative,' Broughall says.

The investigator, who told Broughall that he represented the NHL, said he had been given his name by another former RIM employee. 'I was suspicious going in that this was not something sanctioned by Jim..."
More here...

-- MDT

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4/27/2009
Hennessee Group Fined on Bayou Hedge Fund Due Diligence Failures
Hennessee Group, a New York-based investment adviser is facing a $800,000 fine from the SEC due to the firm's failure to perform promised due diligence of the Bayou Group hedge fund, once run by eventual death-faking, scooter-riding fugitive from justice, Sam Israel.

Bayou, of course, was one of the biggest hedge fund flame-outs of all time, with many of the fund's major players doing jail time. The SEC complaint details about 40 Hennessee clients who altogether has about $56 million invested inthe Bayou fund.

Hennssee head, Charles Gradante has neither confirmed or denied wrongdoing in the matter. While he hasn't commented on the specifics of his own case, Gradante has submitted a letter to the SEC with a variety of recommendations for how other migh avoid Hennessee's fate.

Amongst Gradante's recommendations - increased reguation of hedge fund borrowing and requiring that third parties, such has Kroll, be hired to conductforencic audits of hedge fund financial statements. More here, via Bloomberg.

-- MDT

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4/21/2009
The Malaysian Insider Speculates on Rise in Corporate Fraud
Why yes, I am a regular reader of MI.

Not a lot new here, but look for comments from several investigative leading lights from that neck of the woods - Chris Leahy, managing director of Kroll's Singapore office and Lawrence Lai, from Ernst & Young Risk Advisory Services and Bob Yap, the local head of forensics for KPMG.

-- MDT

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4/20/2009
Kroll Announces San Francisco Office
Focusing on the Kroll Ontrack division and Kroll's Trial Services products.

- MDT

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4/14/2009
Federal Government Background Screeners Admit Fraud
Government reps are making it sound like no big deal - according to a recent report in the Washington Post, since 2007 six investigators working on behalf of the Office of Personnel Management, the agency that heads up background screening for federal jobs, have been charged with making false statements.

Three of the investigators were OPM employees. The three others were employed by government contractors: USIS and Kroll. One of these folks was convicted as recently as last week in Federal court in the District of Columbia. Dozens, if not hundreds of background checks have been admittedly falsified in these cases alone. Tip of the iceberg?

More at the Washington Post.

-- MDT

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3/27/2009
Yet Another Investigative Firm Establishes a DC Beachhead
HedgeCheck, LLC has announced a DC office and the appointment of two new directors to run the show - Natasha Cayenne-McCall, formerly of Lehman Bros. and Stacy Weiner, formerly of Kroll.

At least someone is hiring out there...

-- MDT

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3/03/2009
Doing Some Investigator Job Hunting?
Kroll is hiring in DC for their OPM contract.

-- MDT

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1/22/2009
Your Kroll Global Fraud Report For January 2009...
Is available here (PDF), for your reading pleasure.

-- MDT

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12/21/2008
Financial Times Features Jules Kroll
Just in case you were wondering what he's been up to since retirement.

--MDT

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12/02/2008
Kroll Lending a Hand With Express Scripts Data Breach Matter
Apparently some customers have been threatened with having their stolen personal data revealed unless they pay up. Kroll is assisting Express Scripts in running down the would-be extortionists.

-- MDT

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11/09/2008
Dismal Numbers for Kroll Parent Company
Profits for Marsh & McClellan fell 78% in the 3rd quarter of 2008. Earnings in Kroll's division were down 3.4%. Interested Kroll buyers, Marsh is apparently still interested in selling...

--MDT

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10/08/2008
The Dantes / Kroll Wiretapping Story Lands in the WSJ
See here.

- MDT

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9/25/2008
Kroll: Shadow-y Ballbusters
...as colorfully described on the notorious celebrity gossip website, Jossip.com, which seems to be somewhat celebrating what they are reporting as Kroll's investigation of the even more notorious celebrity gossip website, TMZ.com.

If Jossip is to be believed, a Kroll investigation of TMZ (complete with the forementioned shadowy ballbusting) has been bankrolled by fed-up celebrities tired of TMZ profiting from the exhaustive documentation of their human failings.

Please...someone - more details?

-- MDT

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9/16/2008
Kroll Asked to Tail Steve Jobs?
So says a new article from Portfolio Magazine which profiles Bob Brenner, head of Kroll's business intelligence group for the U.S. and Canada.

For the record, Brenner declined the Jobs-tailing assignment on behalf of Kroll. It had been requested by a hedge fund that wanted to get to the bottom of the Apple chief's seeming ill health...

-- MDT

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9/15/2008
Quarterly Kroll Fraud Report Forthcoming
Showing that the average company's losses to fraud are up 22% compared to the previous year. Watch this space for the download.

-- MDT

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9/01/2008
Kroll Hiring
If El Centro, California sounds good to you, here's your chance.

-- MDT

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7/31/2008
U.S. Marshalls and Asset Recovery
Cool piece from Bloomberg on this - had no idea.

Look for cameos and colorful anecdotes involving some of your fave white collar crooks.

-- MDT

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New Kroll Global Fraud Report is Out
This one focusing on investigations.

Nice.

You can download the PDF and get educated right here.

-- MDT

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7/21/2008
Job Hunting?
Kroll is Hiring in Washington, DC - background investigation work for the Office of Personnel Management. Salaried and work from home... not bad.

-- MDT

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7/13/2008
Stanford Calls on Kroll For I.D. Theft Protection After Data Breach
A little make-it-right goes a long way when it comes to exposing your students and faculty's personal data.

-- MDT

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6/16/2008
Jules Kroll Plans Retirement
July looks to be it.

-- MDT

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6/12/2008
Spying the Spyers
Good article from the Wall Street Journal on how the corporate world is getting a little bit wiser with regard to thwarting the increasingly commonplace threat of electronic surveillance. If you are in the market, several firms make cameos in the article include Kroll, Risk Control Strategies and Stratfor.

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6/03/2008
Nardello & Co. Picks Up DC Digs
Due diligence outfit Nardello & Co. is expanding their footprint a bit, picking up a larger presence here in Washington, DC. They've snagged former James Mintzer Ainsley Perrien to head up the DC office as managing director - just spitting distance from the FBI building and my olde stomping grounds at the National Archives.

Owner Daniel Nardello's name should be familiar to many of you as one half of a longstanding investigative partnership with attorney Bart Schwartz - the aptly named Nardello & Schwartz. The two parted ways back in 2006.

Perrien's
DC crew joins Nardello offices in New York, where Nick Peck (formerly of Gryphon Investigations as well as Kroll) runs the show. There's a third team in the UK.

Many thanks to our friendly tipster who picked up the story from the fine folks at Intelligence Online.

And good luck, Ainsley, with the new gig.

-- MDT

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5/13/2008
IPOC, Alfa and the Missing Multi-Millionaire
This IPOC story just gets weirder and weirder... Remind me to never, never get in a pitched battle over lucrative telecom contracts with very rich and very shady Russian businessmen.

Keep an eye out for a cameo in the article from the fine folks at Kroll as well as a brief recap of how Diligence LLC's ill advised involvement (and bad judgement) cost them some serious cash.

The IPOC tag below will also lead you to the full background, should you need it.

-- MDT

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5/08/2008
Kroll Ontrack Decifers Space Shuttle Columbia Hard Drive
Here's a fascinating piece on some fine and admirable work from Kroll Ontrack - salvaging the scientific data on a hard drive recovered from the wreckage of the Space Shuttle Columbia.

The Columbia broke apart during re-entry into Earth's atmosphere on February 1, 2003. Of the seven crew members there, sadly, were no survivors. A hard thing...

Ontrack was able to preserve much of the contents including data on a test of how xenon gas flows in a zero gravity environment.

Pretty darn impressive for a hard drive that literally fell out of the sky...

-- MDT

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Marsh & McLennan to Break Up Kroll?
That's the word on the street... And there's a hot prospect waiting in the wings.

-- MDT

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5/06/2008
Kroll in Embarassing Work Product Mix-Up?
Could'a happened to anyone...but it sure does suck when it happens to you.

-- MDT

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4/28/2008
FCPA Compliance is Big Business
Interesting article from WaPo on the rise of Foreign Corrupt Practices Act compliance consulting. Keep an eye out for investigator cameos from Michael Hershman of the Fairfax Group and Dan Karson of Kroll as you take it in.

Good stuff.

-- MDT

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4/08/2008
Five San Diego Officials Face Fraud Charges
This is more fall-out from the seemingly endless audit of the city and its attendant pension scandal. The SEC has brought charges against five former San Diego officials - City Manager Michael Uberuaga, former Auditor Ed Ryan, former Deputy City Manager Patricia Frazier, former Treasurer Mary Vattimo and former Assistant Auditor Teresa Webster. Further details here.

-- MDT

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2/22/2008
Live in Charleston? Kroll is Hiring
You'll be working for Kroll Government Services on the company's background check contract with the Office of Personnel Management.

Also, the fine print:
Contractors are not employees of Kroll and are paid on a work-completed basis.
Benefits are not included.




-- MDT

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1/22/2008
Kroll Updates Global Fraud Report
This time the focus is on intellectual property protection. Counterfeiting, piracy, theft of trade secrets - if these concerns knot your brow at night, the latest Kroll Global Fraud report is worth a look. You'll find equal parts Kroll-in-action international vignettes combined with a variety of process-oriented recommendations meant to tighten up your business practices.

-- MDT

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1/10/2008
Live in DC? Kroll is Hiring
Looks like Kroll is picking up some new folks to help fulfill their background investigation contracts with the Office of Personnel Management. If you've got some experience (interviews, courthouse searches, database) and live in DC, the application details are right here.

--MDT

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12/18/2007
Portfolio Covers Spies n the Corporate World
Really interesting stuff here from Conde Nast Portfolio (great magazine, even better website) on the movement of government spooks into the private sector. This article is an absolute must read.

Included in the piece is big coverage of the recent shenanigans at Wal-Mart along with name-checks of spy-heavy investigative outfits like Diligence LLC, GlobalOptions, Trident Group, Kroll and Business Intelligence Advisors.

You'll see reference to many of the recent scandals that have been attached to these names (and covered in this space - click the tags below for past Daily Caveat coverage). You'll also get a bit of history on how spooks came to find their way into the private sector.

Again, highly, highly recommended reading...

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12/11/2007
A Little Update on Kroll's Recent Foray into the World of Motorsports
Here's a break-down of the full FIA report from someone who cares about racing a whole lot more than I do.

-- MDT

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12/09/2007
Kroll, India Hiring
If you're in the market.

-- MDT

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12/05/2007
Diligence IPOC Mess Deepens With Internal Dissention and Another Prominent Investigative Firm on the Scene
This quagmire seems to get nothing but deeper...

The Diligence / IPOC story is a convoluted one, but at the meat of it are two Diligence investigators who apparently pretended to be British Intelligence operatives in order to pump KPMG emplyees for information on an onging money lanudering investigation into the Bermuda based, Russia connected IPOC International Growth Fund.

Diligence was subsequently sued by KPMG alleging bribery, deception, and computer hacking. Diligence was also sued separately by law firm, Barbour Griffith & Rogers, their apparent client in this mess. BG&R had reportedly hired Diligence on behalf of the Alfa Group, an entity competing against IPOC for control of lucrative Russian telecom business.

Meanwhile, a lawyer representing IPOC made claims that another investigative firm, Kroll, had broken into the email of Bermuda law firm, Wakefield Quin, seeking data on the matter. While this claim was ultimately unsubstantiated, Kroll WAS also active in the matter - not in Bermuda, but rather in Europe.

Kroll's IPOC involvement was confirmed by the chair of a Geneva audit panel charged with making decisions about whether IPOC or the competing Alfa Consortium would end up with the rich prize of OAO MegaFon telecom shares - worth about $2.5 billion (and you wondered what all the fuss was about...). Kroll is (was? - need to check on this) currently under investigation by Russian authorities due to their activities in the case.

But I digress. Back to the (relative) here and now. Let's let Law.com do the talking:
Diligence’s problems began in earnest in September 2005. Court documents show that the company accused its then-chief financial officer, Igor Alexeev, of stealing internal documents, directing employees to erase data from Diligence computers, and encouraging workers to leave the company. Nick Day, Diligence’s CEO, fired Alexeev on Sept. 28.

Weeks later, a sheaf of Diligence e-mails appeared at the offices of accounting firm KPMG in Montvale, N.J. The messages detailed an operation straight out of a John le Carré novel. (The document drop and details of the operation were first reported by BusinessWeek in February.)

Posing as British and American intelligence agents, Diligence operatives infiltrated a KPMG office in Bermuda, according to court papers. The goal: to get their hands on a draft audit KPMG had conducted on IPOC International Growth Fund.

The audit contained potentially damaging financial information that could be used against IPOC in a high-stakes fight over control of Megafon, a $1.5 billion Russian telecom.

Diligence had been hired by Barbour Griffith, which, in turn, had been hired by Alfa Group Consortium, a Russian conglomerate, to turn up dirt on IPOC. Alfa was also battling for Megafon and would later use the information from the audit against IPOC in an arbitration over Megafon’s ownership.
Officials at Diligence were virtually certain, according to media reports, that Alexeev had burned their investigation and tipped off KPMG. Claims and counter claims were filed between Diligence and Alexee and the whole thing turn ten shades of ugly, even as the ramifications of Alexeev's alleged leaks took their toll on the company.

Currently the whole mess is in arbitration, which is where the story takes another interesting turn...

Lawyers for Diligence have subpoenaed any communications between Alexeev and Terry Lenzner, head of the DC-based Investigative Group International. The material turned over so far suggests that Winston & Strawn hired IGI to assist in IPOC’s lawsuit against Diligence. Well slap my face and call me Aunt Sally... Beat that for your scandal dollar: Diligence, Kroll and IGI all wrapped up in one tangled international mess.

Check out the full Legal Times article for expanded details. There is also a load of past reportage relating to IPOC available via the TAGS below.

-- MDT

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Blogger PIAVAsaid...
Well, I'll be dang--Round up the usual suspects!

Tack this on to the Seattle indictment of the 10 private investigators by USDOJ.

Indictment is at http://www.piava.wordpress.com.


Geezzzzz.

Bill Lowrance
President PIAVA
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10/26/2007
The Guardian Interviews Jules Kroll
The Kroll patriarch always gives a good interview and this is no exception. Fun family anecdote: draftig his mom to work a surveillance gig in the early days of the company. Check out the Kroll interview here.

