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Rutgers University is a mess.

First, their basketball coach Mike Rice was fired for verbally abusing players. To replace Rice, they hired Eddie Jordan, who said he had a degree but never actually graduated. More disturbing, and hard to believe, is that the purported degree was from Rutgers University.

Following the fallout from the coaching abuse scandal, Rutgers hired Julie Hermann as the new athletic director, who turns out to have a history of misconduct and is at the center of a sex discrimination lawsuit from 2008. In hiring Hermann, Rutgers reportedly conducted a “thorough background check conducted by one of the world’s leading private security firms.”

Yesterday, news was released that Parker Executive Search was the firm hired to find Rutgers a new athletic director and provide other support with the hiring process, which included conducting a background investigation.

Most people are asking: How could they have missed all this?

It’s an excellent question, one that can’t fully be answered at this point, but this whole process has taught us a couple of valuable lessons about background investigations.

An executive search firm should NEVER be responsible for conducting a background investigation!

First, they are an executive search firm, not a background investigation firm. You wouldn’t hire a lawyer to do your taxes, especially if the lawyer’s fees are directly related to how much money you get back on your tax return.

Second, by nature, an executive search firm has absolutely no motivation to conduct an in-depth background investigation. Why would they? To dig up dirt on their own candidate whom they spent all this time looking for? It’s a complete clash between the university’s interests and their own.

Even if a search firm hires one of the “world’s leading private security firms” to conduct the background investigation, they have no motivation to dig deep and find the stuff they need to protect their clients. They are interested in protecting themselves.

If you hire a candidate for a very public position that pays $450,000 per year and you are coming off a very public scandal, splurge on a background investigation!

Rutgers paid Parker Executive Search $70,000, which included finding the candidate, providing other services and conducting the background investigation. USA Today and numerous other news outlets ran an outrageously false headline suggesting that Parker paid $70,000 for a background check. They didn’t, I promise you. They were paid a total of $70,000, a portion of which was used for a background investigation.

Rutgers University Background InvestigationPictured above: The “background investigation” outlined in the engagement letter between Parker Executive Search to Rutgers University.

Based on what they described in the engagement letter (see above), the portion set aside for the background investigation was probably no more than a few hundred dollars (not including the reference checks).

In fairness, based on some recently reports, it looks like they went a bit deeper, but the so-called “background investigation” that they describe here is nothing short of a joke.

McDonald’s candidates get a more thorough background check.

Dear employers: Stop checking the box with those background investigations.

Background checks are one of those “check the box” things that employers do. Something to put in the file. It’s not until things like this happen that they really start looking into the process a bit more deeply. The same thing happened when the CEO of Yahoo was found to never have earned a degree.

Granted, not every candidate needs a thorough, in-depth background check, but for executive hires, C-level hires, public positions, board members or companies coming off a major scandal, don’t get a “check the box” background check for the file.

This kind of background investigation is good for the circular file, but that’s about it. Get a real background investigation done.

Oh yeah … don’t count on the executive search firm to do it (properly, at least).

Not all background investigations are created equal.

Parker’s “background investigation” included “criminal, credit and motor vehicle investigations”; confirmation of candidates’ degrees; reviewing derogatory media; and checking the NCAA for infractions, in addition to some reference checks. Oh yeah … they were supposed to have the candidate sign a statement that their bio was accurate (another sick joke).

We’ve talked about this in a previous post, but the terms “background check” and “background investigation” get thrown around quite a bit. As far as I’m concerned, the so-called background investigation that Parker Executive Search promised in the engagement letter for Rutgers is a joke, especially given the level of the position and the scrutiny that Rutgers had already been under. A lot more can and should be done.

Background investigations will go as far as you want them to go.

A background investigation can be whatever you want it to be. You might consider a Google search to be a background check (it’s not). Or a criminal record search in the county where a candidate lives (sort of a background check). You can go as far as you want and call it whatever you want.

