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For over 35 years, Gryphon has been a leader in providing innovative solutions in due diligence, investigations and business intelligence. Our approach blends information and data with human insight, enabling clients worldwide to make hiring and investment decisions, to navigate complex global markets, and to power up their litigation strategy with critical—and hard to find—information.
Is your company regularly verifying the information listed on candidates’ resumes? You should be. In today’s competitive job market, resume fraud is more common than many employers and investors realize. Case in pointA client recently hired Gryphon to conduct due diligence on an individual. The individual had listed on their LinkedIn profile and their company bio, that they had been awarded a Bachelor’s Degree in Business Administration from a university in the United States. However, when we ran the information through a third-party verification site, the university was not listed. This was unusual as most U.S. universities are represented. The bigger pictureHere is where the initial red flags started to appear. After searching the school’s website, we could not locate a registrar or any contact information. There was a general e-mail that noted there would be a guaranteed response by staff within 24 hours. Furthermore, the address of the university listed on their site was in Delaware; however it was an address for an office building, rather than a school. A 2023 survey by ResumeLab indicated that 70% of job applicants admitted to lying or considering lying on their resumes. After not receiving any response from the general e-mail, Gryphon’s experienced investigators decided to dig deeper into this university: We identified media that indicated that this school was possibly a “diploma mill” school, which was listed as a “university” affiliated with a Pakistani-company that offered diplomas and degrees through hundreds of American fictitious schools. This company was part of an investigation in 2019 in which its CEO and other executives had been sentenced to prison. Further research into the school identified that the school’s website had contained fake photos for their “faculty” that were stolen from other university websites. The bottom lineSurface level checks would not have uncovered this detailed information surrounding the fake degree the individual self-reported to have received. When organizations are considering a new hire, an investment opportunity or a new partnership, Gryphon is the trusted partner that provides them with the deep, actionable intelligence they need to assess and appropriately size risk, and make confident, fully-informed decisions. To learn more, contact Gryphon at [email protected].
False information. Misuse of funds. Unnecessary risk. Hiring a due diligence firm that prioritizes artificial intelligence tools over experienced human researchers may result in misleading and incomplete due diligence reports – at a significant risk to your business. Thorough due diligence still requires a personal touch that addresses the blind spots inherent in large language model AI tools, which can otherwise miss important red flags visible only to a competent human investigator. Case in point A client recently hired Gryphon to conduct due diligence on an e-commerce company that disclosed being involved in a federal civil lawsuit. The subject had told the client that it had simply been seeking damages for undisclosed liabilities stemming from its acquisition of a separate e-commerce company. A surface-level investigation would have found that the subject company was properly registered, that it had not been the target of any regulatory proceedings, and that it had received dozens of five-star customer reviews on mainstream corporate rating websites. An automated approach to due diligence relying on AI tools may have stopped there—with the client receiving a report giving the impression of a well-respected company with a nominal litigation profile. Such an impression would have been highly misleading. AI results should be fully vetted by an experienced human researcher – like those at Gryphon. The big picture Gryphon’s experienced investigators recognized the e-commerce company’s business model as similar to known varieties of get-rich-quick scams. Evaluating the company’s online presence through this lens raised several red flags that would have otherwise been missed: First, Gryphon identified the dozens of glowing customer reviews as highly suspect, given that they are routinely faked by get-rich-quick scams, even on normally reputable rating sites. Research into the subject’s disclosed commercial lawsuit found that the acquired e-commerce company and its former owners were subsequently targeted by a Federal Trade Commission (FTC) lawsuit for scamming clients out of tens of millions of dollars. While the subject of the report was not mentioned in the FTC suit, its principal ultimately co-signed a multi-million dollar injunction that liquidated the assets of the scam enterprise acquired by the subject. The bottom line As many due diligence companies continue to trend towards a greater reliance on AI, clients may be paying for reports that are incomplete or compromised by fake reviews, commissioned articles posing as independent news, and other online content optimized to fool AI. While AI can be helpful in building efficiencies into a research process, the results it produces should be fully vetted by an experienced human researcher – like those at Gryphon. Gryphon’s experienced team of knowledgeable investigators helps eliminate this risk by giving our clients the certainty that the information they are receiving is comprehensive and high quality. Gryphon is the trusted partner that provides the deep, actionable intelligence necessary to assess and appropriately size risk. To learn more, contact Gryphon at [email protected].
