A Business Referral Does Not Mean You Should Forego a Due Diligence Background Check

The following is an anecdote from our CEO & Founder, Dennis Drellishak Sr., who has been in the background screening business for 30+ years.

Several years ago, I needed new technology for my growing business but did not have any idea who I could trust with this important purchase. So, like most busy executives, I asked a few close advisors and associates for referrals. Eventually, I received a call from an old friend who put me in contact with Joe, an owner of a local technology company. Joe (not his real name) was someone that my friend just started doing business with, and so I was grateful that I did not need to waste time finding a company and getting references on my own. A referral always seems to be the easy path to take when you are short on time and have other tasks on your business to-do list besides, who would prefer a company with a bad reputation?

When I met Joe for the first time, he seemed like a knowledgeable and accomplished business owner that insisted his company could fulfill our technology needs. My business policy was to still conduct background checks on potential business partners even if they were referred to me. However, I had other pressing needs at the time, so I decided to put off purchasing the technology. Consequently, I did not conduct a background check on Joe and his company.

I did not think about Joe again until I received an urgent message a few months later from the friend who referred him. When I returned the call, my friend was sitting in his attorney’s office and told me that Joe had just transferred $600k out of their bank account into his own. I was shocked and could not understand how Joe had gained access to their account. My friend explained that Joe had convinced them to help finance the purchase of new technology from a foreign company that was just introduced in the United States. Joe convinced them that this technology was just gaining popularity and they could make a healthy return on their investment. Unfortunately, my friend gave Joe access to their bank account to easily move money around and not miss this opportunity. Nevertheless, Joe moved the money overnight and they could not get ahold of him.

When my friend contacted the bank and claimed the withdrawal was unauthorized, they were told Joe was a signer on the account, which meant that they could not get the money back. My friend asked if I could conduct a background check on Joe after the fact to see if there was a clue as to why he did this.

So, who really was Joe? We discovered through public records that Joe had worked for another technology company before starting his own business. We found news stories as well as civil and criminal complaints claiming Joe had embezzled money from his previous employer, was convicted of several theft offenses and spent a year in jail. His previous employer went bankrupt because of the embezzlement. While in prison, Joe struck up a relationship with the wife of the owner of the company that he helped bankrupt. Once released from prison she helped Joe get back in business doing what he did best, scamming people out of money. Joe was eventually arrested for committing fraud a second time and I never learned if my friend's business ever recovered its losses.

This is a scary example of why you should never forego conducting due diligence. A quick background check would have alerted them that Joe is an individual you should not do business with. Keep in mind that even business referrals should undergo due diligence.

Dennis Drellishak Sr. - CEO & Founder

Dennis Drellishak Sr. is recognized as a leading authority in the business information services industry with more than 30+ years of experience in high-level business investigations and pre-employment screenings. When you need fast, precise due diligence background checks, whether, on a company or an individual, we are here to help. Before you make a significant business decision, make sure you have all the relevant information by conducting a due diligence background check.

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