-- MDT

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9/26/2007
Kroll Releases New Report on Business Fraud Worldwide
In keeping with the morning's corruption theme, investigative juggernaut Kroll has released its 2007 report outlining the effects of fraud on global business. The report, drawing on work by the Economist Intelligence Unit, publishers of The Economist magazine, indicates that four of five companies worldwide are effected by fraud. To dig a little deeper, check out the report synopsys or just download the whole darn thing.

-- MDT

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9/11/2007
Hard Times for CFOs Mean Boom Times for Forensic Accountants
Really nice, if brief, article on gumshoe accountants from Financial Week. Look for notable quotes from William Keevan, a senior managing director from Kroll. In addition to being the most prominent corporate investigative firm in the world, Kroll is also one of the big four forensic accounting firms, along with Navigant Consulting, Huron Consulting and FTI Consulting.

Joe Bartling at FTI is a great fellow, I can certainly vouch for that.

-- MDT

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7/11/2007
U.S. Regultors Ramping Up Prosecution of Foreign Firms
A recent Kroll report, cited in the FT shows a trend of the U.S. Department of Justice going after an increasingly broad array of foreign firms based on corrupt business practices. The traditional real of these probes would be oil companies, defense contrractors and the like, but the field of pursuit has widened considerably over the period from 2000 to 2006 to include telecom companies, pharmaceutical and consumer products manufacturers. Check out Kroll's press release and take a look at the full Kroll report right here.

-- MDT

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6/26/2007
IPOC, Diligence, Kroll -- Oh My!
We've written extensively in the past on the Bermuda-based end of the scandal surrounding the IPOC investment fund, KPMG and investigative firm, Diligence. Diligence got caught with its mits in the cookie jar trying to pry sensitive information about an IPOC audit out of KPMG. Kroll, probably the most prominent investigative firm around, was also at least implicated in the back-and-forth clandestine activities between the two sides in the IPOC dispute.

Kroll WAS also active in the matter but not in Bermuda - in Europe. The EU-based accusations (dumpster diving, attempting to access private bank accounts) come from Bernard Meyer-Hauser, chair of a Geneva audit panel charged with making decisions about whether IPOC or the competing Alfa Consortium would end up with the rich prize of OAO MegaFon telecom shares - worth about $2.5 billion. Kroll is currently under investigation by Russian authorities due to their activities in the case.

The back-story here is, well.....complicated. Law.com has an excellent overview of the entire affair, from start to finish. This is required reading.

-- MDT

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5/01/2007
Kroll Investigator Goes Fishing in Hong Kong, Gets Hooked
Here's one from the vaults...

An interesting post that I only just ran across from former investment banker David Webb who now runs Webb-site.com, which comments on "corporate and economic governance, business, finance, investment and regulatory affairs in Hong Kong."

On his site, Webb describes at length how, back in 1999, he was able to out a Kroll investigator who, using the pretext of a Seattle-based journalist, was attempting to gather information on a Hong Kong development project.

While I am not sure that Kroll's interest in Mr. Webb's commentary ultimately reflected the "startling implications for press freedom in Hong Kong" that Webb implies, it is interesting to review how things went down. (NOTE: Email headers are not private...).

The silly thing is that Kroll used a pretext at all. You'd think that simply asking the guy might have worked better...

Anyway...not exactly a hot off the presses story, but a cautionary tale for your friendly neighborhood investigator.

-- MDT

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2/11/2007
UK's Guardian Profiles Simon Freakley, CEO of Kroll
The Observer's profile of Kroll CEO, Simon Freakley is a nice piece, overall. Not exactly hard-hitting journalism mind you but interesting nonetheless. The mag uses Brit, Freakley as a local-angle excuse to examine Kroll and how the company has diversified its business in recent years beyond its core investigative and security enterprises. Well worth a read...

-- MDT

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1/03/2007
Busines Schools Turning to P.I.s to Fact Check Resumes
It seems the dishonest habits we often seen displayed in business don't originate there. BusinessWeek does a follow-up on how an intern helped investigative giant, Kroll, break into a new market - college admissions. That Kroll intern, by the way, was Brian Lapidius, who is now Kroll's vice-president for strategic development at the background screening division.

-- MDT

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12/22/2006
Holiday Reading Recommendations from a P.I.
Not from The Daily Caveat, though. In this case the P.I. in question is one Betsy Blumenthal, a Senior Managing Director for Kroll (perhaps you've heard of them?) based in their San Francisco office.

She confided a few of her book-of-'06 picks to the Berkeley, CA-based Ghost Word literary blog. Scroll about halfway down this post to see Mrs. Blumenthal's recommendations - that last minute something for the corporate P.I. on your list.

-- MDT

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10/31/2006
More from Jules Kroll...On Pretexting, Databrokers, Etc.
Lots of stuff from Jules the last few days. Check out his further comments on pretexting (for phone records) and the under-fire data broker industry. A snippit:
“Data brokers have become a very big factor in the last ten years. They are in the business of obtaining data in any way they can. They are at least three or four steps down the food chain from us. It is a business we chose not to go into,” the Kroll chairman said.

“Those people who are legitimate investigators and have followed the rules of the road over the last ten years have been greatly disadvantaged by these brokers.”

Mr Kroll believes that the data brokers are giving his industry a bad name, luring potential customers away from mainstream companies and exposing clients to illegal activity. “I think what you should see is federal legislation against these people,” he said.
I couldn't agree more...

Here's The Daily Caveat's take from back in January '06 on the whole phone records issue, which has frankly been brewing for many months. Also, some more recent thoughts on the recent HP debacle. We've covered the issue extensively so search the site for a plethora of related articles.

-- MDT

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10/29/2006
Jules Kroll on the HP Pre-Texting Fiasco
Speaking of Mr. Kroll... Here's an article well worth reading where he describes how he would have suggested handling HP's investigation of high-level leaks, had his firm been involved. Here's the best bit:
"If you read Patty Dunn’s testimony to Congress, she recommended to her general counsel that he hire Kroll,” Mr Kroll says with a grin. “But he did not do that..."
Ever the showman.

Read on, here.

-- MDT

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Big News on the Horizon - Kroll Thinking Buyback?
Back in 2004, Kroll, the world's most prominent corporate investigative and security firm was acquired by mega-insurer, Marsh & McLennan, for a cool $2.billion. This was ironically, just in time for MMC's own explosive financial scandals, (you know, the sort of things that fuel bread and butter work for your friendly neighborhood corporate P.I).

Just two years later, there is scuttlebut that Kroll execs may be thinking about buying back ownership of the firm founded back in 1972 by former New York assistant district attorney, Jules Kroll. Ans this isn't the only talk about divestitures at MMC. Putnam Securities is already up for sale and there is talk that Marsh will end up being further dissected.

Anything happening at Marsh is big news in the business world. And anything happening at Kroll, well thats big news for investigators. So far Jules Kroll has personally denied that a buy-back in the works, but time will tell.

-- MDT

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10/16/2006
The Telegraph Covers Corporate Spooks (Politely, Thanks)
Quite a good article, here, from The Telegraph - for whatever reason the UK press always takes a more educated and friendly tone when reporting on corporate P.I.s. In this case the two firms featured are Diligence and Kroll in a discussion of the new due diligence recommendation currently being drafted for London's AIM stock exchange.

I highly recommend you give it a look, for another side of the P.I. world, one that you won't get from the endless permutations of the HP scandal being turned over elsewhere in the business pages (not that Diligence or Kroll have entirely sterling choirboy-like reputations, mind you, but lets focus on the positive).

As the article makes clear, both firms have found great success in doing great and subtle work on their clients' behalf - work that falls well within the bounds of the law and adds great value to the business process by enhancing the information available for decisionmaking and ensuring transparency in business transactions.

Thomas Helsby, who heads up a bundle of Kroll's international operations describes it quite eloquently in the article:
"What we do isn't secret, it is not even unique. At its most fundamental we deal with problems and opportunities, such as supporting lawyers in civil litigation cases. We investigate internal fraud and corruption. We may be working to recover assets or money obtained in a judgment..."There are only two ways information comes to you – through your ears and through your eyes. You ask, 'Who is going to know the information I am looking for and what is the basis on which he can reasonably share it with me?' Most of the time there is someone who knows who has a good reason to share it with you. It is about working out who they are, where they are, and the best way to talk to them."
Read on.

-- MDT

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9/12/2006
Investigative Firms are Still Finding Bounty in Checking Out Hedge Funds
This recent Pittsburgh Post Gazette article has the details...

As usual, I am always somewhat surprised by what firms get mentioned in these types of articles on corporate investigations. Sure there are the usual suspects, like Kroll, which deserves by virtue of its sheer size, mention in any such article. However, there are always firms I'm unfamilair that show up, while other prominent and well known players don't merit a mention. The article is interesting, to me at least, in these sense that it shows how quickly new investigative turf can become commoditized.

Most of the firms featured in the article as gp-to Hedge Fund vetters do what I think of (perhaps unfairly) as "chop shop" style work. These types of vendors do a volume-based business, predominately operating on a stripped down check list approach to investigation. Rather than trying to be truly comprehensive, they work on the law of averages that nine times out of ten their cut-rate, limited approach won't miss any outlying or obscure details that would be an issue for their clients.

Now based on my background, I am simply biased against this approach. But then, from my first day in the business I was steeped in the practice of "bespoke" investigations, each project and budget tailored for the specific needs of the client. Now, certainly I've worked on a shoestring from time to time and overperformed for the sake of retaining a client who might beget more work, but I'll never be convinced that a checklist is the best way to conduct an investigation.

Then again, these firms appear to be doing quite well. Clients? They like checklists. And they like cheap, too.

-- MDT

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8/24/2006
Kirk Wright Update - NFL Players Suing League, Background Checkers, Wright's Possessions Sold at Auction
Ahhh, Kirk Wright, America's favorite hedge fund fraudster. The Seven NFL players he swindled, including Marc Coleman, Steve Atwater, Ray Crockett, Al Smith, Blaine Bishop, Carlos Emmons and Clyde Simmons have been doing their level best to get their lost $20 million back, including suing Wright, the NFL, the players' association and anyone else who gets in their way.

The NFL players' association apparently endorsed Wright as an investment advisor through their Registered Financial Advisor Program was "started in 2002 to protect former, current and prospective NFL players from financial fraudsters and con artists" (even though he had outstanding liens against him and lacked professional liability insurance).

The latest version of the complaint has the players pursing satisfaction from two new defendants, ABC Corp. and XYZ Corp. The suit describes those entities as "John Doe" companies who are unknown to the plaintiffs, but were tasked to perform background checks for the NFL and NFL players' association.

Now wouldn't The Daily Caveat like to know which companies those would be? We do know that Kroll was tasked with tracking Wright (and his stolen cash) down, for whatever that's worth.

The NFL, for its part, is also in the crosshairs, but claims that the players bear sole responsibility for their finances. The League is asking for the suit to be dismissed and the NFL players' association is taking a similar tact. Both entities contend that they player contracts state that, in any case, arbitration - not litigation - is the remedy specified in player contracts. How the league will explain away the apparent total negligence of giving its endorsement to known fraudsters is a separate issue.

Meanwhile, with most of the $185 million that Wright swindled from investors still missing, his property is being put up for auction. Wright himself was arrested by the pool at the Miami Ritz Carlton (clearly having seen the error of his ways, of course) back in May and is cooling his heels while waiting for the myriad civil, criminal claims and charges against him to come due.

Couldn't happen to a nicer guy.

-- MDT

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8/10/2006
Kroll San Diego Audit Report is Finally Out
Better late than never, I guess, for the nation's biggest P.I. firm. Check our The Jurist for a quick run-down of the findings.

-- MDT

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8/03/2006
Kroll Worldwide Hires New York City Official
From the press release:
Senior Criminal Justice Official for NYC Mayor's Office Joins Kroll

Press Release
August 1, 2006

Richard Plansky, formerly the Deputy Criminal Justice Coordinator for the Office of the Mayor of the City of New York, has joined Kroll, the global risk consulting company, as a managing director in its Business Intelligence & Investigations division.

Based in Kroll's head office in New York, Plansky is responsible for corporate investigations, fraud prevention and detection, and integrity due diligence.

Plansky, a 14-year veteran of the criminal justice system, has led complex investigations involving sex crimes, homicides, police shootings, larcenies, and other serious crimes. Most recently, as Deputy Criminal Justice Coordinator, he oversaw the development of multi-agency criminal justice initiatives, including a comprehensive program targeting the distribution and use of illegal guns. He also developed the John Doe Indictment project, a citywide effort to preserve unsolved sex crimes for later prosecution through the use of DNA technology.

Plansky began his career as an assistant district attorney in New York County where, from 1992 through 2001, he prosecuted 30 Supreme Court trials and conducted more than 150 grand jury presentations and investigations. He subsequently served as assistant general counsel at the City University of New York, where he led extensive investigations involving allegations of organized cheating and identity theft, as well as student and faculty misconduct.

In 2002, Plansky was appointed special counsel to the Mayor's Criminal Justice Coordinator, and was promoted the following year to general counsel and director of the Mayor's Office of Midtown Enforcement. In this role, he oversaw all legal affairs, formulated quality of life enforcement strategies, and developed and coordinated a wide spectrum of criminal justice programs, including an initiative to combat large-scale trademark counterfeiting establishments.

Plansky received his Juris Doctor, magna cum laude, from Harvard University.

More on Kroll, here.

-- MDT

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8/01/2006
Vermont's Rutland Herald Profiles P.I.
Not a one represented from one of the larger corporate firms, like Kroll, IGI, Control Risks, The James Mintz Group, Global Options, Gryphon Investigations or Diligence to name a few. Even so, the piece provides an interesting look at cross section of P.I.s and their work, from cheating spouses and insurance fraud to due diligence and litigation support. Worth a look.

-- MDT

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7/24/2006
Investigator Steve Rambam of Pallorim Arrested for Impersonating a Police Officer
Seldom do we really get the opportunity to dig in and write about corporate P.I.s at The Daily Caveat. Sure the blog is for and about corporate investigations, but normally our bretheren in the industry move quietly behind the scenes to get the job done (well, ok, other than Kroll, that is). More often than not it is the cheesy Hollywood P.I.s, or stern grandfatherly ex-Cop types who make the news. So consider it no fun to write about a corporate P.I. geting snagged by the FBI...

