Pension Risk Matters : Pension Risk News & Analysis : Investment Governance, Inc. : Pension Risk & Investment

According to TechCrunch ("Canopy Financial Turns Into Sad, Comical Game of Hot Potato" by Michael Arrington), nearly $90 million in venture capital money may have done little to thwart alleged fraud at Canopy Financial. If true that this company has been reporting incorrect numbers, why has it taken so long to uncover?

Here is what I've been able to uncover from a quick search of the web (with no guarantees that these website links will remain live much longer, if they even exist now):

• Canopy Financial was listed #12 on Inc. Magazine's 2009 list of fast-growing companies with reported growth of nearly 8,000%, 84 employees and 2008 revenue of $19.8 million. Click to read more.
• Important website links for Canopy Financial except for a single Contact Us page (About Canopy, Learning Center, Solutions, Press Releases, Clients) are broken.
• Red Herring reported that Canopy Financial raised $15 million in a "funding round led by Granite Global Ventures," allowing this health insurance-related service company to "develop and market some of its new products and services." Read "Canopy Financial Banks $15M" by Cassimir Medford (January 10, 2008).
• Healthcare Finance News reported on an acquisition by Canopy Financial about a year ago. See "Canopy Financial buys CareGain" (October 20, 2008).
• PE Hub writes that Canopy Financial's CEO claims "no prior knowledge whatsoever of any fraud..." Click to read "Statement from Canopy Financial's Ex-CEO" by Dan Primack (November 24, 2009).
• The link from the Spectrum Equity page for Canopy Financial is broken.
• The link to Perkins Coie is likewise broken though Google shows text that reads "Represented Canopy Financial in its Series A and Series B Preferred stock financings."
• Crunchbase.com lists financing for Canopy Financial in the amounts of $15 million Series A funding (January 2008), $8 million Series B funding (August 2008), $4 million in debt funding (2009) and $62.5 million in Series C funding (October 2009). Click to read more.
• Health Care IT News reports a partnership between Canopy Financial and Wolters Kluwer Financial Services to "make Canopy's healthcare banking platform available to all banks and credit unions." See "Financial providers integrate HSAs for banks" by Molly Merrill (February 14, 2008).
• Canopy Financial reports the release of its "Mobile Consumer Directed Healthcare (CDH) Software Application." Read the May 13, 2009 press release.
• Canopy Financial sought to recruit a product analyst as recently as November 9, 2009.
• Canopy Financial's November 3, 2009 press release describes a partnership witih A.D.A.M., a "leading provider of healthcare information technology." Click to read more.
• Canopy Financial sends out a March 2009 press release that lauds its successful completion of the "Statement on Auditing Standards No. 70 (SAS 70) Type II audit, which assesses the operational effectiveness of internal controls within service organizations." Read "Canopy Financial Achieves SAS 70 Type II Certification."

The list continues. If true, yet another fraud perpetuated on investors would be shocking. Questions abound, some of which are listed below.

• Who was conducting the due diligence for each funding round?
• What due diligence was done on Canopy as relates to several acquisitions and partnerships?
• What was the role of the auditor?
• What questions were asked of the management team by the Canopy Financial board of directors? 
• Did institutional investor limited partners utilize finder firms or contract with the venture capital general partners directly?
• Did any of the investors review the SAS 70 audit report and find it wanting?

Until more facts are uncovered, everyone deserves their day in court and we can't make hasty judgments.

On a general note, the hope is that lessons are learned along the way about who is tasked to do what, on what basis and with what rigor. While I truly believe that there are many, many good players who do their work thoroughly and with high integrity, one is compelled to reflect on why the stigma and shame of dishonesty is discarded by those who rightfully deserve a place in the Financial Hall of Ignominy.

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If you haven't watched the 55 minute PBS Frontline documentary about the Madoff fraud (originally aired on May 12, 2009), click here. As I watched the video, I kept asking myself. How could this happen? Why were so many individuals willing to trust without verification? Hopefully (as they become available) court case transcripts will shed some light on the due diligence role of intermediaries. If financial market participants can learn lessons to better mitigate risks, we'll have at least one silver lining from this massive debacle.