The fact is, it’s impossible to dig up everything, but at the end of the day, you get what you pay for. A background investigation firm may recommend conducting a $20,000 investigation, which in this case would not have been outrageous.

Rutgers, I am sure, would have balked.

Now, Rutgers is paying for what they got … in spades.

 

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The Federal Bureau of Investigation released a background check report on Steve Jobs from 1991 when Jobs was being considered for a position in George H.W. Bush’s administration. Aside from a few comments about “his personal life being lacking due to his narcissism and shallowness,” there were not a whole lot of surprises in the 191 pages, other than the fact that he did some drugs in the 1970s (who didn’t?), he was neglecting his daughter born out of wedlock and was involved in a few lawsuits.

What may be surprising to some folks is the degree to which the FBI used “open sources,” or public records, in the course of the investigation. While the FBI did access sources only available to law enforcement officials (i.e., NCIC), the majority of the report is filled with public record checks, including checks of civil and criminal indices, verification of high school and college degrees, review and analysis of court documents, and interviews.

Today a background check of this depth and nature by a private investigative firm would cost upwards of several hundred thousand dollars, but it can be done.

Here are some interesting tips to take from the Jobs report:

Questionnaire – Jobs filled out a 12-page questionnaire, providing his address history, school history, detailed employment history, familial history, “police record,” litigation history and medical record, among other things. If you are hiring an executive for your company or a board member or even considering making an investment with someone, why not ask the person to fill out a background check questionnaire?  Asking someone to fill out a medical record questionnaire is completely off-limits due to privacy restrictions, but asking some basic questions may not be.

Signed Release – People watch too much TV and think that the FBI has a dossier on everyone and can instantaneously access everything about you. They can’t. Even the Federal Bureau of Investigation required a signed release from Jobs to access information about him, including his credit report.

Review Court Records – In addition to retrieving and reviewing litigation that Jobs disclosed on the questionnaire, the FBI reviewed and retrieved civil and criminal indices in the counties and states where Jobs had resided.  The report indicates that they checked records at the courthouses in the California counties of Santa Clara and San Mateo, where Jobs lived.  As we have previously discussed on this site, even in the digital age, going straight to the courts is the single most important thing you can possibly do to find civil lawsuits and criminal records.

Interviews, Interviews, Interviews – Although public records can provide an enormous amount of detail about a person’s past, “human intelligence” can provide some information that you may not get elsewhere. Through the more than 15 interviews with former business associates, employees and other persons knowledgeable about Jobs, they found that he “experimented with various drugs” and was “strong willed, stubborn, hardworking and driven, which they believe is why he’s so successful.” One thing you will notice:  The FBI didn’t interview “references” that he provided; they went out and sought independent references.

Financial Means – One focus of the FBI’s inquiry was to determine if Jobs “lives within his financial means.” As we have pointed out at various times on this site, living beyond one’s means is a major red flag of potential illegal activity. While the FBI conducted interviews to determine Jobs’ financial means, you can also check public sources to identify houses, boats and cars or social media to identify expensive jewelry, vacations or art.

Fill in the Blanks – Another focus of the FBI was to “account for” the last ten years of Jobs’ life. Understanding where the person lived and worked and what he did for any given period of time can find holes, inconsistencies and misrepresentations that need to be vetted. For example, if a previous employer is missing, where was he employed? If there is a gap in address history, where did he live? These questions can lead to employers that fell off of a resume for a good reason or even disclose a stint in a mental institution or jail.

Of course the FBI has access to information that the public does not, but even the FBI relies on openly available sources to conduct background checks at the highest level of the government.

So how do you conduct a background check like the FBI does?

All you need is several hundred thousand dollars. Bank account and routing number available upon request….

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Given the current competitive landscape and growing unemployment rates, executive level employment candidates are more willing to make overt misrepresentations that could be uncovered in an executive background check. Executives may make representations during the interview process such as embellishing credentials, omitting prior criminal or regulatory infractions, or providing false circumstances concerning their departure from a prior employer.