In the realm of business and investments, the allure of a promising opportunity can often overshadow the critical necessity of thorough due diligence. While many are vigilant in seeking out “smoking guns,” such as major scandals or legal disputes, the more insidious risks often lie in the patterns of behavior exhibited by the individuals or entities involved. These patterns — whether they manifest as repeated legal troubles, financial irresponsibility, or ethical lapses — can be indicative of deeper systemic issues that pose significant risks to prospective partnerships, investments, or business dealings. The Deceptive Allure of the Smoking Gun In background investigation processes, there is often a tendency to focus on singular, attention-grabbing red flags — the proverbial smoking guns. These could be large-scale frauds, regulatory violations, significant criminal activity, or high-profile lawsuits. The reality is that “stuff happens” in someone’s life and professional career, and a single issue, even if material in nature, may not be a deal killer if it was a one-off occurrence dating back in time, with proper remediation and a clean track record since. While such issues certainly warrant attention and scrutiny, relying solely on identifying these singular events can lead to overlooking broader, more pervasive problems. A more troubling scenario could be when a potential business partner has a history, including recent occurrences of career/education misrepresentations, excessive traffic violations, license suspensions, minor criminal infractions or a trail of breached contracts. These instances, when viewed in isolation, might seem manageable or unrelated to the core business at hand. However, when viewed as part of a larger pattern, they may point to a lack of reliability, responsibility, and ethical integrity. Understanding Patterns of Behavior Patterns of behavior encapsulate the consistent actions, decisions, and outcomes that define how an individual or entity operates over time and are likely predictive of how they will behave in an ongoing relationship in the future. These patterns often extend beyond legal and regulatory compliance to encompass financial management, ethical standards, integrity, and interpersonal relations. For instance: Someone with a history of recurrent financial troubles — frequent late payments, bad credit, or bankruptcy filings despite adequate resources — demonstrates a pattern of financial irresponsibility that can adversely affect business partnerships or investments. Individuals or entities embroiled in multiple legal disputes for breaching contracts, repeated citations or fines, and unethical business practices reveal a pattern of disregard for legal obligations and ethical boundaries. While each lawsuit or dispute may seem small in isolation, collectively they indicate a recurring pattern that poses legal, financial, and reputational risks and may be an indicator of future litigious or unethical behavior with an investor. The true essence of effective risk management lies in recognizing and understanding patterns of behavior. The Cumulative Impact The significance of patterns of behavior lies in their cumulative impact on business outcomes and relationships as well as being a reliable predictor of future behaviors. Unlike singular events that may be isolated or remediable, patterns are ingrained behaviors that influence decision-making, risk management, and overall business conduct. They can erode trust, disrupt operations, and undermine long-term viability. For example: A business executive with a history of ethical lapses — such as misrepresenting financial data or engaging in conflicts of interest — may jeopardize not only the company’s reputation but also its legal standing and investor confidence. An investment opportunity backed by individuals with repeated instances of regulatory non-compliance or governance failures presents systemic risks that go beyond immediate financial returns. Effective due diligence entails identifying, analyzing, and mitigating risks associated with patterns of behavior. This process requires a comprehensive assessment that goes beyond surface-level checks…
Beneficial Ownership Information (BOI) transparency for U.S.-registered shell corporations has long been a sore spot for anti-money laundering and combating the financing of terrorism (AML/CFT) efforts in the U.S. According to The Washington Post,1 lax BOI reporting requirements have allowed Russian arms dealers, Mexican cartels, and Iranian sanctions-evaders to use U.S.-registered shell companies to effectively evade AML/CFT enforcement from the country’s own investigative agencies. The implementation of the Corporate Transparency Act during 2024 promises to upend this dynamic and usher in substantial changes and enhancements to U.S. BOI reporting requirements, but has also engendered a growing movement seeking to overturn the law through federal litigation. Background In a December 2016 report, the intergovernmental Financial Action Task Force (FATF), of which the U.S. is a member, found that U.S. law enforcement could not access adequate, accurate, and current BOI for U.S.-registered entities, creating “fundamental gaps” for AML/CFT enforcement in the world’s largest economy.2 Reporting requirements varied significantly state-by-state, and federal regulations only required “responsible party” disclosures for companies with income, employees, or a bank account, allowing shell companies registered in permissive U.S. states to operate with little to no insight into their actual owners. Further, even the “responsible party” reporting could be abused, since responsible parties were not technically the same as beneficial owners.3 As a result of its review, the FATF gave the U.S. a “Compliance and Effectiveness Rating” of Low for Legal Persons and Arrangement and a “Technical Compliance Rating” of Non-Compliant for Transparency & BOI of Legal Persons, ratings the U.S. shared with Algeria, Sri Lanka, and Suriname.4 5 The FATF urged the U.S. to implement BOI reporting reforms as a top priority. The Law With the backing of pro-transparency civil society organizations, major financial institutions, and the U.S. Chamber of Commerce, the U.S. House of Representatives passed the Corporate Transparency Act in October 2019,6 followed by the Senate in December 2020,7 ushering in a new era for BOI reporting in the U.S. The American Bar Association has called the CTA the “furthest- and widest-reaching federal business entity law ever enacted.”8 The new rules promulgated by the U.S. Department of the Treasury (DOT) and the DOT’s Financial Crimes Enforcement Network (FinCEN) generally require all U.S.