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Several readers have offered comments about signals they deem could have and should have been indicators of trouble. Adding to our January 13, 2009 list ("Madoff Red Flags" How Many Can You Count?"), the tally now includes:

• Regularity of returns despite market volatility
• Complex strategy
• Poor transparency about performance reporting standards
• Unknown audit firm
• Seemingly limited due diligence by some parties
• Unclear assignment of investigation-related duties (knowing who does what)
• Questionable diversification
• Few questions asked about risks
• Limited internal controls, if any
• Lure of "movie star" reputation
• Limited attention paid to hedging efficacy
• Limited knowledge of rebalancing techniques
• Limited knowledge of trading limits and stop loss points
• Limited knowledge of collateral risk
• Unclear understanding as to who played the role of fiduciary
• Limited knowledge about asset valuations and related valuation process
• Absence of an independent custodian to safe keep assets
• Analysis of option open interest and trading volume activity that would have shown "bad math" (reality versus alleged activity on the part of Madoff affiliates).

According to "Risk test study of Madoff claims" by Anuj Gangahar (Financial Times, January 21, 2009), a bias ratio computation could have likewise shed light on what is now accepted by most as the largest financial scandal in modern times. Believed to be akin to a test for randomness, the bias ratio is "a mathematical technique that identifies abnormalities in the distribution of investment returns." (I wrote about the bias ratio in "Hedge Fund Returns - Illusion or Fact?" on July 15, 2007. Riskdata is releasing a study today on their findings.)

Gangahar likewise mentions something called Benford's Law, a comparable method that is used by forensic specialists to detect accounting fraud. According to "I've Got Your Number" by Mark J. Nigrini (Journal of Accountancy, May 1999), a physicist named Benford discovered that "numbers with low first digits occurred more frequently in the world." Applied to Madoff, observations made by this 1920's GE employee could infer that sustained steady growth would have been highly improbable. (Paul Kedrosky, author of "Infectious Greed" seems to debunk the value of Benford's Law as applied to Madoff returns. See "Bernie vs. Benford's Law: Madoff Wasn't That Dumb," December 19, 2008.)

Editor's Note: Keep in mind that underlying assumptions for any mathematical technique that is used to detect fraud and/or lack of randomness must comport with reality. In the Madoff situation, an option strategy referred to as a "split strike conversion" was heavily relied upon. It would be helpful to know if any Madoff-related risk analyses took into account the asymmetry of historical statistical returns for this option collar technique.

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According to the Wall Street Journal video "Connecticut Town Loses Millions With Madoff" (January 14, 2009), Fairfield is the first municipality to "go after" Madoff. In an attempt to recover $42 million or 15% of the this Connecticut town's pension plan, an arrest warrant has been issued for Mr. Madoff. The town is pursuing civil action as well. Click to watch the video.

What would be interesting is if Fairfield law officials succeed in jailing Madoff after several failed attempts by the U.S. government to do the same.

Editor's Note: In 2006, Money Magazine ranked Fairfield, CT as #9 on its list of "Best Places to Live."

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With losses estimated at $50 billion, “l’affaire Madoff” is deemed the largest financial fraud in world history. Not since Charles Ponzi scammed millions from investors in the 1920’s have world financial markets seen such a systemic breakdown of what should have and could have been done to prevent fraud. Institutions and individuals alike bear the pain, forcing some organizations to shut their doors, declare bankruptcy, withdraw charitable donations, offer fewer scholarships or go back to work, long after retiring. Litigators and regulators are busy filing lawsuits and enforcement actions that could take years to settle. Questions abound. Who was responsible for due diligence? What could have been done before the fact to preempt financial ruin? What can be done now to avoid subsequent losses?

Based on research of publicly available information, I count well over a dozen red flags, including but not limited to the following:

• Regularity of returns despite market volatility
• Complex strategy
• Poor transparency about performance reporting standards
• Unknown audit firm
• Seemingly limited due diligence by some parties
• Unclear assigment of investigation-related duties (knowing who does what)
• Questionable diversification
• Few questions asked about risks
• Limited internal controls, if any
• Lure of "movie star" reputation
• Limited attention paid to hedging efficacy
• Limited knowledge of rebalancing techniques
• Limited knowledge of trading limits and stop loss points
• Limited knowledge of collateral risk
• Unclear understanding as to who played the role of fiduciary
• Limited knowledge about asset valuations and related valuation process.