Steve Rambam of New York's Pallorium, Inc., which bills itself as an international investigative firm, was arrested today as he was about to give an address at a computer hacker conference. FBI agents escorted Rambam from the hall just moments before his presentation was to begin in relation to charges stemming from Rambam allegedly posing as a law enforcement officer to extract information from an informant. How Rambam will answer the charges remains to be seen. More here.

UPDATE: Check out the Washington Post story, with additional details on Rambam's arrest. And more on the hacker conference he was attending, from Wired.

-- MDT

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7/20/2006
San Diego v/s Kroll
This story and been going on a loooooooong time. Like, when dinosaurs roamed the earth, long. We haven't covered it much at The Daily Caveat because, frankly...where to jump in? It goes something like this: Once upon a time in a sunny land beside the sea called San Diego, the mayor and cit council retained the services of Kroll, a risk management company that also happens to be the largest investigative firm around. Kroll was supposed to help San Diego with an investigation and audit into mismanagment of the city's finances. And, well, somewhere after that point the story goes off the rails and we're still waiting for the happily ever after. San Diego's City Beat has as good a run-down of the story that you are likely to find, and pithy to boot. And if you are curious about that private CIA comment, read about it here.

-- MDT

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7/13/2006
Was FBI Pressure a Factor in Coulbeck Suicide?
Scotland's Daily Herald (among others) is reporting that harrassment from the FBI may have been a factor in the apparent suicide death of Neil Coulbeck, a former Royal Bank of Scotland employee who has been widely cited as a key source in the investigation of the three former bankers and their apparent ties to the Enron fraud.

The wholse scenario is shades of the Abbey National / Richard Chang case of almost exactly one year ago. Quite eerie, actually. In related news, apparently the NatWest three have touched down in the colonies. Friend of The Daily Caveat, Peter Henning has the details over at The White Collar Crime Prof. Blog.

-- MDT

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Was FBI Pressure a Factor in Coulbeck Suicide?
Shades of the Abbey National / Richard Chang case of almost exactly one year ago. Quite eerie, actually. In related news, apparently the NatWest three have touched down in the colonies. Friend of The Daily Caveat, Peter Henning has the details over at The White Collar Crime Prof. Blog.

-- MDT

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2 Comments.
As the youngest sister of Richard Chang I believe that the truth relating to Richard's death has still to be revealed.
Vital evidence relating to the Metropolitan Police's investigation into the death and the selection process by Abbey Management of suspects has been withheld from the Chang Family by the Metropolitan Police. It is quite shocking that one of the explanations given by the police is because of the existence of commercial confidentiality between themselves and Abbey National. We are calling on the public to please support our campaign www.justice4richard.co.uk
Anonymous Anonymoussaid...
Today is Saturday 3rd November 2007 and the newspapers are full of things relating to wronful police action regarding the killing of Jean Charles de Menezes. It is very sad the UK police could not help Richard Chang or his family and that Neil Coulbeck suicide is as unlikely as that of Richard Chang. SFO/3/C/920 and 9/11 to be addressed soon.
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6/04/2006
Kroll Not Licensed in Russia, Or Simply Guilty of Having the Wrong Friends
Regulatory snafu or poltitical payback - either way the result is a headache for the world's largest corporate investigative firm. Kroll is under investigation in Russia for alledgedly operating without a license. While the company has declined to comment on the accusations and the ongoing investigation (the company has maintained a Moscow office for more than ten years), some have speculated that the companies ties with Russian telecom magnate, Mikhail Friedman have led to the the firm being targeted for reprisals. Friedman, who heads the Afa Group, has been involved in a contentious legal battle over the Alfa Groups's holdings in the telecom group Megafon, reportedly hired Kroll to investigate Russia's telecom minister. Just the kind of thing that can get you on the wrong side the the state beaurocracy, it would seem.

More here, from The Times Online.

-- MDT

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5/18/2006
People Applying to Nonprofits Most Likely to Lie on Resumes
While they aren't hit as hard on crimiinal backgrounds as other employment sectors, non-profits do apparently face a significantly higher probability that potential employees with lie, exaggerate or otherwise dissemble when when presenting their resumes. No doubt this results in part because non-profits are obviously the least likely to expend precious resources fact-checking resumes:
Of 16 industries ranging from construction to technology, people applying in the nonprofit field during 2005 were most likely to provide false or inconsistent information about their education, according to Infolink Screening Services, a background-checking business in California and a unit of New York's Kroll.

The "hit ratio," as the company describes it, was 21.7 percent for nonprofits, while the average for all industries was 14.1 percent. Applicants for nonprofit jobs also led the way in problems with past-employment verification, which was nearly 10 percentage points higher than the average.
One hopes, at least, that non-profits exercise more discretion when it comes to investment decisions effecting their endowments.

More here, from the New Jerey's own, Star-Ledger.

-- MDT

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5/02/2006
Former SEC Enforcement Officer Joins Kroll's San Fran Office
From the press release:
Senior SEC Enforcement Official Joins Kroll's San Francisco Office

May 01, 2006
BUSINESS WIRE

Kathleen Bisaccia, former assistant district administrator for the U.S. Securities and Exchange Commission's Division of Enforcement in San Francisco, Calif., has joined the San Francisco office of risk consulting company Kroll Inc. As a managing director in its Business Intelligence & Investigations division, she is responsible for conducting corporate internal investigations in all areas of the federal securities laws, including financial reporting, Sarbanes-Oxley compliance, and the Foreign Corrupt Practices Act. Bisaccia will also oversee projects involving due diligence and other regulatory issues.

Bisaccia began her career at the SEC in 1991, when she joined its Los Angeles office as a staff attorney. She subsequently served as branch chief for four years, and following a move to the San Francisco office, as senior counsel and branch chief. Most recently, in March 2005, she assumed the senior position of assistant district administrator. In that capacity, she supervised enforcement managers and staff in all aspects of complex securities law investigations and litigation, including strategy, legal analysis, evidence collection and analysis, case planning, and evaluation of legal theories. Bisaccia also served as director of equities enforcement at the Pacific Stock Exchange in early 2000...
More here.

-- MDT

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4/09/2006
Another Investigative Firm in Hot Water in Bermuda's IPOC Investigation?
Via The Royal Gazette:
Law firm denies allegation of e-mail system break-in

Bermuda Royal Gazette
by JONATHAN KENT
April 07. 2006

A CLAIM has been made in court evidence that an international detective agency broke into the e-mail system of Wakefield Quin – but the local law firm has categorically denied that there is any evidence of that. The allegation surfaced in a secretly-filmed video tape that was admitted into evidence in a civil case related to the IPOC International Growth Fund.

A senior counsel of Wakefield Quin referred us to Alan Dunch, the lawyer acting for the firm in connection with the IPOC litigation and investigation. "Having been made aware of the allegation that Wakefield Quin's computer network had been breached, a full investigation was undertaken," Mr. Dunch said yesterday. "No evidence whatsoever was unearthed that would in any way substantiate the allegation." He declined to comment further.

The allegation was made by Jeffrey Galmond, the Danish lawyer who runs the Bermuda-based IPOC Fund, in the course of a conversation with a former business associate, James Hatt. "You know Kroll broke into the e-mail system of Wakefield Quin," Mr. Galmond told Mr. Hatt. "They are very good, I must hand it to them, they are very good, right?"

The conversation took place at the Ritz Hotel in London on September 6, 2004, and Mr. Hatt filmed it without the knowledge of Mr. Galmond. We contacted the global headquarters of Kroll in New York, but they offered no comment for our story. However, an industry source suggested that the company had not broken into Wakefield Quin's e-mails...
More here.

-- MDT

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4/05/2006
More on Kroll's Investigation of Fraudulent Kirk Wright Hedge Fund
It had been announced a few weeks abck that Kroll had been called in to track down Wright and the now "dissipated" assets of his former hedge fund, International Management Associates. While the agreement to hire the investigative juggernaut is still awaiting approval by the court, this Rocky Mountain News article provides some additional details regarding the ongoing case.
Kroll's on the case - Famed private eye may help find missing hedge fund millions

By James Paton
Rocky Mountain News
March 24, 2006

...Kroll Inc., whose sleuths could receive up to $450 an hour, has been asked to search for the assets of International Management Associates, an Atlanta firm, according to court documents filed Thursday. An agreement to hire the high-profile investigator awaits court approval.

Federal regulators have accused the company and its founder and Chief Executive Kirk Wright of hiding "massive" losses from investors after reeling in as much as $185 million from hundreds of people, including a few one-time Broncos, prominent doctors and others.

Nearly all of the cash has vanished, according to the lawsuit filed by the Securities and Exchange Commission. The allegations came on the heels of a complaint leveled by former Broncos Steve Atwater, Terrell Davis and Ray Crockett, and current wide receiver Rod Smith.

They sued after the hedge fund firm refused to return their money and claimed that Wright had made a big bet short-selling stock of Time Warner even though he had promised not to take on that kind of risk. Efforts to reach the players have been unsuccessful.

International Management told investors that its Taurus Fund rose 20 percent last year, while in reality the assets of the fund and other products "had been largely dissipated" by 2005, the SEC said...

...Wright, the Harvard-educated head of International Management, took money from the hedge funds and made more than $6 million in investments in several real estate ventures and bought a Jaguar, a Bentley, an Aston Martin and other cars, in addition to $600,000 in art and jewelry, SEC papers show...

...Kroll, founded by Jules Kroll and based in New York, declined to comment on the hedge fund case.
More here in the full article.

-- MDT

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3/28/2006
More on Fugitive Hedge "Fiend" Kirk Wright
Leave it to the New York Post to come up with something like "hedge fiend." But the shoe apparently fits for Kirk Wright, formerly of supposed hedge fund, International Management Associates, and late of the lam. Wright skipped town after it became clear to many of his clients, which include several prominent National Football League players, that something was amiss with Interntaional Management's "management" of their money. Subsequently investigative giany, Kroll was brought it to help track the $100 million plus is missing assets and Wright himself. The New York Post has further details on the continuing story, with a particular Postian emphasis on the lavis lifestyle Wright made for himself at his client's expense.

-- MDT

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1 Comments.
Anonymous Anonymoussaid...
"hedge fiend" as applied to Kirk Wright is actually a complimentary reference, as compared to what the man really is, whose true description would probably be censored on this blog.
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3/13/2006
A London P.I. Cocktail Party...Hosted by Who Else But Kroll
The amusing details, via The Telegraph. A snippit:
"...This drinks and canapé reception in an unassuming little room might have been entitled The Secret Policeman's Other Ball, if Monty Python and Rowan Atkinson hadn't thought of that name for Amnesty International events 25 years ago...

...It's a private eye for an eye in a crowded room at the London nightspot Sketch, supposedly filled with corporate investigators. At least I think it is. I have been invited into this darkened space by Kroll, the world's largest corporate investigations firm, but, as I am about to discover, you can never tell anything in the mysterious world of private sleuths..."
Pithy, no? Read more.

-- MDT



-- MDT

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3/07/2006
Speaking of Kroll...
...as the preceding article did at length - the investigative giant has announced the purchase of California-based Infolink Screening Services.

Kroll as also been installed as the liquidator of failed hedge fund, Philadelphia Alternative Asset Management (PAAM, to you and me.) Form more on the PAAM flame-out and how Man Financial fits into the picture, click here.

-- MDT

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Higher Profile for Corporate Sleuths
While I take some minor exception to the implication that corporate P.I.s spend the majority of their time rifling through dustbins, the essential truth is the same - our industry is growing, our client base is expanding and our public profile, for good or ill, is inching ever higher. And dustbins... they CAN be useful:
Sleuths step out of the dustbins and into the limelight

By Liz Chong
The Times
March 04, 2006

Companies may not admit using them, but private investigators have gained acceptance. Their clients include governments, leading investment banks, hedge funds, private equity houses and FTSE 100 companies, but few would admit that they have ever hired corporate detectives, let alone met any. It would be too embarrassing to reveal that a company had enlisted the help of a private investigator to dig up the dirt on an opponent or client, or disclose that they had been duped by an employee or partner...

...business investigation and intelligence is on the rise, driven by an array of legislation introduced by the US Congress in an attempt to clean up corporate America. The laws impose heavy duties on directors, accountants and lawyers. Directors, perhaps not surprisingly now that they are personally liable for any financial scandals, want to avoid falling foul of prosecutors, who have zealously pursued white-collar crime in recent years, with the open backing of the Bush Administration.

...The plethora of bribery and corruption legislation has made it common practice for investors to hire investigators to look at the hedge funds they may invest in, or for private banks to hire companies that examine the background of a new client from Eastern Europe...

...Increasingly aggressive business tactics make it standard practice for private equity houses to use investigators to examine the curriculum vitae of the chief executive of a potential target. Similarly, investment banks advising well-known businessmen on mergers and acquisitions have been known to conduct due diligence on their past by hiring corporate sleuths. Lawyers are also a steady stream of revenue for the industry...

...The willingness to hire private investigators can be partly attributed to the success of the industry in shedding its threatening image. The credit for this lies with Jules Kroll, the enigmatic grandfather of the industry, who spent much of the 1980s absorbed in high-profile takeover investigations for Wall Street. Mr Kroll’s success was cemented in 1992 when he was featured in The New York Times as Wall Street’s “gumshoe”...

...The industry is characterised by a handful of larger companies, with some smaller boutiques. These include GPW, headed by Patrick Grayson, a former Irish Guards officer who previously ran Kroll’s London office. Another recent breakaway is the good governance group, known as G3. The marketplace has even attracted interest from the Big Four accounting companies, which have set up specialist units within their forensic sections. Yet they are all dependent on the web of contacts accumulated through networking.

...The companies all say that they have strict ethics policies, which require them to observe the laws of the country they are working in. But it is not uncommon for investigators to distance themselves from surveillance work or bugging by hiring smaller agencies.
Check out the full article here.

-- MDT

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3/02/2006
FLASHBACK: Caveat's Comments on Hedge Fund Due Diligence Featured in Risk Magazine
Whether on behalf of individual investors or fund of funds who bear responsibility for the actions of the funds they manage, corporate investigators can be a crucial component in risk management - operational, headline and otherwise. If nothing else, the IMA story illustrates that if you don't work investigators on the front end, you may end up hiring them anyway...when it comes time to figure out where your money went.

