Professional Background Screening a Small Price to Pay

By: Brent Bowers
The candidate for chief financial officer at a fast-growing computer hardware company was forthright about his own money troubles.
He had resigned his previous position to care for his wife, who had been badly injured in a car crash, he told his interviewers, and after the insurance company refused to pay her medical bills, he had no choice but to declare bankruptcy.
He got the job. Six months later, when the company brought in a team of accountants for a surprise audit, he announced he had accepted a position elsewhere. By the time the accountants found out that $3 million was missing, he had vanished.
That was when the company hired Ken Springer, 54, the president of Corporate Resolutions, a business investigations concern, to find out how the fugitive executive had taken the money.
Mr. Springer, a former white-collar crime specialist at the Federal Bureau of Investigation, started Corporate Resolutions in 1991 in New York, and has expanded it to 25 employees and offices in London, Boston and Miami, with a fifth planned for Hong Kong in October.
Most of his clients are private equity lenders and hedge funds that ask him to conduct management background checks at companies they are looking at, and to look into suspicions of wrongdoing at companies they hold stakes in.
There is plenty of wrongdoing out there. Employee theft alone exceeds $400 billion annually, according to Automatic Data Processing, the nation’s largest provider of payroll services. With the economy in the doldrums, the problem may well get worse.
After spending nearly three decades investigating larceny in the workplace, Mr. Springer has some suggestions, especially for smaller companies, which are particularly vulnerable.
Few face greater risks than start-ups. Mr. Springer cited a technology company that grew from 50 to 500 employees in nine months and recruited a seasoned project manager to handle its physical expansion. The manager hired an acquaintance as his sole contractor and in collusion with him signed off on fraudulent invoices. The company managed to get back $1 million of the $3 million they stole.
Mr. Springer’s primary recommendation is to screen all potential employees, starting with their résumés. If you detect a single lie, he says, throw the résumé in the wastebasket.
Be wary, too, of claims that are difficult to verify, gaps in applicants’ job histories and vague descriptions of what they did.
If, for example, the computer hardware company tried to contact the three references listed by the candidate for chief financial officer, it would have learned that one was dead, one did not exist and the third had a low opinion of the candidate. Everything the man said about his wife was true, though — except that her accident occurred three years after his bankruptcy filing, not shortly before it.
Once hired, the executive began his scheme almost immediately, buying a large number of computers, returning most of them and depositing the refund checks in an account that he had opened with the same name as the company’s except that it had L.L.C. at the end instead of Inc.
Mr. Springer suggests that after authenticating the facts in a job candidate’s résumé, a background check should be done.
Payroll companies and other concerns often offer basic screening for $100 to $400, Mr. Springer said. Automatic Data Processing, for example, offers the service on a Web page that flashes statistics like “One out of every 20 job applicants screened last year had a criminal record” and “Nearly 1,000 workers are murdered and 1.5 million are assaulted in the workplace each year.”
Mr. Springer also mentioned HireRight and National Applicant Screening. Searching the Web with the words “employment screening,” “pre-employment screening” and “employee background check” yields hundreds of leads.
If you are unable to verify important information, you may have to turn to detective operations like Mr. Springer’s, Huhn & Associates or the risk consulting giant Kroll Inc. (Because smaller companies often need to farm out work where they lack a physical presence, collaboration among them is common.)
His company’s fees are generally $2,000 to $5,000 a person for management background checks and $25,000 to $50,000 for corporate investigations. He expects strong growth for his company and the industry, largely because more companies will need investigative services in an increasingly global economy. He sees Asia and Latin America as the hottest markets.