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The Many Faces Of Fredo, Or, Due Diligence In The Real World – Part Four: Home Is Where The Dirt Is
by Tara J. Lamer
We return to continue your investigation on potential business partner Frederico “Fredo” Corleone. Depending on the scope decisions made at the beginning of the investigation, you learned that he is either a stand-up guy married to a successful actress, or that he has a propensity to act out violent scenes, particularly when his substance-abusing wife is involved. Recall, the difference in this was essentially two answers – whether to conduct law enforcement searches, and whether to conduct the same set of investigation methods on his spouse.
There are certainly clients who would look at all this and not be concerned. After all, people have their business lives and people have their private lives, and no one is perfect. This deal is about money, and your client wants to know one thing – can I trust Fredo with my money?
You know already that Fredo has no history – in his name – of contract suits (in Nevada), that he pays his taxes, that he has never declared bankruptcy, and that he owns a house. Everything you know about Fredo’s financials seems like he has it under control, so you feel like diligence is done. You might be very wrong.
No matter what you have been told in the past, understand this: unless you have the full and honest cooperation of the subject, such as in the context of making financial disclosures, or unless you are already in the courts and have a permissible discovery tool in play, the (legal and private) accessibility of specific personal financial information is extremely narrow.
In situations where you may prefer to operate your diligence check under the radar, the real picture of an individual’s financial situation has to be made through several separate sources of information. There is one in particular that seems like it is easy to breeze right by in a scope discussion, particularly with a constrictive budget – property records.
In my experience, property records are one of the most overlooked gold mines in the investigation of an individual. (In fact, I love them so much, we will be discussing property records again next week, and if you stick with me on this, I think you will see why.)
So returning to your hasty initial call to your investigator, she is inevitably going to ask you:
Do you want expanded properties background?
Most individuals will have a very basic set of documents on file with their home county – a marriage record, maybe a divorce judgment, a first mortgage, a deed of trust or similar with their mortgage company, and possibly (for the lucky ones!) a deed of release when they have paid off their residence.
A question I have received time and time again is “Why does property research take so much more time and money?”
There are several reasons for this, the primary one being that unfortunately, in the race to digitize county records, property records may be the last on the list for many local governments, and even when they make it to the “new online system,” they are sometimes limited to only more recent years.
After that issue has been identified and addressed, depending on what county or counties you are dealing with, you will have to decide how far back you want to look. In scenarios where the records have been digitized for, say, the last ten years, it may make sense to start there, and indeed, many investigations do just that. In scenarios where your client has a significant amount of money on the line, however, it may make sense to have your investigator head into the county courthouse basement and go back to the beginning.
The second reason property records research can be so time-consuming and expensive is that you are not typically dealing with “most individuals” when looking at potential partners in heavily-funded transactions. One thing to remember when thinking about a diligence investigation, always, no matter how charming or transparent your subject seems to be: Your clients are likely sophisticated operators, and therefore likely seek out fellow sophisticated operators with which to conduct business. It should come as no surprise then that these individuals are and have been operating at that level for some time prior to your client having drinks at Fredo’s club – after all, that was probably the initial attraction. While this can make someone an ideal business partner, it can also make them a tough nut to crack in an investigation.
There are myriad tricks and loopholes that individuals use to transfer, finance, and even willfully conceal both real and personal property. Conversely, some people use seemingly transparent property transactions to conceal their money or even their connections. As boring as it all sounds, an individual’s real and personal property may be the first rock in the avalanche revealing their true background, current situation, and attitude toward money.
So at the end of the day, yes, depending on your subject and where he or she lives, researching property can add a fair chunk of change to an investigation. That said, through a diligent work-up of a person’s local recorder of deeds and local assessor, you may learn some secrets that are definitely worth knowing. Next week, we will take a closer look into what your money can get you by venturing into Fredo’s properties (or in real life, whether your investigator may have an exciting trip to a county government basement in her future.)