Recently The Daily Caveat had the opportunity to discuss the challenges of hedge fund due diligence with the fine folks at Risk Magazine, the world's leading fianancial risk management journal. Seems appropriate to revisit the story, in light of continuing concerns in this arena:
Fund investors turn to private investigators

Risk Magazine
November 2005
By Jayne Jung

The recent to turn to private investigators to dig deeper into fund managers and to conduct due diligence

A spate of hedge fund-related scandals in recent months has increased concern among investors about fraud, and is prompting many to turn to private investigators to dig deeper into fund managers and to conduct due diligence. "What's going on with Bayou, Refco and Man Financial makes people nervous. And nervous people call investigators," says Michael Thomas, a partner at Caveat, a Washington DC-based corporate investigation firm...

...Caveat's Thomas says investors' focus is broader than the financial markets when making investment decisions, and with good reason. Something as simple as a driving under the influence of alcohol or drugs charge might cause investors to withdraw cash from a fund manager, he says. Investors don't want there to be any kind of question mark hanging over the integrity, or principles, of a manager.
The full article appears here.

-- MDT

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Kroll to Step in, Help Trace Missing Millions (And AWOL Executive) in IMA Hedge Fund Fraud
This sounds like quite the juicy case. Would love to be in on this one:
Private eye to help search for hedge fund millions

By Svea Herbst-Bayliss
February 28, 2006

Investors, who funneled millions into an Atlanta hedge fund firm, will hire private detectives to help find a missing manager who has been accused of cheating clients out of $100 million or more, a lawyer said on Tuesday...

..."We plan to hire Kroll, the international investigations, security, and risk consulting services group, today to help the FBI and local authorities who have not located Mr. Wright," said Glenn Delk, a lawyer who represents several dozen of the fund's estimated 500 investors. There are a lot of folks here who want to talk to him"...
More here.

-- MDT

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2/24/2006
Kroll Ontrack Acquires Norwegian Ibas Holdings
Via LegalIT.net:
Kroll OnTrack bolsters data recovery and forensics with £25m Ibas buy-out

Legal IT
February 23, 3006

Kroll Ontrack has strengthened its position in the data recovery and computer forensics market with the acquisition of Ibas Holdings, a leading Norwegian-based rival, for $45m (£25m). The deal follows Ibas’ recent acquisition of its main European competitor, UK-based Vogon International.

The conditions of the public offer were met within 30 days, with acceptance by 90% of Ibas shareholders and approvals from the Norwegian and German competition authorities.

Ibas has become a subsidiary of Kroll Ontrack AS, a newly-formed Norwegian entity. Bjoern Arne Skogstad, former CEO of Ibas Holdings, will retain his leadership of the Ibas group and the company’s 166 employees.

"By combining the strengths of these organisations, we are able to bring world class data recovery and computer forensics services to customers in 13 different languages in more than 21 countries," said Ben Allen, president of Kroll Ontrack.
The original article appears here.

-- MDT

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12/20/2005
The Professionalism of Private Eyes
While the folks behind this Newsday article may still be a bit behind the times (example: far more than 15% of P.I.s are women - at least in the ranks of corporate investigators) it is nice to occaisionally see that the long running stereotypes about our industry are slowly being dispelled.

Companies like our own Caveat Research produce a highly technical, extensively detailed work product that demands a broad range of skills and institutional knowledge. Our clients, quite frankly, are not sultry dames, cuckolded spouses or long lost relatives, but rather attorneys and business-persons of the highest level of sophistication. They demand timely and accurate informational resources to support their decision-making.

Some clips from Newsday.com:

Professionalization of private eyes- Gumshoes are being replaced by high-tech wizzes, many employed by companies to prevent stealing of intellectual property

By James Bernstein, Staff Writer
Newsday
December 19, 2005

...Gone, both private eyes and security industry experts say, are the days of the trench-coated, fedora-wearing investigator, who always had a cigarette in his mouth - yes, it was almost always a he - and a line on a sure-bet horse.

"These days, there's no smoking in our office," said Francis Shea, president of Melville-based Alpha Group, an investigative agency that hired Gatta to spy on Nancy Kissel. "We look for a more educated individual and somebody who can sit in a boardroom instead of a bar," said Shea, who spent 15 years as a New York City police officer before starting the firm.

"I think [private investigators] have a long way to go because many of them are still saddled with that old image," said Vincent Henry, also once a city cop and now a professor of homeland security at the Southampton campus of Long Island University. "But in the last decade, there have been a lot of changes" in the industry. Technology and the Internet are now as much a part of the job as the old Yellow Pages and notepad...

...Kroll Inc. of Manhattan, now one of the country's largest investigative firms, has about 3,600 employees worldwide, up from 300 as recently as 1997, said Jeremy Kroll, the company's managing director and son of the founder, Jules Kroll...."It's a much more legitimate, mainstream corporate service" that agencies are providing these days, Jeremy Kroll said.
Indeed. Check out the full article here.

-- MDT

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12/12/2005
Tab for Consultants Triples in Endless San Diego Audit
The Daily Caveat has considerd writing about the continuing issues with the ongoing audit of the city of San Diego, primarily because investigative giant, Kroll has been active throughout as one of the prime contractors. But frankly, where to begin. The whole project has been plagued with semi-scandal for more than a year. In any event, the North County Times, the bill for the project may tripled previous best estimates:

Consultant bills triple for city

Bills for consultants hired to help the city dig out of its financial mess have tripled in some cases, it was reported today. The tab for the top four consultants hired to help San Diego unravel its financial mess has topped $17 million, the San Diego Union-Tribune reported.


Kroll Inc., a New York-based risk management firm, was hired to help get the city's overdue fiscal 2003 audit issued; it has billed the city $5.1 million so far. The New York-based law firm of Willkie, Farr and Gallagher, which works for Kroll, has billed the city $2.7 million so far. Accounting giant KPMG, which is working to complete the 2003 audit, has been authorized to spend $3.1 million for its work.

The Houston-based law firm of Vinson & Elkins, which no longer works for the city, was hired to investigate San Diego's pension system and disclosure practices and to represent the city in front of the Securities and Exchange Commission; it billed $6.3 million for its work over 18 months.

Those figures do not include billing for November, and the firms estimated that they may need additional $9 million to $11 million to finish their investigation of accounting errors and possible fraud, the Union-Tribune reported.

"It's not a way that I would prefer to do business," Mayor Jerry Sanders told the newspaper. "I believe that we should authorize expenditures before we spend the money. I hesitate to step in and stop everything right now. We need to move forward, but we also need to get complete control of this."

City Attorney Michael Aguirre called the spending "out of control. "It's chaotic, and Kroll has done nothing to help other than send us more bills," he said.

The original article appears here. And here's another glowing editorial, via Voice of San Diego.

-- MDT

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Corporate America Learning to Love Investigators?
So says The Business Online:
No risk for Kroll leaving shadows

Rupert Steiner - City Editor
December 11, 2005
The Business Online

One of the few industries to benefit from Sarbanes-Oxley and the myriad of tighter regulations plaguing America’s Fortune 500 companies are the corporate detectives. The growth in corporate governance red tape serves as a coming of age for firms such as Kroll and Control Risks, who for years have carved a living out of analysing risk and restructuring businesses.

But still they hide in the shadows of big merger and acquisition deals to conduct their due diligence and data verification, despite being de rigueur among the entourage of lawyers, publicists and ­corporate financiers who follow around acquisitive chief executives.

Their work is a far cry from the old-fashioned gumshoe image that those working for purer professions still afford them. The change in laws and technology have made risk ­consulting companies a sophisticated and rapidly growing business.

Kroll is about to make a bid for IBAS Holdings, a Norwegian company valued on the Oslo stock market at £28m (E41.6m, $49m). It specialises in data recovery and computer forensic work. Risk businesses should use transactions like these as a turning point to be more open about the work they do. Customers should share what they unearth. This is important for corporate detectives who are finally becoming accepted and trusted in the business world.
Interesting. While it is true that corporate investigators are regularly called upon to assist in dealmaking decisions, I'd argue that Sarbox in specific has been a much greater boon to the big business consulting companies, which have turned SOX compliance into an nice little industry for themeselves.

If you want a front-line view of how investigators most often intersect with SOX protocols, check out last week's post from Caveat's own Thea Bournazian.

The original Business Online article appears here.

-- MDT

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12/07/2005
Investigators Seek Langbar's Missing $633 Million
Via The Daily Telegraph:
New sleuth put on the trail of Langbar's £365m deposits

By Robert Miller
December 5, 2005
The Daily Telegraph

Serious Fraud Office lawyer Stephen Myers will take over as case controller today of the formal investigation into Langbar International, the suspended Aim-listed company. One of his first tasks is to meet senior officials from the Stock Exchange and the Financial Services Authority, who are working hard to limit the Langbar case damaging investor confidence in London's junior market.

At the heart of the investigation is what has happened to an estimated £365m-worth of cash deposits that Langbar and its newly installed chief executive, Stuart Pearson, told shareholders was held by the company in September.

Mr Pearson, a former Baker Tilly corporate financier, travelled to Brazil and met officials at the Banco do Brasil who, he said, confirmed in writing that the deposits existed. Subsequently he reported through the London Stock Exchange that $294m of this had been transferred to the Dutch bank ABN Amro and would be used to invest in Spanish and Portuguese property developments.

Until the cash verification notice, Langbar, which changed its name from Crown only this summer, had been a cash shell whose only assets were promissory notes and certificates of deposit. These had been issued by the Barcelona-based Lambert Financial Services, which had a 60pc stake in Crown paid for by a £142m certificate of deposit lodged at Banco do Brasil, after Crown announced it had won a contract from the Argentinian government to build public works.

Lambert, whose president is listed as Dr Rivka Meir with Abraham Avi' Arad as chief trustee, is an investment firm that manages money on behalf of some 2,000 wealthy Jewish settlers in Latin America and Israel.

When it was reported in September through the Stock Exchange that Langbar, whose share price was languishing at around 50p, had net cash assets of £300m or more it attracted a surge of investor interest, particularly on internet bulletin boards.

Some of the City's top fund managers now appear on the shareholder register including Gartmore, Merrill Lynch, Henderson and the Universities Superannuation Fund as well as thousands of private investors.

In October Mr Pearson asked the London Stock Exchange to suspend Langbar's shares and he appointed risk consultants Kroll Associaties to verify its cash deposits with Banco do Brasil and ABN Amro. Within weeks Kroll reported "it appears likely that the company has been subject to a serious fraud".

The SFO investigators must establish the whereabouts of Langbar's money. To do this they will need to make a formal request to the Brazilian authorities, where the money trail started as certificates of deposit and promissory notes at Banco do Brasil, and Bermuda where Lambert, like Langbar itself, is incorporated. The fraud office will also want to talk to Langbar's Spanish auditors Gironella Velasco.

Meanwhile, David Greene, of law firm Edwin Coe, who acted for private shareholders in the recent Railtrack court case, is heading an investors' action group. "We are seeking an urgent meeting with the company to understand what has happened. It is important to move swiftly to recover any assets we can.
The original article appears here.

-- MDT

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Kroll Receives Homeland Security Contract for TSA Screeners
Via WashingtonTechnology.com:
DHS taps Kroll for background investigation work

By Alice Lipowicz
Staff Writer
December 6, 2005

The Transportation Security Administration has awarded a contract to Kroll Government Services Inc. to perform preliminary background investigations of TSA screeners and other employees, the company announced today.

The indefinite-delivery, indefinite-quantity contract is for one year with four one-year options. It is potentially worth $17.2 million.

Kroll Government Services, a subsidiary of the risk consulting firm Kroll Inc. of New York, has done background checks for TSA airport personnel since 2003, when Congress made the checks mandatory...
More here.

-- MDT

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11/28/2005
UK Serious Fraud Office Investigating Missing $650 Million at Langbar
Via The Guardian, UK:
Fraud inquiry starts into shell firm's missing millions

Simon Bowers
November 26, 2005
The Guardian

The Serious Fraud Office has been asked to investigate a suspected fraud at what was thought to be the biggest cash shell on the junior Aim market, Langbar, after it emerged that forensic accountants were "unable to establish the existence" of bank deposits previously said to be worth £365m.

It is by far the biggest suspected fraud to hit Aim, which has been relatively free of scandal since it was set up in 1995. The Stock Exchange said yesterday: "Clearly we are taking this matter very seriously and are working closely with other authorities involved." These include the Financial Services Authority - the City watchdog - City of London Police and, very recently, the SFO.

Concern first arose last month after it was disclosed that Langbar's Monaco-based founder Mariusz Rybak had made £2.5m from a series of share sales in October, selling shares at between 55p and 65p a share when the company was said to have cash deposits in Brazil and the Netherlands worth 220p a share. Trading in shares was suspended on October 12.

In a statement yesterday, the company, which until recently had been known as Crown Corporation, said forensic accountants from investigators Kroll Associates had found it "likely that the company has been subject to a serious fraud"...
You don't say? The article continues here.

-- MDT

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11/21/2005
So, Seriously, What'd I Miss?
Tony and Thea did a bang up job of keeping up appearances here at TDC and I'm hoping they'll continue to offer their opinions and insight on a regular basis. Otherwise, you'll be left with nothing but my continuing paltry efforts.

Now....some recent headlines, just a few, so I feel caught up from my week in the technology-free zone:
Refco Buyers, vultures? Matthew Goldstein at TheStreet.com takes a harsh look at the firms that have been circling since Refco's collapse.
Oh and....Bennett plead not guilty.

SEC Probes Firing of Wachovia Analyst...is a bigger scandal waiting to break on this one?

Kroll UK Directors Get Fat-Cash Following Takeover.

NYSE and the NASD joining forces - A new era in self-regulation?

SEC Compliance Office Prepping Hedge Fund Inspection Bootcamp.

Volkswagon hit by claims of sex junkets....sounds uncomfortable.
Whew...not I feel like I am fully back in blogging action. Back later with some interesting news on the status of the Milberg investigation, hedge fund sleuthing and the perils of reputational risk.

-- MDT

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10/20/2005
Reuters Picks Up Kroll / South African Controversy
But if you are a regular at The Daily Caveat, you read about it in this space more than a week ago. Here's what Reuters had to say:
S. Africa's police, spies squabble over elite unit

October 19, 2005

By John Chiahemen
Reuters

JOHANNESBURG (Reuters) - South Africa's police and spy agencies are locked in a damaging power struggle that could undercut efforts to improve security in one of the most crime-ridden countries in the world. A row over which government department should control the FBI-style Scorpions investigation unit has openly split President Thabo Mbeki's cabinet and brought into the open wrangling among heads of his intelligence agencies.