It goes without saying that much remains to be learned about the Madoff situation. The good news is that more attention, at least for some organizations, will now be paid to due diligence and prudent process.

What did I leave off the list that should be added? Email me and let me know.

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According to John Gapper, funds of funds ("FOFs") are significant players, accounting for nearly one-half of all hedge fund assets. This Financial Times chief business commentator connects growing institutional interest to a rise in demand for intermediaries who offer due diligence services. Post-Madoff, he paints a grim picture for the industry unless good players are able to differentiate themselves from those who are now being scrutinized.

Whether certain organizations could have detected fraud is unknown at this time though Grabber suggests that "funds of funds need to work harder and show that they actually contribute something valuable." I am quoted as saying “It is not as if this stuff is really complicated. A lot of the risk of fraud can be mitigated by measures that are low-cost and not very time-intensive.”

I certainly agree with Gapper that there is a "role for the good funds of funds." I'd go further to say that it is unfortunate indeed for those funds of funds that exercised care and discipline in researching  financial and operational risks on behalf of pensions, foundations and endowments. They are unfairly being painted with a dirty brush.

For institutional investors, a key question remain. Will pensions, endowments and foundations continue to reach out to funds of funds or decide instead to hire in-house experts? If they have already hired one of the funds of funds that turns out to be tied to large Madoff-related losses, to what extent might investment fiduciaries be asked to explain their FOF choice and subsequent oversight of said FOF? These are important questions, yet to be answered.

Click to read "Funds of funds have to work harder," Financial Times, January 7, 2009. (Access may be limited to subscribers only.)

Editor's Note: Click to read "Hedging Your Bets: A Heads Up on Hedge Funds and Funds of Hedge Funds," published by the U.S. Securities and Exchange Commission. Click to read "Report on Funds of Hedge Funds," published by the International Organization of Securities Commissions, June 2008.

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In a January 5, 2009 press release, the Federal Bureau of Investigation ("FBI") announces its intent to hire "over 2,100 professional staff employees and 850 special agents" in "one of the largest hiring blitzes" in the agency's 100-year history. Mathematicians and computer scientists are in demand, along with finance and accounting experts who can assist with investigations of corporate malfeasance. See "Wanted by the FBI: Talented Professionals to Serve the Nation."

Is this a harbinger of more financial fraud to come or a way to address cases already being investigated?

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Many financial market participants seem resigned to an onslaught of new regulations. For them, it is no longer a question of "if" but "when," with the unknown being the form of eventual rule-making. One area that is likely to receive more than a passing glance is the role of the service provider to pensions, endowments and foundations. Always important, the Madoff scandal has pushed the issue front and center as institutional investors, reeling from reported losses, ask their advisors for clarity about their exposure to the now defunct Bernard L. Madoff Investment Securities LLC. According to "Crackdown on hedge funds after Madoff affair" (December 29, 2008), Financial Times reporters Deborah Brewster and Joanna Chung suggest that funds of funds may be especially feeling the pinch, with an anticipated change in how due diligence is conducted.

Next week's Congressional hearing should be telling. Convened by U.S. Congressman Paul Kanjorski (Democrat - Pennsylvania), this investigative meeting may be "standing room only" as members of the Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises seek to understand what went awry before being able to "craft a strong, effective, modern regulatory system for the financial services industry." 

Though best left to legal experts, one wonders if a likely inquiry will center on the allocation of fiduciary duties across investors and advisors. Under what circumstances might an advisor or consultant be seen as encouraging an "unsuitable" investment? This of course begs the question as to what is deemed "appropriate" for a particular buyer and on what basis should an investment be assessed for a particular pension, endowment or foundation? We've heard that some financial professionals are responding to l'affaire Madoff by imposing more stringent, and arguably prudent, literacy requirements BEFORE accepting client money.

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In a recent speech, Federal Bureau of Investigation ("FBI") Director Robert S. Mueller, III, warns white collar criminals that agents are busy at work. Citing an alarming increase in fraud (up by "more than 80 percent since 2003"), Mueller provided some interesting facts to attendees of the American Bar Association, Litigation Section Annual Conference.

