The Magic in Due Diligence Comes in Doing
The Case of the Missing Due Diligence
This press release from the Manhattan District Attorney both surprised me and did not surprise me.
According to court documents, between April 2019 and June 2021, David Kushner purported to use his company, LaMancha Funding Corporation, to serve as a liaison between lenders and private borrowers, who were often professional athletes and sports agents. During this period, Kushner facilitated 12 loans totaling $4.78 million.
When marketing the loans to the lenders, Kushner claimed that he would identify credit-worthy borrowers by conducting extensive due diligence, including searching criminal histories, conducting credit checks, and confirming collateral. In contrast, Kushner did not perform due diligence, and knowingly marketed loans involving borrowers with substantial criminal histories or a history of bankruptcy.
Read the whole release here, there’s a lot more shocking details.
It Depends
I just put up a post centered around some bad jokes to make the point that what you find in your open-source research depends. Yes, I argued, a lot of it depends on your skill and experience doing research. As the skilled and experienced Steve Mason commented on my post:
I’m a big believer that with experience and dedication, you can eventually reach the point where you have a “feel” for how to conduct an investigation and can even see around some corners.
So true, but I also emphasize in this article that much of what you find depends on stuff being there to find. I’ve said this a million times, your work as a researcher is at the mercy of the rotten-ness of the people you research. People only value your work when you have findings. Clean copy does not make for satisfied customers.
You Miss 100% of the Shots you Don’t Take.
No Michael Scott did not originate this quote. If you think it’s a good one for OSINT, here’s an even better Gretzky quote:
Not doing it is certainly the best way to not getting it
Believe me, the motivation at times for not doing your diligence, for not checking things out is that you do not want to know. Ignorance is bliss and perhaps, for some people, for some situations, the defense they need. Not knowing gives them the excuse.
Is wanton neglect the best or worst reason to avoid initiating background research? Gentlemen don’t read each other’s mail, a quote from back in the days of long coats, attributed to one time Secretary of State Henry Stimson, who shut down an American spying operation. It’s doubtful that any adherents to this philosophy remain at Foggy Botton, but I’ve seen this sentiment in the business world. People often do not want to probe hard for fear of insulting their counter-party or just to be a good fellow. They don’t do due diligence because they do not want to do it.
Again, is savoir faire the best or worst reason you have seen? Most researchers in the game as long as I know one oft used, yet oft unspoken excuse. Cheddar. Moola. The big green machine. How much. We are expected to know for every research project, the cost and be able to produce a budget for any request. We obviously fight back with ranges and caveats. Still, the price, however presented, will be sticker shock to some. In a post filled with cliches and aphorisms, there’s this about shopping at the jeweler for a Rolex –if you have to ask the price, you cannot afford it. I have been a party to many situations where I was the Rolex. No one asked the price. They just wanted information. In fact, in one project, they told me they wanted to pay by the pound, meaning just crank out the memos. There are just as many cases where the budget was met with shock, skepticism, anger, and at times, rejection. Too many people do not want to pay for their due diligence, or what they want to pay is insufficient to do the research.
Due Diligence is not a Rolex
You can tell time with your iPhone. You show off with your watch. People do show off by commissioning research. It can be a perk and a psychological ploy. It can also be necessary to identify borrowers with criminal histories or those with histories of bankruptcy. You only know you failed at due diligence when you have failed at due diligence. When you are faced unexpectedly with a criminal for an employee. When your computer tech turns out to be a North Korean spy (true story!). When your business partner has a track record of failures. As Wayne Gretzky might also say, you miss 100% of the things when you do not search.
There are many reasons to skip the diligence. But you won't know if you made the right decision until it was not.