A special commission ended public hearings last week and will advise Mbeki whether the Scorpions should fall under police control, as their critics demand, or retain their elite status in the Justice Ministry's National Prosecuting Authority (NPA). Many analysts worry that bringing the Scorpions under the police -- whose poorly paid and poorly trained members are barely managing to cope with one of the highest crime rates in the world -- could further undermine the fight against crime.

"The Scorpions were set up to do their own part of crime fighting, and they do a good job -- better than some expected, perhaps," said political analyst Herman Van der Linde. In a submission to the commission, Mbeki's spy chief, Billy Masetlha, accused the Scorpions unit of compromising national security "because it relies on and interacts with foreign intelligence agencies".

According to a leaked version of the submission, he also said the unit's outsourcing of forensic work to foreign companies like Kroll International meant vital information could pass into the hands of foreign agencies. Masetlha was backed at the commission by national police chief Jackie Selebi and, surprisingly, by Justice Minister Bridgette Mabandla, whose ministry now oversees the Scorpions.

Opposing them were Intelligence Minister Ronnie Kasrils and Vusi Pikoli, head of the NPA and its Scorpions unit, whose official name is the Directorate of Special Operations (DSO). Mbeki and his cabinet have denounced Masetlha's submission in which he named Scorpion agents he said were cooperating with the U.S. Central Intelligence Agency and Britain's MI5.

In a statement, the cabinet said it wanted to "distance government from statements ... which seek to question the integrity of officials employed in the DSO and to cast aspersions on cooperation that our institutions have with their international counterparts". Government spokesman Joel Netshitenzhe told Reuters the submission "does not reflect our policy of cooperating with international agencies on issues like fighting terrorism".

TURF WARS

Masetlha, who until last year headed Mbeki's presidential intelligence unit, is director-general of the country's domestic intelligence network, the National Intelligence Agency (NIA). The NIA has become increasingly alarmed by the growing involvement of the Scorpions in external intelligence, notably their hunt abroad for South Africans suspected of working in the black market for nuclear components, security sources say.

But political analysts said underlying the row was Mbeki's contentious sacking of his popular deputy, Jacob Zuma, who was investigated by the Scorpions and charged with corruption in a case that has split the ruling African National Congress (ANC). As a former operative in the ANC's exiled armed wing during the fight against apartheid, Masetlha would have worked under Zuma, who was head of the ANC's military intelligence unit. Many NIA officials were in the same unit.

Critics say Mbeki has turned the Scorpions into an instrument for political vendetta. Zuma says the graft charges following the conviction of his former financial adviser were trumped up to prevent him succeeding Mbeki in 2009.

The original article appears here.

-- MDT

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10/14/2005
Scandals Buoy Hedge Fund Investigative Business
KL Group...Bayou Management...Liberty Corner Advisors...Wood River...If you follow hedge funds - and really in investment today, what could be hotter than hedge funds - these are the names that keep you up at night. In order to avoid biting into the next bad apple many individual and institutional investors are turning to corporate investigators such as ourselves to vet investment opportunities.

Via Reuters:
Scandals make hedge fund sleuthing pay off -experts

October 12, 2005
By Svea Herbst-Bayliss

BOSTON - Back-to-back hedge fund scandals are sending investors a frightening message: Spend a few thousand dollars now to sidestep a multimillion-dollar fraud later. Lawyers and investigators said this week that the collapse of hedge fund Bayou Group and suspected fraud at hedge fund Wood River Partners likely will prompt investors to take more precautions before stepping into the fast-growing $1 trillion industry.

"The circle of who has gotten burned is getting bigger and the trend is that people will ask for more due diligence because they realize it pays to conduct these inquiries," said Peter Turecek, who manages the hedge fund business at Kroll, a New York-based security consulting firm. Financial regulators are sorting out what went wrong at Bayou, where investors are said to have lost $300 million, and Wood River, which once said it was managing $500 million.

Investors and lawyers have not been able to reach Wood River in the last few days, and in a lawsuit filed by Lehman Brothers against Wood River, the Wall Street investment bank said that it suspected the hedge fund ceased operating. Wood River is under investigation by the U.S. Securities and Exchange Commission.

These are the latest blowups in an industry that has attracted billions of dollars from pension funds, endowments and charities since becoming a hot asset class by delivering outsized returns in the late 1990s and positive returns during the stock market's almost three-year sojourn in bear territory.

Many investors, particularly funds of funds like Glenwood Capital Investments and Mesirow Financial that select hedge fund portfolios, already rely on investigators to snoop around and verify a manager really is who he says he is. For fees ranging between $2,000 and $50,000, firms will compile dossiers that can turn up anything from unpaid parking tickets to lawsuits to lies on resumes.

"Getting reports on managers shows that for $2,000 up front, you can avoid people like this instead of having to spend hundreds of times that amount to recoup millions of dollars in losses later," said Randy Shain, executive vice president of First Advantage CoreFacts LLC, which investigates hedge funds. "It is cheap insurance," he added.

Still, there are plenty of investors who pick managers based on a gut feeling and who consider due diligence a cost -- heaped on top of hedge funds' already hefty fees -- that is not part of their investment, lawyers and investigators said. But these are the people who might come around now, they added. "Every time there is a fraud, investors profess to do more due diligence and this is no different," said Scott Berman, a partner at law firm Friedman Kaplan Seiler & Adelman.

Those who still trust their gut may change their minds after hearing what firms like First Advantage CoreFacts turned up. This summer, a report on Wood River founder John Whittier showed the former technology analyst faced four tax liens, was sued for not paying rent and was sued for $1.6 million in securities losses, Shain said. His clients passed on Whittier. "Taken together, these three things added up to a red flag," Shain said, explaining that "the report shows Whittier ran out of money or that he's sloppy. Neither inspires confidence."

Fact checking also turned up discrepancies on Bayou founder Samuel Israel's resume when Shain's analysts tracked down the hedge fund manager's former employer, Leon Cooperman, who said he hadn't been head trader and wasn't there for four years.

As investors burned by these blowups wait to recoup money, the trend will be for people to spend a premium on "reputational reviews" that highlight behavior patterns which could become a liability later, investigators said. "People will want to know that the person is a good trader, but they'll also want to hear if the guy heads off to the bar and drinks all night every night," Kroll's Turecek said.

Looking ahead, investors also are likely to press for more clarity on operational matters like who checked the books after Bayou fabricated a firm to certify its returns. "We were able to discover that Bayou's auditor was bullshit," Shain said. This week, Reuters reported that Wood River told potential investors it had retained two firms as independent auditors. But those auditors on Tuesday denied any relationship with the controversial hedge fund.

The original article appears here.

-- MDT

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10/11/2005
Kroll Under Scrutiny in South Africa For "Scorpion Connection"
You don't become the largest investigative and security firm in the world without having your fingers in a few pies. In South Africa, Krolls influence on the that nation's Directorate of Special Operations, known as the Scorpions has come under question.

At issue are what some local observers believe to be Kroll's strong ties to the United State's Central Intelligence Agency. South Africa's National Intelligence Agency is pursing an investigation into whether the Scorpions have become "vulnerable to exploitation by foreign entities."

A very interesting and detailed piece, via South Africa's News 24:
CIA runs Scorpions

October 10, 2005
News24 South Africa

Johannesburg - The National Intelligence Agency (NIA) has accused some members of the Directorate of Special Operations, also known as the Scorpions, of spying for foreign governments. It claims that the elite investigative body is breaking the law by running its own intelligence unit.

The NIA is unhappy about the Scorpions' alleged working relationship with US-owned Kroll, a risk-management company with perceived strong ties to former Central Intelligence Agency (CIA) operatives. There are also concerns about the Scorpions' apparent close and regular liaisons with the American embassy in Tshwane.

The Scorpions and the National Prosecuting Authority (NPA) are also said to "have become the platform from where the old (apartheid) guard seeks to consolidate and direct criminal justice processes in South Africa".

Senior investigators at the elite unit, many of whom handle sensitive probes into matters of national security, are said to have "resisted" being vetted by the NIA which is the usual practice with all other state agencies that deal with security issues and state information.

These allegations are contained in confidential correspondence submitted to Judge Sisi Khampepe before this week's public hearings into whether the Scorpions should remain in the NPA or be incorporated into the South African Police Service (SAPS).

Earlier this week, Khampepe rejected police attempts to hold certain parts of the hearings in camera. This forced some of the parties to revise their submissions to prevent sensitive information from making its way to the public.

But City Press can reveal that, even before this week's hearings in Tshwane, a war of words had been raging with the NIA and the police on one side and the Scorpions on the other.

At the heart of the conflict between the three state agencies is the political battle over the future of the Scorpions - a powerful investigative unit whose activities have brought down - political leaders such as former deputy president Jacob Zuma, ex-ANC MP Tony Yengeni and struggle icon Winnie Madikizela-Mandela.

The NIA and the police want the Scorpions to relocate to the SAPS. They want the unit's mandate changed to prevent its continued overlap with other security structures.

Their stance received a major boost this week when Justice Minister Brigitte Mabandla, whose ministry is indirectly in charge of the Scorpions, told the commission that the relations between the police and the Scorpions had "irretrievably broken down" and were unlikely to improve if the status quo remained.

In a confidential replying affidavit written by deputy national director of public prosecutions, Leornard McCarthy - who also heads the Scorpions - it emerged that the NIA believed the Scorpions "are vulnerable to exploitation by foreign entities" and that some of its members have "regular meetings with representatives" of the US embassy.

The Scorpions are accused of breaching "counter-espionage protocol" and failing to heed warnings from the NIA.

Responding to the NIA submission, McCarthy said the document contained "unsubstantiated hearsay and innuendo" and that it "bears the hallmark of sinister motives".

"Furthermore, the matters contained in the NIA document were never raised at the inter-ministerial committee or the co-ordinating committee. . .Because there was no substance or truth in the said allegations, the matters were never raised in the said fora," McCarthy said.

Key to the NIA's misgivings about the Scorpions is the claim that the unit runs its own intelligence body that does not account to the National Intelligence Co-ordinating Committee (Nicoc) which is in charge of the country's intelligence services.

But McCarthy denied this.

He said the DSO only "gathers, keeps and analyses information relating to matters falling within its mandate". He said the former national director of public prosecutions, Bulelani Ngcuka, once requested that the Scorpions be granted status at Nicoc but was told "it will not be possible".

Ngcuka left the NPA last year amid claims by former intelligence operative Mo Shaik that he had spied on his comrades during apartheid. These allegations were proved false at the Hefer Commission last year. "It is only recently when the current national director raised the issue... that I, as head of DSO, was invited to sit on the Nicoc Principals' Forum," McCarthy said.

Other NIA claims against the Scorpions and the NPA are that:
• The DSO employs foreign nationals like a Ms De Gabrielle, an American who, says McCarthy, was assigned by the US department of justice and its local counterpart to advise the NPA on financial and commercial prosecutions;

• The DSO has formal relations with foreign intelligence structures and the NPA concluded a memorandum of understanding with the Chinese intelligence services;

• Certain members of the NPA have "undeclared links with foreign intelligence services";

• Foreign intelligence services have infiltrated DSO using private-sector companies that the Scorpions sometimes work with during investigations;

• A senior DSO official provided a German agent with copies of DSO documentation - the official has links with the French Intelligence Service ;

• In carrying out its operations, the DSO sometimes uses private security companies run by foreign intelligence services or with links to apartheid-era spooks; and

• Senior DSO officials "compromise sensitive information" by leaking it to the media.

McCarthy denies the allegations.
The original article appears here.

-- MDT

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9/13/2005
Private Security Firms Experience Boom in Katrina's Wake
Via the Houston Chronicle:
Business booming for private security: Firms help escort supplies and rescue files

By Terri Langford
Houston Chronicle
September 12, 2005

Perhaps someone to get your cat and your Lamborghini out of the French Quarter? After Katrina's storm waters flooded New Orleans, the city's moneyed and corporate elite reached for their cell phones and called people like David Nicastro, who owns one of the many private security and risk management firms that have descended on the city.

"We're getting requests for all kinds of things," said Nicastro, president of Secure Source Inc., a risk consulting firm in Southlake, near Fort Worth. "We're lining up transportation services, any need you might have. Porta-Johns to fuel and other things. Everything needs to be escorted in."

As federal troops and rescuers struggled to get to New Orleans and other ravaged Gulf Coast areas last week, convoys of private security and risk consulting firms, many made up of ex-military and former law enforcement officers, quickly arrived on the scene.

"We're actively engaged in New Orleans," said Jodie Rosenbloom, spokeswoman for Kroll Inc., the New York-based risk management consulting firm, which has a mix of corporate clients and the "high-net-worth individual." The company, which stresses it is not a private armed security firm, has offered all clients storm damage assessments of their office buildings.

Computer data retrieval has been a large part of Kroll's job. "Since the storm hit, we're offering free evaluations, we're telling them not to power up their waterlogged hard drives," Rosenbloom said. "We've been busy."

Private security guards, many armed, are doing everything from checking on individuals' houses to retrieving damaged computer files to pulling out luxury cars and photographing storm damage. "We're chartering aircraft and getting people into their homes," Nicastro said. "We're protecting large companies."

Most of the private security consultants have been hired by Louisiana and Mississippi businesses. "You're looking at energy companies, critical infrastructure type of calls, real estate management to provide security for the owner," said former FBI agent Bob Doguim, president of Safeguard Security Holdings Inc. in Houston.

Some companies are working with the government as volunteers and contractors as well as with individuals. North Carolina-based Blackwater USA, like other companies, took about a day to get in place in Louisiana, a lightening-speed mobilization compared with the one organized by local, state and federal governments.

"We're working with the Coast Guard as well as some private sector clients," Blackwater spokeswoman Ann Duke said. Some companies are providing individual homeowners with protection against looters. For $150, Secure Source will check on your house.

"They want someone to drive by a few times a day and make sure it's not being looted," Nicastro said. "Some have us actually sitting on property to protect it. Some we are escorting in and want to get back into their home." Armed security stationed at the home costs between $700 and $2,000 a day, Nicastro said.

Before Katrina hit, Louisiana had about 185 private security companies licensed in the state, according to Wayne Rogillio, executive secretary for the Louisiana State Board of Private Security Examiners. By Friday, 33 more companies had registered.

