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Inside Fraud

Background Check? Why Bother

The potential for bad publicity for one, and the risk of legal liability for another.
Theresa Mack Cendrowski Corporate Advisors


Whether it’s a fraud investigation or an employee hire, background checks are the first essential step in uncovering any criminal or litigation history that could impact your company’s reputation.

Fraud is on an upswing—reason alone to put background checks front and center in your hiring process. The reasons people commit fraud are endless, but honestly, the reasons aren’t important; what matters is protecting yourself and your company from reputational damage and legal liability.  

Employers have a duty to protect their employees, customers, clients, et al from the risk of harm. If a reasonably diligent reference and background check would have revealed that, say, a job applicant lied, is unfit for the position, or may be a threat to others, then the employer’s failure to investigate could result in legal liability.

Studies indicate that roughly 50 percent of applications contain false information. Why do people lie? Desperation is the primary motivator—wanting to gain an edge in the selection process, maintain a certain lifestyle, or revitalize a lagging career, for example.

The most common lies relate to educational credentials, criminal histories, liens and judgments. A background check will help to shed light on the truth, and prevent embarrassing revelations in the future. For example, discrepancies that come to light include outstanding speeding tickets, a pattern of lawsuits, bankruptcies or a failure to pay child support. Do you really want to hire someone who doesn’t take care of their legal and moral obligations?

So what should you search for to get at the truth and protect your company?

Financials: Check for bankruptcies, charge-offs and delinquent payments.

Legalities:
Look out for civil judgments or liens; federal or state lawsuits, tax liens, or regulatory matters; and convictions for fraud, domestic violence, sexual offenses, DUIs, etc.

Open source information: This type of data includes public information housed on social networking sites, in articles and on blogs.

Education: Make sure applicants have earned the credentials they say they have.

When it comes to researching public information, I recommend checking out these sites:
Inforuptcy maintains a free portal where you can find bankruptcy case information and track cases.  

Pacer allows public access to electronic court documents, including criminal, civil and bankruptcy information. Check every state in which the individual has lived.

Many states and municipalities have online portals that include a wealth of public data such as property taxes, litigation, liens, delinquencies, corporate registrations and criminal histories. Check out the Cook County Register of Deeds, State of Illinois Secretary of State, Illinois State Police and Cook County Assessor’s Office.

Wayback Machine will tell you when a website was created, and therefore allows you to confirm if in fact a business was operational at the time indicated.

Additionally, licensed private investigators  have access to data tools that aren’t readily available to the general public. It may be worth using their services as an extra failsafe.

Over the coming months, I’ll share more of my expertise and advice in an effort to combat the growing incidences of fraud both at home and abroad.