• The FBI has nearly 2,000 agents working on almost 17,000 white collar cases, "from public corruption and financial fraud to health care and mortgage fraud."
• The FBI has successfully prosecuted more than "490 corporate and securities fraud convictions in 2007" with more than 30 insider trading indictments affecting employees of at least four major banks.
• The FBI is investigating in excess of 1,300 mortgage fraud incidents and has identified "19 corporate fraud matters related to the subprime lending crisis."
• The FBI has its sights on "accounting fraud, insider trading, and deceptive sales practices."

Urging reform to protect shareholders and other relevant parties, this lead G man cites the need for independent (and arguably competent and objective) auditors, outside counsel and independent directors. Conflicts of interest remain a concern.

Click to read the full text of Director Mueller's speech.

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Bayou Group leader, Samuel Israel III, age 48, receives a sentence of 20 years for his part in handing a $400 million loss to investors. (He pled guilty to conspiracy and fraud in late 2005.) A shorter than 30 year sentence reflects his co-operation with the authorities. U.S. Districut Judge Colleen McMahon is quoted as rejecting leniency and instead chastising this hedge fund "mastermind" as a "career criminal" who "ruined lives." In what appears to be a sea change in sentiment towards financial fraudsters, Reuters cites Judge McMahon's upset, referring to white-collar crimes as "every bit as heinous as every other type of crime."

Click to read "Bayou co-founder sentenced to 20 years in prison" (Reuters - April 14, 2008).

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According to State Editor Jay Jochnowitz for timesunion.com, Attorney General Andrew Cuomo is investigating "alleged abuses of the state pension fund" at school district, town and village levels. External contractors may be costing Empire State taxpayers a bundle in the form of "undeserved" retirement benefits. (See "Cuomo expanding pension probe," April 14, 2008.)

Not surprisingly (and assuming facts bear out the presence of fraud), folks are in a major huff. To read a few takes on the fast-changing situation, check out these items.

• "Cuomo: 90 attorneys' pensions potentially fraudulent" by Robert E. Kessler (Newsday.com - April 10, 2008)
• "New York's Pension Scams Must End Now" by James Ostrowski (Free New York - April 14, 2008)

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In what must be an amazing "way to go" moment for any journalist, Milwaukee Journal Sentinel reporter Dave Umhoefer earns the Pulitzer Prize for his detective-like reporting about pension trickery in Milwaukee County. According to "Pension investigation earns reporter Pulitzer: Umhoefer scoured county data for 6 months," Bill Glauber writes that privileged workers were allowed to buoy their benefits by purchasing "service time for seasonal and part-time jobs held decades ago" (Milkwaukee Journal Sentinel, April 7, 2008). Certainly novel, this form of back-dating is said to violate county and IRS rules galore. Congratulations to Mr. Umhoefer for bringing fraud to light on behalf of honest plan participants.

In "Buybacks may figure in pension lawsuit" (Milkwaukee Journal Sentinel, April 12, 2008), reporters Steve Schultze and John Diedrich write that legal documents have the county claiming that "its full costs of the '01 pension perks will reach in excess of $600 million." Alleging failure to give "adequate warning of the potentially steep costs of the lump-sum provision and related benefits while they were under consideration in 2000," the county seeks redress from defendant Mercer Co. The pension consulting firm counters that the county is "seeking to pass the buck for its own failings."

On the topic of fraud, infamous rogue trader Nick Leeson (remember the sale of Barings Bank to ING for a nominal sum?) warns of a "black hole in some markets unless risk-management systems" catch up with the "sophistication of trading desks." Now a "been there, done that" luminary on the speakers' circuit, Leeson apparently corroborates the intended defense of Jerome Kerviel in Rogue Trader v. French Bank. In "Leeson warns of fraud 'black hole' in markets," Financial Times reporter Jeremy Grant (April 9, 2008) writes that corporate negligence will take the stand as Kerviel shouts "J'accuse" and ponders how his jumbo trading could go unchecked for so long.

If HBO found entertainment value in L'Affaire Leeson ("Rogue Trader" starring Ewan McGregor, 1998), can a french film version be too far behind? With so much real-life intrigue, Hollywood writers have little need to imagine.

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As a result of its investigation of the Retirement System of Alabama ("RSA"), the U.S. Securities & Exchange Commission, Division of Enforcement, issued a March 6, 2008 report "to emphasize the responsibilities of all investment professionals, including large public retirement systems and other public entities, under the federal securities laws and to highlight the risks they undertake when they operate without a compliance program."