John Moritz, who owns Moritz and Associates, a security firm in Houston, said Louisiana officials have been helpful and welcoming to private security personnel. "If you're properly licensed and all of your ducks are in a row, you can get over there," said Moritz, whose security personnel were hired to guard Gulf Coast casinos.

Until New Orleans engineers are able to pump out the floodwaters, security companies will continue to pour into the city and work with businesses and homeowners in retrieving and protecting their belongings.

"We're getting requests for all kinds of things," Nicastro said. "We've had one person who called to say, 'I've got my Lamborghini in the French Quarter, and I have to get it out.' " The client told Nicastro he only cared about his cat and car.
The original article appears here.

-- MDT

Labels: ,

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9/12/2005
Computer Forensics Firm Aids in Data Recovery for Hurricane Victims
Investigative firm, Kroll's data recovery unit, Kroll Ontrack is helping businesses crawl out form under the muck...one hard drive at a time.

Via the Minnesota Star Tribune:
Rescuing the data from the morass

H.J. Cummins
Star Tribune
Published September 11, 2005

There's still mud as thick as gumbo roux in and around much of New Orleans. But as people begin thinking beyond survival to recovery, some are wading into their businesses to salvage the records they will need to start over. Don't think muddy file cabinets. They're as outdated as the rotary phone. Think computers -- specifically, the hard drives inside them whose spinning disks are now the repository of everything from employee pay scales to customer addresses to the secret formula to the company's success.

Last week, the first of the drives pulled from the bayou muck started arriving at Kroll Ontrack, a data-recovery company based in Eden Prairie. Kroll Ontrack is a unit of Kroll Inc., which is part of risk consultant Marsh & McLennan Co., both based in New York. A crescendo of phone calls started up, too, mostly from people asking, if they get their hard drives up to Kroll Ontrack, is there any hope of retrieving anything on them?

At least one business had the bad luck of Hurricane Katrina hitting both its headquarters and its backup storage site, said Jim Reinert, senior director of software and services at Kroll Ontrack. "It was just such a huge storm," Reinert said. When those calls come in, he is in fact very encouraging. "Every case is different, but in general we expect those drives to be highly recoverable," he said. "Even if they're buried in nasty water, they are mostly recoverable."

The first thing Kroll Ontrack does is advise customers how to handle the drives: Don't try to turn on the computer. Package them like they were fine china. And don't let them dry out -- a sealed plastic bag usually does the trick. At the Eden Prairie laboratories, the drives go through diagnostics to find out how many files have survived. Much of the cleaning needs to be done in a special "clean room," where air quality, temperature and humidity are hyper-controlled. A speck of dust can disable the disks.

The company manages to retrieve part or all of almost 90 percent of the drives that come through, said Jeff Pederson, manager of data recovery operations. Floods and fires often do less damage than internal problems, such as another part of the hard drive hitting the disks, Pederson said. The files under any scrape are gone, he said. Kroll Ontrack retrieved 99 percent of the contents of two laptop drives from the space shuttle Columbia, which broke apart in its return to Earth in February 2003. The drives were found at the bottom of a lake, Reinert said. Some of the other requests coming from the Gulf region involve recorded tapes, still the most common form of backup, Pederson said.

One credit union got its tapes safely out of New Orleans, he said, but then had to bring them to Kroll because it didn't have the equipment to run them. Kroll Ontrack transfers the recovered files to CDs, DVDs or external hard drives. For some idea of the volume of information involved, the company explained: The typical drive comes in with about 20 gigabytes of data. It would take more than 4 million sheets of paper to cover that much material. Those sheets, in a stack, would be taller than the Empire State Building.

For a standard PC or laptop, the company charges about $100 for the diagnosis and $1,000 to recover files, Reinert said. Prices vary for more complicated drives and for batches of 20, 50 or more drives from a client company. The diagnosis usually takes a day or two. The whole process, start to finish, usually takes two to five days. Kroll Ontrack is gearing up for a jump in business because of the hurricane, though Reinert said they really don't know yet what to expect. "It could be hundreds of jobs, or thousands; it's too soon to know," he said. "But our business usually tracks with the recovery in cases like this, so we're looking at months, for sure."
The original article appears here.

-- MDT

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9/02/2005
Investigators Face Challenges From New Web Browsers
Via ZDNet.com:
Alternative browsers pose challenge for cybersleuths

By Joris Evers

MONTEREY, Calif.--The advent of Firefox and other alternatives to Internet Explorer means cybercops have to learn new tricks for their investigations Internet Explorer hides nothing from police and other investigators who examine PCs to discover which sites the user has visited, according to a class held Wedensday at the annual training meeting of the High Tech Crime Investigation Association. Investigators know the location of the IE browser cache, cookie files and history, and they know how to read those files. Also, popular forensics tools can help out.

But that story changes when it comes to alternative Web browsers such as Firefox and Opera, instructor Glenn Lewis said at the well-attended session. These programs use different structures, files and naming conventions for the data that investigators are after. And files are in a different location on the hard drive, which can cause trouble for examiners. Furthermore, forensics software may not support the Web browsers, he said.

Though Microsoft's IE remains the most widely used browser, these alternatives are gaining in popularity. The open-source Firefox browser in particular has been able to nibble at Microsoft's dominant share of the market. Web browser data can be important in criminal investigations because browsers keep track of a suspect's online activity.

One specific challenge with Firefox and Opera is identifying which Web addresses have been entered manually as opposed to having been clicked on in a hyperlink, Lewis told the class. The distinction may be important in a case where a suspect claims he did not intend to visit a Web site, but accidentally clicked on a link or was sent to a site automatically. It is hard to make that argument if an address was physically typed into the Web browser. Firefox and Opera store information on typed URLs in a different file than IE does, and the files are somewhat tough to decipher, Lewis said. He showed his students--mostly law enforcement agents and private investigators--how to do it.

Lewis, who works for risk consulting company Kroll, gave attendees more tips on how to read the cache, history and cookie files that Firefox and Opera generate. He recommended some free tools for investigators, including Opea 4 File Explorer, which displays Opera cache files, and Web Historian from Red Cliff, which exports history information for IE, Opera and Firefox into an easily readable Excel spreadsheet.

Private investigator Mark Carlsson felt Lewis' provided useful information. "Each browser has its intricacies," he said. "You can find some details online, but often it is difficult." Carlsson does computer forensics investigations for private clients, such as corporations that need evidence on a rogue employee, he said. The session was also valuable because Lewis provided tools that investigators can use to back up findings from major forensics tools, said Carlsson, who works for Digital Bytes in Lyndora, Pa.

The original article appears here.

-- MDT

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8/29/2005
Treating Voicemail as a Discoverable Electronic Record
An ill-advised voicemail message has more than once proven to be a key piece of fraud-confirming evidence in the course of Caveat's investigative work and according to legal experts, voicmail is proving to be the next frontier in electronic discovery:

Via EWeek.com:
Voice Mail Poses Threat, but Gets No Respect

By Fred J. Aun
Ziff Davis Internet
August 26, 2005

If you shudder at the thought of a jury or government investigator reading your company employees' e-mails, consider what it would be like when indiscreet voice mails are played back in open court. In the appendix of their book, "The Practical Guide to Electronic Discovery," attorney Mary Mack and technology expert Matt Deniston provide readers with a collection of "electronic discovery templates."

Lawyers are urged to use the forms as guides when requesting information from adversaries in lawsuits. As might be expected in these post-Arthur Andersen/Enron days, the electronic discovery templates are for use when seeking e-mails stored in company computers. But Page 122 includes a carefully worded sample request that might catch even the most modern company off guard:

"Produce any and all voice messaging records including, but not limited to caller message recordings, digital voice recordings, interactive voice response unit (IVR/VRU) recordings, unified messaging files and computer-based voice mail files to or from [specified parties] for the period _____ to _____."

The inclusion of that template in the book is one indication among a growing number that, like it or not, voice messages are increasingly considered fair game by lawyers. "Voice mail is often a quick and casual way to communicate, but it is serious business in the world of discovery," wrote April Berman, Mary Ann Miranda and Sonya Smith in an article called "Voicemail: The Other Smoking Gun."

The authors wrote for the American Bar Association's Litigation News, and posted on the Web site of their employer, the law firm of Baker, Donelson, Bearman, Caldwell & Berkowitz. The piece offers an unsettling reminder: "When a live voice mail is played for a jury, the jury hears not only the witness' words, but the tone, expression and other subtle cues inherent in speech." In other words, your PBX just might be a legal minefield.

Many attorneys involved in the growing field of "electronic discovery" agree that it's prudent for companies to treat voice mail messages as business records on par with e-mail. That means government investigators or civil practice lawyers searching for damaging evidence are increasingly likely to ask for those messages.

So far, both government and corporate attorneys have avoided the issue of voice mail files as evidence. But compliance and legal experts are increasingly worried that it will become the next major minefield in corporate litigation. Some companies pin their hopes on expectations that judges will deem it "unreasonable" to ask businesses to retain the thousands of voice mails recorded daily. Indeed, companies are not expected to forever retain every record they generate.

Still, Michele Lange, a staff attorney specializing in electronic discovery for security firm Kroll Ontrack Inc., said lawyers and company executives are nervously awaiting the court case that will "blow the door off" the voice mail topic. Such a case would entail a precedent-creating judicial opinion approving or denying a request for a company to produce all its discoverable voice mails.

So, if this is the calm before the storm, should companies make a point of archiving and otherwise nurturing the myriad voice messages they receive? "Maybe," is the bottom-line advice of Steven Bennett, an attorney who writes about electronic discovery. "We should think about what we're doing," he said. "The question is, are you going to think about it in advance or will you wait until something happens in the course of litigation and then try to make up a system after the fact?"
Check out the original article here.

-- MDT

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China's The Standard Profiles Jeremy Kroll, Kroll Worldwide's China Business
The Daily Caveat loves The Standard, China's Business Newspaper. There is always an interesting article to be found. And it doesn't hurt that they get exactly what it is we do.

Check out their profile of Jeremy Kroll, heir apparent to Kroll Worldwide, the investigative firm founded by his father and perhaps the largest purveor of investigative services in the world.

Kroll Worldwide was recently sold to embattled insurance giant Marsh, but as you'll see from the article, it still remains a bit of a family business.
Wall Street's private eye

Vanson Soo
The Standard
August 29, 2005

Jeremy Kroll rolls his eyes when someone attempts to portray him as a second-generation private eye, even though his family name is as synonymous with the modern profession of risk consultancy and investigations as Pinkerton's once was with detection.

Still, the 34-year-old son of the man who founded Kroll Associates, who works under his father as managing director of global business development and strategy of the company's consulting services group, acknowledges that something akin to the film noir gumshoe spirit does run in his family.

``Back when my dad started the business, my grandma spent a week tailing a subject in her car, changing her outfit every day to make herself harder to spot,'' he says, smiling at the recollection.

``My family is full of curious people, and that has not changed.'' The patriarch, Jules Kroll, now 64, is a former Manhattan assistant district attorney who came to believe that a lot of the time and money spent prosecuting corporate crime would be better spent trying to prevent it. With that in mind, he set up the company in 1972.

Though the company was sold last year to insurance giant Marsh & McLennan, Jules Kroll remains its executive chairman. The younger Kroll, who was in Hong Kong earlier this month to visit clients, graduated in French, Italian and fine arts from Georgetown University in Washington, DC, the same school where his father got his law degree.

A family man, he's the eldest of four children; his sister, Dana Kroll, also works at New York headquarters as an associate managing director. In nine years with the firm, Jeremy Kroll has risen from investigator in the areas of corporate intelligence and due diligence to head of a division with more than US$500 million (HK$3.9 billion) in annual revenue.

If Kroll Associates enjoys some cloak-and-dagger mystique, it's probably because of the large number of ex-police, military and intelligence officers Jules Kroll originally hired to lend his new company credibility.

Nowadays, its recruits are just as likely to be computer nerds, lawyers, accountants and investment bankers. The company has spread far beyond its beginnings in investigative and security services. Today, its four primary business segments are consulting, corporate advisory and restructuring, background screening and technology services.

"Technology is a big growth area,'' Jeremy Kroll says. "Computer forensics is a major weapon in our arsenal.'' The company glories in its reputation as "Wall Street's private eye,'' a firm that multinationals, and on occasion even the US government, are comfortable entrusting with their most sensitive affairs.

It burnished its reputation in the early 1990s, successfully tracking down millions of dollars of assets concealed by political outlaws like Jean-Claude Duvalier of Haiti, Ferdinand and Imelda Marcos of the Philippines, and Saddam Hussein of Iraq. Less glamorous, but probably more typical of the way Kroll earns its bread and butter, is its mandate, bestowed in 2002, to restructure Enron, the fallen angel of the US energy business.

Kroll booked US$900 million in turnover last year and currently employs more than 4,000 people in 65 offices worldwide. Kroll files says the company's security work revolves mainly around emerging markets. ``In some industries, such as oil and energy, there is a need for companies to be in `bad neighborhoods' where it's dangerous to business.''

Does that include China? Not really, he says. If China were considered that dangerous, he adds, would Yahoo! ever have invested, as it did recently, US$1 billion (HK$7.8 billion) to acquire a 40 percent stake in Alibaba, a narrowly focused Internet outfit in a speculative industry that last year earned just US$46 million?

``Overall, we have seen a maturing view of Greater China over the past five to 10 years, as experience and confidence have increased,'' he says. Though in earlier years, China may have been just another bandwagon on which globetrotting companies were expected to jump, it has since moved up the charts to become an integral part of many global strategies.

With that, the level of risks has risen proportionately. ``We get daily phone calls from American and European companies about troubles that are threatening their joint ventures in China,'' Kroll says. The China concerns of Kroll's clients today fall very broadly into three categories - transactional risks, regulatory risks and operational risks. Transactional risks relate to joint ventures and partnerships.

Regulatory risks are those inherent in a company's dealings with Chinese authorities, and operational risks involve issues like technology, supply chains and general ambiguities associated with doing business in the mainland, for example, intellectual property protection.

Kroll also advises on political and societal risks that tend to become more important for companies as their mainland roots deepen. "Kroll helps clients understand their markets a lot better, and to recognize that China is becoming an influential player in the global marketplace,'' he says.

Financial institutions are also rushing headlong into the mainland but many are plagued by doubts about their clients - as basic, in some cases, as whether they are real or fictitious. "The real ownership structure of a company and who's behind them are issues that must be dealt with.''

