Integrity Due Diligence

Client Brief:
India-based team of a global Private Equity Fund with a track record of successful investigations conducted over the past decade.

Situation:
While preparing the blueprint of a project, promoters may exaggerate background information or opt to hide/overlook critical facts that may affect their credibility and thereby fundraising process. It is critical for investors to comprehend their potential partners by verifying the background of the promoters.

The client was approached by a non-resident Indian (NRI) to fund a project he was promoting. The client examined the Investment Memorandum and evaluated the project based on various criteria. The firm was impressed with the business model and was keen to invest in the green field project. The resident Legal Counsel of the fund mandated Alea to conduct a background check of the NRI to establish his background.

Alea’s Role:
The initial level of the research process was conducted internally. The open source research process, which comprises of access to extensive domestic and international subscriber databases, was undertaken. It, however, provided limited information on the individual.

While there were references in the media to the individual and the associated deal, it was intriguing to Alea’s research team to discover that no records were available of his past activities. Additional research was conducted using name variations, revealing significant information for the same person with a different spelling. On analysis of the collated information, it was confirmed by Alea experts that the individual had made a minor spelling variation of his name upon arrival in India.

Subsequent investigations revealed that the Asia-based entity the individual claimed to have worked for did not exist. Furthermore, the individual had been in judicial custody in the US for insider trading during the period for which he claimed to have worked for the particular Asian company. The criminal record signified a red flag and resulted in the deal not materializing.

Conclusion:
Alea was able to utilize the limited information on the individual to perform a thorough background check. The exponential growth in open source information, combined with Alea’s procedures to conduct OSINT checks, helps clients make informed decisions. Alea’s global reach and thorough investigations help clients mitigate unforeseen risks, which may not seem apparent during initial business transactions.