The challenge for corporate directors and management teams is to avoid potential embarrassment and negligent hiring litigation by properly vetting these candidates prior to making hiring decisions.

Just recently, Yahoo suffered a serious embarrassment when it was revealed that CEO Scott Thompson falsified his degree.  There have been a number of other high profile individuals who have lied about their resumes.

By conducting a thorough executive background check, a qualified investigator can identify relevant issues concerning a candidate’s professional career and personal history, which in turn protects the prospective employer’s business, reputation or shareholder value.

Below are 9 potential red flags that you could uncover in an background check prior to hiring your next executive:

1) Unverified Credentials

In addition to stories of individuals who have blatantly lied about their education history, prior employers or military careers, candidates have also been known to misrepresent their professional designations, “hide” former employers or  misrepresent volunteer work. While a little “white lie” may not necessarily be grounds to disqualify a potential employee, even a minor misrepresentation can reflect a broader pattern of behavior of a person.

2) Bankruptcy

Learning about a personal bankruptcy filing by a candidate may not be a “deal killer,” but the specific facts surrounding to the filing may be telling.  A review of the case documents can provide a host of information relating to the candidate’s stated income, debts and other assets held at the time of filing.  An additional red flag involves candidates who “accidentally” transpose digits in their social security number in an attempt to mask the fact that they have been involved in a bankruptcy at all.

3) Reasons for Leaving a Job

While layoffs have been prevalent due to current economic conditions, candidates may use this fact to their advantage with prospective employees.  During the interview, a candidate may mislead the prospective employer to believe that they were a victim of downsizing, when they were actually terminated for performance issues or disciplinary complaints.  In addition to interviewing references to verify information provided, former colleagues or business partners may shed light on the “real” reason an individual left the company.  The discovery of litigation with a former employer may also produce relevant facts about prior conflicts.

4) Litigiousness

Records of civil litigation are scattered throughout the U.S. where the candidate has lived or worked.  The first step in identifying relevant civil litigation is to locate and thoroughly research such jurisdictions; a review of pertinent court documents may identify accusations of misconduct, harassment or questionable business dealings.

5) Tax Liens & Financial Disputes

The existence of tax liens, judgments or financial disputes may suggest that the candidate is under financial pressure or may be living beyond their means. Candidates who are under financial strain may be more susceptible towards committing fraud.  Executive candidates with access to a company’s financials are at an even higher risk of future embezzlement.

6) DUI/DWI arrests

A review of motor vehicle records within the appropriate DMV office(s) that the individual has resided could identify a prior DUI/DWI charge.  Multiple DUI/DWI arrests may raise concerns about a candidate’s potential substance abuse problem while police records relating to the respective arrest may identify other relevant information.

7) Prior Criminal Convictions

Typically a “hot button” item for corporate directors and hiring staff, it is vitally important to understand the wide range of differences between federal and state court procedures with respect to housing and disseminating criminal record history. Identifying a candidate’s address history and relevant jurisdictions is the first step towards locating potential criminal records.  Depending on the territory searched and disposition of the respective criminal charge, many minor infractions and/or misdemeanor charges may not be identifiable.  More prevalent criminal case files which are readily available, typically provide a wealth of valuable background information on a potential hire (which may or may not be openly discussed by the candidate during the interview process).

8) Regulatory Issues

If a candidate has been professionally licensed or certified with a local, state or federal regulatory agency (i.e. SEC, FINRA, State Licensing Boards, etc), they may have been sanctioned or reprimanded by the respective agency for professional misconduct.

9) Hidden Corporate Affiliations

Findings of associated corporations that an executive or his/her relatives have established, raises questions about potential self-dealings or conflict issues. Note that this “shell” entity may been set-up as a vendor or customer to misappropriate funds.

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