Establishing title is a major headache for real estate investors. Shell companies abound, and it is often unclear just who owns what. I ask Kroll what, after a decade in the company, is his most memorable experience? Surprisingly, it has nothing at all to do with catching someone red-handed in a headline-grabbing scandal. "No. It's the recovery of a kidnapped child. It happened when I was in my late 20s. The feeling of returning a child safely to his family is beyond description.''

Finally, I can't help asking him if it's true, as some people have suggested, that Kroll people carry guns when they're in China. "No way,'' he says, laughing. ``The only people in the company who ever carry guns are those involved in personal security protection, but they've never been deployed anywhere in Greater China.''

That's a pretty good indication that Hong Kong and China are not all that dangerous as places to do business.
The original article appears here.

-- MDT

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8/23/2005
Securing New Ground, Security Industry Conference
For investigative and security industry people, here's a no-brainer event to attend...
PRESS RELEASE:

NEW YORK (
Augst 16, 2005) -- For the 10th consecutive year, the Securing New Ground Conference will bring together more industry leaders and investors than any other security industry conference. On November 16 & 17, more than 25 Presidents and CEOs from the security industry's leading suppliers, integrators and investors will present their views on business trends and the investment outlook for the security industry. As described by Jules Kroll, Founder of Kroll Inc. and current Vice Chairman of Marsh Inc., SNG is "Excellent. Thought provoking. Right on target. The best conference of its kind in the world."

The dynamic created by bringing investors together with market leaders continues to attract the "who's who" of the industry along with those funding the markets growth to the Roosevelt Hotel in NYC. The two day conference provides an unparalleled snapshot of the market sectors expected to change the future of the industry plus provide critical information designed to help industry veterans and new investors refine strategies, focus investment and avoid pitfall.

One of the hallmark sessions of the Conference is "Follow the Money" presented by experienced investors Capital Source, Northwest Capital Appreciation and Quadrangle Group. The session, designed to enlighten potential investors or companies wanting to attract investors, has proven invaluable and worth the price of admission.

Other conference highlights include: Jeffrey T. Kessler, Senior VP of Lehman Brothers and "Wall Street's guru on the security industry" will talk about how Wall Street views the market, what sectors and companies are poised for growth and what trends will reshape the traditional industry. Conference attendees will receive a free copy of Kessler's 2006 Security Industry Report.

Keynote speaker, Frank C. Lanza, Chairman and CEO of L-3 Communications Corporation (NYSE: LLL) will provide insights on how security companies can leverage change and find untapped opportunities for growth. Other companies participating that have had a major impact on the industry include Siemens Building Technologies (NYSE: SI) Honeywell Security Monitoring, Guardian Protection Services and The Department of Defense.

About Securing New Ground(TM)

Securing New Ground(TM) is the only conference in the security industry focused on the "business of security." The leaders from all aspects of the security and financial communities come together to discuss trends, opportunities and the businesses changing the face of the industry. For more information about the Securing New Ground(TM) Conference go to: www.SecuringNewGround.com.

The conference was founded in 1995 by Lehman Brothers Inc. - Jeffrey Kessler, ProFinance Associates, Inc. - Michael B. Jones, Sandra Jones and Company - Sandra Jones and was joined by BNP Media in 2005.
You can read more about the conference here. Perhaps The Daily Caveat will see you there come November.

-- MDT

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8/22/2005
Riddled With Lies? Your Average CV...
Prospective employees lie. We can help...

Via BBCNews.com:
The CV detectives

By Tom Geoghegan
BBC News Magazine
August 22, 2005

It might seem like the only way to secure that dream job, but with one in four people lying on their CVs, employers are wising up, and have identified the typical fibs people tell. So, you founded your university debating society, did you?

And what was your greatest challenge in that role? However unlikely, it's a job interview question some people would dread, if they are one of the many people to have faked parts of their curriculum vitae.

A quarter of 3,000 CVs submitted with job applications in 2004 had a lie in them, says employee screening firm Risk Advisory Group. And while the section headed "personal interests and achievements" may seem like a legitimate area for exaggeration, some of the lies are far more serious than fibs about undergraduate life.

Neil Taylor produced a bogus degree certificate to land the position as head of the Shrewsbury and Telford Hospitals NHS Trust in 2003. But after admitting the offence of obtaining a pecuniary advantage through deception, he now faces the possibility of prison.

So what sort of things are people lying about? Inflated job titles, increased salaries and benefits, length of service and qualifications are the most common areas, says Marcia Roberts of the Recruitment and Employment Confederation.

"You'd be surprised to know how common it is to lie about qualifications and how stupid it is because it's easy to check," she says. "Recruiters should never accept that someone has lost their certificates. You'd be surprised how many claim to have been to foreign universities when they don't even exist."

In an extreme case of faking it, people have even been known to send someone else to undertake an interview for them, she says.

Combating the lies

The personal achievements are harder to check and few employers bother. But a skilled interviewer can pick apart any holes in a CV, adds Ms Roberts.

While some people may view the odd lie as acceptable to get the job they think they are fully capable of doing, in areas such as social services or education, there are obvious dangers to employing a bogus carer or teacher. And a criminal records check, which is statutory in some industries, will not pick up lies concerning experience.

But some employers have had enough and are fighting back. London and Quadrant Housing Trust, which provides rented homes to low-income families, says checks on prospective employees reveal so many to have lied that about one in 15 provisional job offers the housing association makes has to be withdrawn.

This is due to the references not standing up or there being errors on the application form such as falsified sick leave. To rectify this, London and Quadrant is among an increasing number of employers turning to outside help.

Checking CVs and application forms is a growing industry, and one that Risk Advisory Group and Kroll Background Worldwide are working within.

Hedley Clark, Kroll's managing director, says: "Companies in the past have done reference checking themselves and just asked people to bring in their qualification certificates when they start.

"What's changing is that people are taking it more seriously and seeing more public instances where a CV fabrication has gone on."

Offenders fired

The extreme examples include people saying they have qualifications they don't have or covering up a period where they were in jail, he says.

Kroll helps the company to devise an application form which is designed to get to the truth in areas like employer history, professional qualifications and directorships. Applicants are warned the forms will be vetted, but that still doesn't prevent nearly one in three containing an error, says Mr Clark.

For between £75 and £300, depending on the seniority of the individual, the person's background as outlined on the form is investigated. This includes financial integrity checks and could mean getting references in different languages.

The penalties vary from being refused the job to being fired if the offender has already started work. Or as Mr Taylor's case demonstrates, the punishment can be even stronger.

Original article appears here.

-- MDT

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8/16/2005
When Delete Isn't Good Enough - The Consequences of Using Anti-Forensic Software
Almost anyone surfing the web (and no doubt everyone using Internet Explorer rather than Firefox) has experienced intermittent, annoying pop-up advertisements offering products that are gar-run-teed to scrub your hard drive of embarrassing or sensitive files.

China's The Standard business paper has an interesting article on the proliferation of such software, its effects on computer forensics and the potential legal repurcussions for those who utilize them in an attempt to hide illegal conduct:
Software hide and seek

August 9, 2005
The Standard
By Steven Barrie-Anthony
(Article originally appeared in the L.A. Times)

...Making files gone has become a booming industry unto itself. Sales of Evidence Eliminator run in the millions of dollars each year, says Andrew Churchill, managing director of Robin Hood Software of Britain - and it's just one of more than a dozen ''file shredder'' or ''anti-forensic'' products on the market. Eraser, a similar tool available free over the Internet, is downloaded roughly 2.5 million times per year, according to its distributor, Ireland's Heidi Computers.

Many of these software vendors claim that their programs, in the words of one, ''use wipe methods that exceed the standards set by the US Department of Defense'' (CyberCide); others boast the capability to ''erase to both the US Department of Defense and German Military/Government standards'' (DataEraser). Their Web sites urge protection against overly curious bosses, family members, corporate competitors and all variants of law enforcement. ``You are at very high risk of investigation!'' warns the Evidence Eliminator Web site. ``There is no need for you to play Russian roulette with your job, family, car, property. Act now!''...

...For your average consumer, ``The biggest concern is wanting to get rid of things they're afraid a spouse will find on the computer,'' says Brendan Koerner, a Wired magazine contributing editor. But spouses aren't the only ones encountering sanitized hard drives. Law enforcement agencies such as the FBI say that in the last year an increasing number of suspects chose to use such computer programs and that they expect the trend will continue. ``It is not surprising to us that this technology is out there,'' says FBI spokesman Paul Bresson. ``And we'll see it even more.''

Making files reappear is a booming business also. Computers are evidentiary treasure troves, and law enforcement isn't willing to roll over without a fight. ``Five years ago, there were 1,000 law enforcement and government workers out there attacking this problem,'' says John Colbert, chief executive of Guidance Software, which makes the forensic software most used by law enforcement. ``Now there are about 20,000"... Private-sector forensics is growing alongside law enforcement. Navigant Consulting, a litigation support company, has doubled its computer-forensics business over the last six months, says managing director James Gordon; Deloitte & Touche's Forensics Investigation Services division had 79 percent growth in the last year, says senior manager Bill Farwell.

Of course, the upswing isn't linked solely to the new popularity of anti-forensic software, there are plenty of regularly deleted files to chase after, but also to the central role that computers are playing these days in civil, criminal and corporate conflict. ``We do have methods which allow us to produce the evidence needed for investigation,'' says Jim Plitt, director of the US Immigration and Customs Enforcement's Cyber Crimes Center, the bastion of classified high-tech in charge of analyzing Johnson's hard drives. ``They've got their classified information and we've got ours,'' counters Evidence Eliminator's Churchill. ``There will never be any way to defeat Evidence Eliminator"...

...Whether or not overwritten data ultimately is recoverable, in courtrooms the use of anti-forensic software is often enough to imply guilt or invite steep sanctions. Even if the software works as planned, each program leaves a unique footprint easily identified by investigators. ``The courts are pretty harsh when software like this is used on data that should have been preserved,'' says Dave Schultz, manager of legal technologies consulting for forensic company Kroll Ontrack. ``You can expect fines, adverse inferences - like the judge telling the jury to presume that useful information was deleted - all the way to default judgments.''

Which was the case when the magistrate in a California civil trial involving the misappropriation of trade secrets ruled that defendant Matthew Hewitt's use of Evidence Eliminator was ``a stark affront to the judicial process.'' The data was ``gone forever,'' wrote the magistrate. Hewitt contended that he used the program only to cover up evidence of an affair and other embarrassments, but he was ordered to pay his former employer, a market research company Communications Center, more than US$145,000 (HK$1.13 million) in costs and fees.

Last year, the 9th US Circuit Court of Appeals upheld a similar ruling. Former Cisco Systems vice president Robert Gordon had been convicted of embezzling and was required to pony up restitution, including what it cost Cisco to dredge his Evidence Eliminated computer. There is greater precedent for these kinds of legal sanctions in civil rather than criminal court, but a look at the June indictment against Johnson will give anybody in the gaze of law enforcement pause. Johnson, who says he is not guilty, could face as many as 30 years in prison if convicted of downloading and possessing child pornography, and an additional 20 years if convicted of destroying evidence with Evidence Eliminator.

Although not sympathetic to criminals, some anti-forensic software makers and privacy advocates express concern about the use of such software as evidence of wrongdoing. It seems awfully Orwellian to be punished for deleting personal information, they say. And at least one federal judge is rethinking the whole hornet's nest of electronic evidence. ``Evidence-gathering is becoming very heavily directed toward cyber materials,'' says James Rosenbaum, chief district judge of the district of Minnesota.

In 2000, Rosenbaum published an article titled ``In Defense of the Delete Key'' in which he recommends a cyber statute of limitations: ``This limitation recognizes that even the best humans may have a somewhat less than heavenly aspect,'' he writes.``It acknowledges that anyone is entitled to make a mistake and to think a less than perfect thought.'' The courts should allow for the existence of ``cyber trash,'' he writes: ``This is what the delete button was meant for, and why pencils still have erasers. Let's engage in the fiction that maybe human beings just make mistakes once in a while,'' says Rosenbaum. ``That your first draft is just a first draft, not a fraud. Maybe it shouldn't be discoverable any more than when you used to throw the first draft of a letter into a wastebasket.''
The full article, with expanded info on the techniques used by forensic investigators can be found here.

-- MDT

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8/15/2005
New Book Targets "Wild West" Finances of Offshore Holding Companies
Former Kroll investigator, William Brittain-Catlin's new book, Offshore: The Dark Side of the Global Economy, attempts to lay bare the wild-cat ways of offshore "boomtowns", such as Bermuda, the Caymans or the British Virgin Islands. And it's is not just shady cartels that operate via these unregluated locations. Major corporations also save a bundle by doing so, skirting regulations meant to reign in the very abuses that offshore banking facillitates.

While Catlin's book illustrates the links between these shady financial centers and some of the biggest recent corporate frauds his focus is ultimately conceptual rather than pragmatic. His target seems to be capitalism itself, using the offshore economy as evidence of its most rampant abuses, as this Detroit Free Press review illustrates:
Chilling expose` dives into murky waters

August 14, 2005
REVIEW BY JAMES PRESSLEY

William Brittain-Catlin, a former investigator for Kroll Associates Inc., nurses a dark vision of capitalism.

'Offshore' - THREE STARS out of four

By William Brittain-Catlin

Capital, as he describes it, is a protean beast, a "wild animal let out of a cage." The nation state has become "a servant of stateless capital," its citizens suppressed by the "controls of bourgeois capitalist society, in particular the work ethic."

Never mind his hyperventilating style. "Offshore: The Dark Side of the Global Economy" is a convincing description of a perverse world in which capitalism is a giant shell game, where mainstream multinationals shunt assets and liabilities around the globe to evade taxes, hide debt and buy political favor. The fall guys for this scam are shareholders, taxpayers and society at large.

"Offshore" has many strengths, offering a solid primer on how capital slithers in and out of brass-plate subsidiaries as companies ranging from GE and Wal-Mart seek to lower their taxes. The author chooses to bring offshore finance into focus through the lens of the Cayman Islands. The sun-soaked British dependency proves an effective setting for this dark drama, as Brittain-Catlin combines snippets of the Caymans' seagoing past (Columbus, turtles and Blackbeard the Pirate) with its role in the collapses of companies such as Enron Corp.