At the heart of the matter was an allegation of improper trading of shares in The Liberty Corporation, prior to the public announcement of its acquisition by Raycom Media, Inc. ("Raycom"). While this state agency, with over $30 billion in assets under management, is described as having cooperated with the SEC, pre-event, it had no "program, policy, practice or training to ensure that its investment staff understood and complied with the federal securities laws in general or insider trading laws in particular. RSA also did not have a compliance officer, and the responsibilities of its general counsel did not include oversight of RSA's investment activities."

According to this official report, RSA founded Raycom in 1996 and was its "primary financing source." (Enforcement investigation aside, this begs an interesting question. Why was the Retirement System of Alabama in the business of creating a private business?) A disturbing excerpt from the SEC report is shown below.

<<RSA's purchases of Liberty stock were unusual in at least two respects. First, RSA's CEO directed the trades even though he normally was not involved in equity trading decisions. Second, Liberty's market capitalization at the time was less than $1 billion and did not satisfy the $5 billion market capitalization guidelines RSA generally used for the two funds that purchased the shares.>>

While state pension plans are not subject to the Investment Company Act of 1940 and the Investment Advisers Act, public plans and their employees are subject to anti-fraud provisions of the "federal securities laws and Commission rules thereunder."

The Commission concluded that bad acts could have been avoided if the state pension plan "had adequate policies and procedures to assure compliance with the federal securities laws." The SEC took into account the following - (a) RSA's cooperation (b) remedial action and (c) the fact that no individual gained from said trades.

Click here to read "Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The Retirement Systems of Alabama.".

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The news broke on January 24, 2008 that a rogue trader at Societe Generale was allegedly responsible for nearly US $7 billion (4.9 billion euros) in fraudulent transactions. Hours later, Bank of France governor, Christian Noyer, tried to allay fears. Refuting any connection between sub-prime exposure and the situation at hand, Reuters reports Noyer as saying that "nobody could have foreseen the loss" but acknowledged that risk controls should have been a barrier. "Today we have seen there was a glitch in the system that was exploited by someone who I think got around five successive risk control systems." See "Bank of France head reassures after SocGen fraud" (January 24, 2008).

When contacted for comments by www.pensionriskmatters.com, Mr. Tony Turner, principal with Financial Tracking, LLC asks - "Who was watching the store and who was watching the watchers? This highlights the need for automated and consistent monitoring and alerting."

What's interesting (at least based on preliminary public information) is that the identified bad player was supposedly an expert in operations and able to use that knowledge to his advantage. Many questions arise. 

• How should back office, middle office and front office controls change to avoid a repeat occurrence?
• What role do humans play with respect to monitoring computer systems thought to be otherwise safe from attack?
• Who should ultimately bear responsibility for le rogue trader?
• Is this type of fraud a "black swan" event or can we expect more trouble?
• What can pension fund decision-makers do to better vet their banks' risk controls?

This will not be the last time we read about fraud and its potentially devastasting impact on related parties.

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According to "Bonds' Pricing Is Questioned In Email Trail, Former Trader at RBC Alleges Mismarking Of Plain-Vanilla Issues " (October 26, 2007) Wall Street Journal reporter Susan Pulliam describes alleged fraud at one of the large Canadian banks. Whether government and corporate bonds were incorrectly valued to hide losses remains to be seen. However, if true, this is serious stuff.

Pension fiduciaries should be regularly asking external managers about their trading checks and balances. However, in light of recent negative headlines, one wonders (a) whether sufficiently tough questions are being asked (b) who is doing the investigation and (c) whether risk management and valuation best practices are more myth than reality at some organizations.

ERISA and state pension laws make it clear that fiduciaries have a solemn obligation to properly select and review external money mangers. Are breach of duty complaints likely to ensue for those plan sponsors who have selected "troubled" money managers and cannot provide evidence of a disciplined and comprehensive review of their risk management and valuation policies? 

Our forthcoming November 6, 2007 webinar will look at trading controls and the selection and review of external money monagers. Click here for more information.

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A recent news article chronicles another insider trading scam that highlights a dangerous variation of pillow talk. According to a May 11 article, "A husband and wife were arrested and charged yesterday after allegedly netting nearly $600,000 (£300,000) of illicit profits from shares they bought in a takeover target." Times.com journalist Steve Hawkes writes that this joint arrest follows quickly on the heels of another couple's guilty plea for providing material non-public information about pending mergers and acquisitions. Click here to read more.

