Alternative Market Briefing

First Advantage Investigative: investors can uncover warning signs of risky behavior patterns in advance, `it is not that you have to look, but that you have to look correctly`

Wednesday, October 29, 2008

From Kirsten Bischoff, Opalesque New York: As the ripples of the Petters fraud are felt throughout the industry Opalesque spoke with hedge fund investigative expert Randy Shain, vice president of First Advantage Investigative and author of “Hedge Fund Due Diligence: Professional Tools to Investigate Hedge Fund Managers” about behavioural patterns which exist in those managers who’s funds end in charges of fraud.

Firms like First Advantage perform background checks for those businesses considering financing a transaction where they are relying essentially on the reputation and business acumen of the other side. “Typically, what we find in managers’ backgrounds is not fraudulent behaviour so much as behavioural patterns. In our experience the managers who tend to blow up have often times lied about where they went to school, or exaggerated their credentials at a particular job, have had a series of regulatory problem, a number of lawsuits, and some even had some kind of criminal history.”

Shain cites Samuel Israel who had DUI charges brought against him as well as Thomas Petters who also had a court documented history of questionable behaviour, one instance of which resulted in an investor levelling debt liability charges against him. Richard Hettler, an investor who gave Petters funds in the 1990s has spent much of the time since then trying to get back funds which were stopped on promissory notes Petters gave him ......................

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