-registered entities and all foreign-registered entities doing business in the U.S. to disclose up-to-date BOI to the FinCEN.9 10 11 The BOI will be kept in a “secure, non-public database” accessible by U.S. law enforcement, financial institutions, and foreign law enforcement by request. The act was designed to target the shell corporations favored by money launderers and terrorism financers, with reporting exceptions for companies with more than 20 full-time employees or at least $5 million in annual revenue, as well as for publicly traded companies and domestic investment funds administered by Securities and Exchange Commission-registered investment advisers. The new rules went into force on January 1, 2024, with companies formed before then required to comply by January 2025 and those formed after required to comply within 90 days of formation. In a follow-up report published in March 2024,12 the FATF praised the reforms as a significant step towards closing the U.S.’ BOI transparency gap and upped its “Technical Compliance Rating” from Non-Compliant to Largely Compliant.13 The Reaction According to the New York Times,14 the CTA has faced significant pushback from corporate lobbyists, some Republican politicians, and business associations arguing that the new requirements were too onerous, raised privacy concerns, and were poorly understood by business-owners now facing civil and criminal penalties for willful violations of the CTA. So far, the most successful effort to overturn the CTA has been a federal lawsuit filed by…
John Polizzi is a certified fraud examiner and a Partner at Gryphon Strategies. John works with institutional investors and private funds during their analysis of new opportunities. He also leads Gryphon’s asset investigation projects and has assisted Gryphon’s clientele in the identification of millions of dollars’ worth of collectible assets in the U.S. and abroad. In recent years, private equity firms have become increasingly attracted to family-owned businesses. So much so that some firms have created investment funds strictly targeting family or entrepreneur-backed businesses. The reasoning behind this investment strategy is easy to understand. Family businesses are founded with a long-term vision and a focus on establishing strong customer relationships. In addition to these inherent strengths, family businesses continue to prove themselves as economic engines for growth. A recent study summarized that family businesses generate over 60% of the U.S. Gross Domestic Product (GDP) and create nearly 80% of all new jobs within the U.S. workforce. Complimenting these advantages is a growing willingness on the part of family business owners to entertain private equity offers. A 2023 survey of 200 family owned businesses by PwC asked whether the owners would be open to a private equity investment. A resounding 90% of the respondents said yes. While this may be due to a changing perception of private equity partnerships or a greater flexibility in financing terms, other reasons for accepting a private equity investment may be more problematic. Family Capital, a publication focused on the global family enterprise sector, reported that only 27% of family businesses have established plans for continued success following the exit of company founders. Additionally, the aforementioned studies note that only 30% of family businesses survive their first ownership transition and that nearly 50% of family business owners planning to retire within the next 5 years are without a proper succession plan. With this in mind, diligent investors are routinely seeking more intelligence around family dynamics and potential succession plans of a business before closing on an investment. Although professional and reputational concerns over an investment in a family business can be situational, there are several categories and questions that a potential investor should take into consideration. Below, we break down some of the most common questions that Gryphon aims to answer when assisting clients with pre-investment due diligence into family-owned businesses: Succession Planning Are customers and employees loyal to the founder or the enterprise? What will happen when they depart? Is there a succession plan in place? If so, what is the reputation and skillset of the company’s future leaders? Are they prepared to run the business or will there be a loss of expertise? Are key stakeholders aware of the current succession plan and in agreement over the future of the company? Company Structure and Policy Does the company have a formal set of policies and business practices? Is the company following standard accounting and human resource protocols? Is leadership taking steps to ensure the company is innovating and keeping up with industry standards? Is expertise and/or power concentrated within select individuals? What does this mean for the business and the private equity investor? Is there any evidence of self-dealing within the company’s leadership? Are founders utilizing company assets for personal use? Are there controls in place to prevent fraudulent practices? Family Politics Are there any known issues between family members involved in the business? What are the family dynamics/causes of friction? How entrenched are problematic family members within the company’s operations? Where do these individuals see themselves post-investment? Is there a toxic culture within the company? Are there perceptions of nepotism amongst staff and clientele? Are stakeholders aligned or is there…
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Congratulations to Margie DeAngelis on being named Gryphon’s employee of the month! Since joining Gryphon in 2016, Margie has been an integral part of the Operations team. As our Office Manager, she is truly a jack-of-all-trades. She wears a variety of different hats — and does it all with a smile! Her positive attitude and willingness to lend a hand wherever needed have made her truly invaluable. Perhaps most importantly, Margie is often one of the first people new employees meet, and her friendly demeanor goes a long way in making them feel at home from day one. Her dedication, versatility, and warm personality embody the Gryphon culture and spirit. We are lucky to have her!
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