Does nuptial bliss mean scandal? Prison is now a known commodity to Mr. and Mrs. Fastow of Enron fame. Similar allegations were recently launched against a husband and wife team who worked at a hedge fund and investment bank, respectively, and engaged in questionable "chatting."

Fraud is not uniquely committed by power couples with privileged access. Sometimes it's a family act.  A former New York University student pled guilty last year to bank and wire fraud. His mother "was sentenced in March to two years in prison after she pleaded guilty last year to conspiracy to commit wire fraud in the scheme. The two lived in Pound Ridge before they were arrested in June 2005." Click here to read more.

These cases are yet another reminder that risk comes in many forms. It's simply not enough to look at risk-adjusted return performance (historical, current and projected). Pension fiduciaries must carefully vet money managers (regardless of asset class) on a comprehensive basis. This includes a rigorous assessment of their internal controls that relate to trading, how valuable information is protected and the ethical requirements for anyone on the "production line."

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According to Business Insurance, the former Chief Financial Officer of the Ohio Bureau of Workers' Compensation gets sixty-four months in jail. Involved in a rare coin investment scandal dubbed "Coin Gate,"  he pled guilty to "violating the federal Racketeer Influenced and Corrupt Organizations statute." (See "Former Ohio comp bureau CFO sentenced" by Roberto Ceniceros , May 11, 2007.)

The current Statement of Investment Policy and Guidelines prohibits investments in coins. Click here to access the document.

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The latest news on Hilton heiress Paris is not good. Sentenced to forty-five days time for violating probation over a suspended license, she must report to jail on June 5. Click here for the CNN.com story.

Ordinarily we wouldn't include a story about Paris Hilton except that it gives one pause for the following reason. In the last week, we've been busily focused on gathering news about litigation, enforcement and general stories about fraud in the financial world for www.pensiongovernance.com and www.pensionlitigationdata.com.

Our conclusion? There are a lot of Paris Hilton wannabes out there if you think of her as a role model for "let them eat cake."

One can barely keep up with allegations of wrong doing - securities fraud, option backdating, imprudence of investment selection, lack of oversight, accounting "flexibility," incorrect valuations, conflicts of interest, absence of prudence, excess this, excess that. Many of the cases being filed allege fiduciary breach on the part of pension decision-makers or directors and officers or both.

To be VERY clear, allegations mean little until due process takes place and individuals have their day in court to argue their case. Additionally, we recognize that it's easy to hang our hat on the most egregious events, letting them taint everyone in the business. This too is an injustice for those folks who work diligently to execute best practices.

That said, however, the sheer number of news stories, allegations and complaints about financial bad acts is daunting to say the least. There are some who predict more to come, especially with so many millions of dollars at stake and increased exposure to complex securities and strategies.

We'd like to emphasize the importance of applauding the "good guys and gals." Let's learn lessons from demonstrated bad acts (for the sake of improvement).

For those who find it hard to resist temptation, keep in mind - The "pass the buck" mentality is unseemly and dangerous, especially when innocent bystanders stand to lose.

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According to the SEC website, a complaint has been launched against an economics professor and several funds he controlled. In "SEC v. Albert E. Parish, Jr., Parish Economics LLC and Summerville Hard Assets LLC, Civil Action No. 2:07-cv-00919-DCN" (D. S. C., April 5, 2007), the SEC charges fraud.

Shortly after the filing, in a somewhat sad turn of events, news outlets report a claim of amnesia. See "Fund Manager Offers Memorable Response to SEC's Fraud Charges" by Suzanne M. Schafer (Associated Press), April 7, 2007. Click here to read the article (one of many).

What's ironic is that the professor, apparently oft-cited as an economic forecasting expert, was quoted in May 2006 as happy with the Enron verdict. "It certainly provides a boost of faith." Click here to read the text of "Local businessman, economists pleased by Enron verdict," The Sun News, May 26, 2006.

Everyone should have their proper day in court but it does seem odd that $134 million is allegedly missing and a "smart" man suffers forgetfulness.

Nevertheless, in the spirit of lessons learned, plan sponsors can be reminded (for that matter, all investors should pay heed) that background checks of key players is desirable, nay essential.

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