In lean prose, the author captures the convoluted story of U.S. energy trader Enron in 20 pages and boils the fraud at Italian food company Parmalat down to nine. The summations create crisp snapshots on how multinationals funnel profits offshore even as they milk governments onshore.

Enron, for example, used hundreds of Cayman subsidiaries to slash its U.S. taxes and hide losses. The Houston-based company also used its clout, including a friendly connection to President George W. Bush, to keep the government from regulating energy-derivatives trading, he says.

Enron combined offshore freedom with the kind of onshore protection that prompted government bailouts of Chrysler Corp. and the entire U.S. savings and loan sector. "The modus operandi for the corporation is to pass the cost of its losses onshore onto society and its taxpayers, while the corporation runs off with the profit and parks it offshore," Brittain-Catlin writes.

The same dichotomy lies at the heart of the success of Lakshmi Mittal, the author says. The Indian magnate created the world's biggest steel company -- with mills from Cleveland to Kazakhstan -- through offshore holding companies in tax havens such as the Netherlands Antilles. Yet he built Mittal Steel Co. with the help of politicians like U.K. Prime Minister Tony Blair and soft loans from the European Bank for Reconstruction and Development.

"Offshore" blames this mess on Western philosophy. Brittain-Catlin traces the roots to Immanuel Kant, who argued that the individual had absolute moral autonomy -- a vital bulwark against the utilitarianism of the age. Along the way, though, this freedom was subverted in the struggle against absolutism, the author argues. Political freedom suppressed individual rights, forcing us to conform with bourgeois mores. "What was billed as freedom in fact turns out to be a pretext for coercion," he says.

It doesn't take too much imagination to draw a line from the age-old urge for autonomy to a modern German's desire to protect himself from punitive taxation by dragging a suitcase full of cash to a bank in Luxembourg. Unfortunately, Brittain-Catlin muddies the argument with a sometimes-tortuous line of reasoning that leads from Greek mythology to the hypocrisy of the European bourgeoisie. Equally irritating is the author's failure to offer any solution. He challenges neocons and reformists alike, yet offers no answers of his own.

One thing is clear: Brittain-Catlin rejects the argument that there is a legitimate use for offshore finance. "A distinction cannot be made," he says, "between the use and abuse of offshore tax havens any more than it can be made between the light and dark side of the international financial system." That distinction, made routinely by bankers and accountants, has worn thin in our age of terrorism, money laundering and corporate fraud. Bankers may bristle at Brittain-Catlin's rhetoric; they cannot ignore his message.
The original review appears here. If you would like to hear the author speak about his book in his own words NPR has an interview with Catlin.

And if you are interested in regular updates from this sector, The Daily Caveat recommends Know Your Customer News, which offers daily updates, email newsletters and searchable databases relating to offshore incidents and intrigue.

-- MDT

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8/09/2005
Investigating Hedge Funds
An interesting article from the Wall Street Journal follows, describing the growing role of the corporate investigative sector in assessing and evaluating Hedge Funds individual-investor clients as well as larger institutions. Based on their capacity for rapid returns, hedge funds have become a tempting investment choice for many, but their sparsely regulated nature and the infrequent horror story in the financial press leaves potential investors sometimes feeling unsure of how to separate the reputable from the reprobates. That's where we come in:

Digging for hedge-fund dirt

August 08, 2005
By Jane J. Kim
The Wall Street Journal

The exploding popularity of hedge funds is creating a boom for modern-day corporate sleuths, who are doing big business digging into these secretive investment vehicles and their managers. The investigative firms range from large, multinational companies such as Kroll Inc., a unit of Marsh & McLennan Cos., to smaller shops with just a handful of private investigators. Though their biggest clients are institutional, a growing number of wealthy investors and their family offices also are looking for information.

The costs of these reports can range from roughly $1,000 to check out a one-manager hedge fund to tens of thousands of dollars for an in-depth, detailed report on a fund with multiple managers and world-wide operations. The investigators typically are former law-enforcement agents, licensed private investigators, forensic accountants and investigative journalists.

Because hedge funds -- lightly regulated investment pools that employ a wide range of strategies and are geared to institutions and the wealthy -- aren't subject to many of the reporting requirements that apply to mutual funds, it can be difficult to get details about their assets, returns and the people who run them. Assets in hedge funds are estimated to have more than doubled to about $1 trillion during the past five years, while the number of hedge funds has swelled to more than 8,000.

There have been some high-profile blowups recently, such as KL Financial Group, a Palm Beach, Fla., hedge fund that shut down amid an investigation by regulators of allegations that it reported outsize returns while actually losing money. In the five years through 2004, the Securities and Exchange Commission brought 51 cases against hedge-fund advisers who, it asserted, defrauded investors of more than $1.1 billion.

For many investors, checking out a hedge-fund manager used to be as simple as making a few discreet calls to well-placed friends at Wall Street firms. But as more money and new players flood the industry, returns -- in the 20 percent-plus range a decade ago -- have moved closer to those of stocks and bonds. In their quest for higher returns and innovative strategies, investors increasingly are seeking out international hedge funds or managers with nontraditional backgrounds, making the usual means of gathering information more difficult, experts say.

Investigative firms verify the manager's credentials and scour public records, such as news sources, company documents, regulatory filings and court documents, including criminal filings, bankruptcy records and civil lawsuits. Though some searches have turned up outright crooks, most discoveries are more mundane: managers who padded their resumes or failed to disclose jobs that went bad. (One investigative firm found that a fund manager was banned from the national parks for indecent exposure.)

But sometimes managers have had run-ins with securities laws. Tax liens, prior bankruptcies or other signs of financial difficulties are often deal breakers for potential investors. Even evidence of an active social life can deter potential investors who worry that the person may not be singularly focused on managing the fund.

"Unlike your friends, who you want to be Renaissance men, in a hedge-fund manager you're looking for the guy that doesn't have a personality," says Randy Shain, executive vice president at First Advantage Corp.'s First Advantage CoreFacts LLC investigative unit, which produces BackTrack Reports."People who have spent a lot of time doing a lot of other things, like auto racing, means that they're away from a computer screen."

Investigative firms estimate that between 10 percent and 20 percent of their searches will turn up suspicious information. But many say that percentage has been increasing as investors flock to more exotic funds and nontraditional managers.

Whether the information that a search turns up is enough to quash a potential investor's interest in the fund depends on the investor. Some will balk if a "white lie" pops up on the manager's resume, whereas others may be reluctant to walk away after spending a significant amount of time and money looking into the fund, even if faced with evidence of criminal activity. That is especially true if the criminal conviction was long ago or if the type of activity, such as drunken driving, isn't considered "material" by the investor, says Jeff Brenner, principal at Intelysis Corp., a corporate-fraud investigation firm. "It's a character flaw, I suppose, but not one (of) business acumen."

To be sure, institutional investors such as pension funds, endowments and so-called funds of hedge funds -- which bundle stakes in different hedge funds into one investment -- conduct a fair amount of due diligence on their own, analyzing investment strategies and delving into performance. But they are increasingly relying on outside investigators to look further into a manager's background.

Some consultants and investigators, such as London-based Control Risks Group and Capco, a unit of Capital Markets NV of Belgium, also look at whether assets reported to investors, as well as the methods used to value those assets, are accurate. That is a growing concern as hedge funds have become more complicated, with multiple managers investing in increasingly hard-to-value securities, such as credit derivatives. And as more hedge funds seek control of companies through private-equity deals, they themselves are hiring investigative firms to vet the directors or management.

The Financial Investigation Services division of NCO Financial Systems Inc., a unit of NCO Group Inc., says hedge funds now make up about 30 percent of the division's revenue, up from about 8 percent three years ago. The division's private investigators are spending more time delving into the backgrounds of hedge-fund managers in Asia, Europe and the Middle East as U.S. investors look overseas for higher returns, and hedge funds set up shop in countries with less regulation. About 12 percent to 15 percent of the division's revenue now comes from overseas projects, up from less than 5 percent five years ago.

The original article apears here. For more on all things hedge fund, check out our friends at FundStreet.org.

-- MDT

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7/21/2005
Interviews Conducted by Investigative Firm Undergird Legal Against Plaintiff Firms
It is a situation that any investigator dreads, when the veracity of statements obtained from witnesses in the course of litigation is brought into question. Our of the industry's largest firms is currently facing such a challenge, in connection with the criminal investigation into the conduct of three plaintiff firms, Baron & Budd of Dallas; Ness, Motley, Loadholt, Richardson & Poole of Mount Pleasant, S.C. and Weitz & Luxenberg of New York.

Via the New York Times:

Plaintiffs' lawyers, long accustomed to public criticism and lawmakers' wrath, now face a new and more dangerous adversary in federal prosecutors. The latest evidence that the government may be increasingly willing to pursue these lawyers comes in the bankruptcy of a company overwhelmed by asbestos claims. Recently filed court documents show that federal prosecutors in Manhattan may have begun to investigate the conduct of three law firms.

The documents - which surfaced in the bankruptcy case of G-1 Holdings, formerly the GAF Corporation, a manufacturer of roofing material - show that lawyers for G-1 have met with prosecutors from the United States attorney's office in Manhattan in recent months. The documents also show that the company's lawyers have turned over records of extensive interviews with former employees of the three plaintiffs' firms in which some employees described coaching potential claimants and noted efforts to influence doctors' diagnoses...

...The current criminal investigation is the latest example of a new willingness by prosecutors to look into the conduct of plaintiffs' lawyers. Last month, the United States attorney's office in Los Angeles announced the first indictments related to a three-year-old investigation of Milberg Weiss Bershad & Schulman, a law firm known for its frequent shareholder class-action lawsuits.

The interviews of former employees were conducted by investigators from Kroll, which was retained by G-1 to gather evidence in its three-year-old civil lawsuit against three plaintiffs' law firms: Baron & Budd of Dallas; Ness, Motley, Loadholt, Richardson & Poole of Mount Pleasant, S.C. (a law firm in the process of disbanding); and Weitz & Luxenberg of New York.

Last month, Kroll investigators, after receiving a subpoena from prosecutors, turned over their findings; the subpoena suggests that prosecutors are interested in the asbestos claims. Lawyers say at least one insurance company has also received a subpoena.

A spokeswoman for the United States attorney's office declined to comment on the matter, as did a spokeswoman for Weitz & Luxenberg. Steven Storch, a New York lawyer representing Ness, Motley, Loadholt, Richardson & Poole, said, "We would've expected that if there were anything of any interest, we would've heard about it during the course of civil litigation, and we didn't hear anything."

Frederick M. Baron, of Baron & Budd, said that he knew documents had been provided to the United States attorney's office, but that the same documents had not proved persuasive in the civil case by G-1 against the firm. "We have received no information that the U.S. attorney's office has done anything other than accept documents that the lawyers from G-1 have asked them to." Mr. Baron said the judge in the civil case had reviewed the documents and not found them credible. "The Kroll affidavits are bogus in the extreme," he said.

G-1 was driven to seek Chapter 11 protection in 2001 as a result of some 150,000 asbestos claims. The court filings, in which lawyers describe the activities that generated their bills, indicate that lawyers for G-1 have spoken or met with assistant United States attorneys several times in recent months. The United States attorney's office in Manhattan is also pursuing an investigation into thousands of claims filed on behalf of people who said they were injured by exposure to silica, another dangerous material. Some of the same law firms that brought those claims also brought asbestos claims, some of the same doctors who diagnosed silica injury in claimants also diagnosed asbestos injury in claimants - and many of the same people claiming they were hurt by silica previously claimed they were harmed by asbestos.

The criminal investigation could have broad implications for the civil justice system that compensates victims of personal injuries. If it proceeds to an actual case, it could also force some lawyers who file what are known as mass tort claims to change their tactics. And defense lawyers, who have often been reluctant to take on plaintiffs' lawyers armed with thousands of claims in open legal battle, could be emboldened.

The investigation, raising the specter of fraud, will almost certainly be seized on by advocates of changes to the nation's civil justice system. Lawyers who represent people who are already sick as a result of asbestos exposure said they worried that any such changes might make it harder for legitimate asbestos victims to recover damages they deserve...

...A criminal investigation could provide potent ammunition to litigators like Irving Cohen, a lawyer at Cohen Pope in New York who has filed objections to asbestos settlements in various corporate bankruptcies on the ground that they unfairly discriminate against people who are currently sick as a result of exposure to asbestos. "It can't give anything but momentum to what we've been doing," Mr. Cohen said. "The implication of a criminal investigation is that perhaps some wrongdoing was occurring and if that were to be the case, it would certainly augment the civil remedy. Depending on what kind of evidence that they can obtain, it is potentially very big."

Given the significance of the Kroll affidavits to the government's case, The Daily caveat expects to see a great deal more discussion of their contents and veracity as the matter goes forward. Read the full article here.

-- MDT

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Death of Abbey Bank Employee Ruled a Suicide, Neither Abbey Bank Nor Kroll Found at Fault
The Daily Caveat wrote earlier this week about the pending inquest regarding the death of a London-are Abbey Bank employee, Richard Chang who fell do his death last year immediately following an interrogation involving bank personnel and representatives from security contractor, Kroll. The interview related to an ongoing internal investigation into the origins of an anonymous letter that was circulated to bank officials and described sexual misconduct and corruption in the dispensation of Abbey Bank IT contract. Chang was a suspected source of the letter.

Chang's family sought confirmation via the inquest that Abbey Bank and or Kroll violated British employment law in the course of the internal investigation and potentially contributed to Chang's death. The jury at the inquest deliberated for less that an hour before returning with a verdict of suicide. No fault was ascribed to either Kroll or Abbey bank, although the coronor did offer the following:
The coroner said he will send a report to employee arbitration service ACAS to help provide guidance for employers dealing with similar investigations in future, although he said this implied no blame on Abbey's conduct. "When an interview has been conducted the employee should not be unescorted. There is a risk of the employee being rendered vulnerable by the interview. There is an issue about preventing similar fatalities. This case is obviously tragic and employers are going to be faced with these situations in future," the coroner said.
Chang's widow, speaking on behalf of her family, was unmoved by the court's ruling:

Chang's widow Lay Pen Lim said in a statement released after the verdict that her husband had been deceived into attending the meeting and then subjected to "consistently hectoring and misleading" questioning by Jones. "I believe that, had this meeting not taken place, Richard would still be with us today. Richard had everything to live for. The children and I are absolutely devastated. We will never get over our loss," she said.

The full story can be read here.

-- MDT

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all content © Michael D. Thomas 2009